Expect questions that give you two statements and ask which is the mission, or a short scenario that asks whether it shows a value or a skill.
The key ideas
Core values versus core competencies
Core values are defining beliefs and principles that guide what a business does. Examples are creativity, excellence, transparency, empathy, and reliability. Core competencies are capabilities, skills, and expertise that help a business outperform rivals, such as innovation, customer service, communication, and efficiency.
A quick test: is it something the business believes matters, or something it does well? A belief is a value. A skill is a competency.
A furniture store that believes in honesty refunds a customer for a defective table even after the return window closes. Honesty is the value. Its warehouse team can pack and ship an order in two hours, which rivals cannot match. That speed is a competency.
How values and competencies drive decisions
Businesses share their core values with employees so everyone makes choices that fit the company, even without a manager watching. They also look at their competencies when deciding which opportunities to chase and where to spend resources.
Individuals do the same. When you pick a major, a job, or a training program, you weigh what you care about and what you are good at.
A delivery startup with strong logistics expands into same-hour grocery drop-offs. A student who values creativity and is strong at drawing considers graphic design before accounting.
Vision statements and mission statements
A vision statement is a concise description of a business's core values and aspirations. It points to the destination. A mission statement describes what the business does and how it will reach its long-term goals. It describes the route.
Both go to employees to guide decisions and give them a shared purpose. They also tell customers and investors what the business stands for.
Vision: a neighborhood where fresh bread costs less than a latte. Mission: we bake daily in small shops, buy flour from nearby mills, and keep every loaf under four dollars. A statement that names activities and a plan is the mission. A statement of pure aspiration is the vision.
Goals of businesses, social enterprises, and nonprofits
Businesses seek profit, aim to fulfill their stated mission, and try to stay competitive over the long run. They raise profit by increasing revenue, cutting costs, or both.
A social enterprise aims for profit and a social objective at the same time, through its product, its operations, or its financial model. A nonprofit serves the public good instead of generating profit for owners. Any surplus, meaning revenue above costs, must be reinvested by law, and nonprofits often rely on grants and donations.
A cafe that hires and trains young adults who aged out of foster care, while still paying its owners a share of profit, is a social enterprise. Khan Academy and Habitat for Humanity are nonprofits. A nonprofit can end the year with a surplus, but it cannot pay that surplus out to owners.
Key terms
- Core value
- a defining belief or principle that guides decisions.
- Core competency
- a capability, skill, or expertise that helps someone outperform rivals.
- Vision statement
- a concise description of a business's core values and aspirations, its destination.
- Mission statement
- what a business does and how it plans to get where it wants to go.
- Internal audience
- people inside the business, mainly employees, who use these statements to guide decisions.
- Social enterprise
- an organization that seeks profit and a social objective at the same time.
- Nonprofit
- an organization that serves the public good and must reinvest any surplus rather than pay it to owners.
- Surplus
- revenue in excess of costs.
- Grant
- funding awarded to an organization, often by a government agency or foundation, usually for a specific purpose.