Corporate policy Archives - Management Control: Blog and Downloads

Mission+Vision+Values

Examples of good documents on corporate policy, demarcation between policy and strategy. Content-related elements of a corporate policy.

Why the Differentiation between Mission, Vision and Values?

“Sheer Driving Pleasure” is the widely known vision of BMW. It has been valid since 1973 and is also applied to models with electric drive (see https://www.bmw.com/en/automotive-life/the-history-of-the-bmw-slogan.html). This vision is part of the corporate policy.
Purpose, visions, values and generally valid rules of conduct are part of the “corporate policy” planning level. Corporate policy should describe who the company is and/or wants to become.
Because corporate policy is used as a collective term for the self-identification of an organization and for the description of its intended future position, terms such as vision, mission, strategy, rules of conduct and governance are often not clearly distinguished from each other and are not separated from strategy and operation. This in turn leads to the fact that the importance of such statements is not sufficiently recognized within the company.
To clearly assign the various sub-contents of a corporate policy, we use the structure from the St. Gallen Management Model (p. 31 ff.):

Vision: Basic statement for which the company wants to be known and what position it wants to achieve in its area of expansion.

Mission statement: Brief description of the overarching values, rules and lines of development. They apply above all to all employees.

Management concepts: These define the key values to be adhered to and the positions to be achieved in future developments. According to the division into natural, social, economic and technological sub-environments, see the article “Management Control Requires Environmental Reference”), a technology/market-related, an economic and a social concept are to be described. These three management concepts should also specify through which social, technological and economic developments the organization will contribute to the protection of the natural environment.

In his book “Levers of Control, p. 33ff., see bibliograpy” Robert Simons states that every organization is purpose-oriented and that a corporate policy is needed to fulfill its purpose. This policy should contain the core values and beliefs as well as the general boundaries (risks to avoid). Vision, mission statement and the three management concepts thus form the top-level documentation for guiding the behavior of managers, for deriving strategies and for operational implementation (fulfilment of purpose).

“Wacker Chemie AG is a technology leader in the chemical industry, produces for all global key industries and is active in the fields of silicones, polymers, life sciences and polysilicon.”
With this definition, the company describes the product areas it stands for and the industries in which it wants to win its customers.
It is worth studying the corporate policy principles of this group, which has sales of around EUR 5 billion. Their Codes of Conduct can be downloaded as a PDF file from there: https://www.wacker.com/cms/de-de/about-wacker/wacker-at-a-glance/corporate-strategy-and-policy-guidelines/ethical-principles.html .

In our opinion, strategies are not part of corporate policy. They define with which products or services in which markets which positions can be achieved. A company can operate in different markets with different products or services, which means that different strategies can be pursued in different markets. To structure this requires the definition of strategic business units (SBU). Each SBU can pursue an independent strategy but must adhere to the corporate policy guidelines.

Main Questions of each Planning Stage

Mission, strategy and operation should answer different questions for different application scopes and timespans.

The Main Questions of each Planning Stage

Before implementation of its operational plan, each company needs to distinguish between four planning levels (or management levels), as in each of these levels a different question needs to be addressed.

Corporate policy (or mission statement) defines what the organization plans to become in the future and how it will distinguish itself from others. A company must consider the requirements of the various environments in which it operates and, if necessary, react to changes in these requirements. These adjustments should be reflected in the core values of the owners and senior management to determine whether the whole business can become what it wants to be.

As noted in our book (Management Control with Integrated Planning), the basic corporate policy statements are documented in three corporate concepts: the performance-based concept, the financial concept, and the social concept. The performance-based concept should be in line with the technological and market environments. Elements of the financial concept are profitability to be achieved, financing structure, use of results, maintenance of liquidity. The social concept sets out the guidelines on topics such as management methods, employee development, and conduct towards government, associations and competitors.

Strategic planning defines which markets are to be served, with which products and services, which technologies appear to be decisive for implementation, and in which price segments one wants to offer. Additionally it is necessary to identify which existing internal potentials for success must be enhanced and which new ones must be built up in order to reach the wanted market positions.

In operational planning the results to be achieved are recorded in terms of content and deadlines. The question is therefore how and by when the targeted market positions are to be achieved. In operational medium-term planning (usually 2 – 5 years), the focus is on building up and expanding the success potentials required for strategy implementation. The planning contents are often structured according to functional areas, because the potentials have to be built up there (personnel, market development, suppliers, plants, IT, financing). To document these plans, it is advisable to define functional concepts. In this way, it can be tracked whether the development of potentials is progressing properly and on schedule.

In (operational) annual planning, the results (objectives) to be achieved in the planned year are derived from the strategies and the functional concepts and transferred to the sub-budgets. This makes it clear to everyone involved what contributions they should make to ensure that the organization as a whole achieves its goals. Finally, the content-related plans and objectives must also be represented in terms of value, so that it is clear whether the plans are financially feasible. This is done in the cost, activity, revenue and profit and loss account (via management accounting).

Because customers order products in different quantities and at different times than planned, because unexpected plant downtimes occur, and because employees can be absent or projects delayed, tactical planning and control during the year is necessary. The majority of the data required for planning is managed in the ERP (Enterprise Resource Planning) systems. The comparison of actual data with planning supports employees and managers in meeting their annual targets.