Edgeman, R., Eskildsen, J. and Neely, A. (2015), "Translating triple top line strategy into triple bottom line performance", Measuring Business Excellence, Vol. 19 No. 1. https://doi.org/10.1108/MBE-12-2014-0054Download as .RIS
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Translating triple top line strategy into triple bottom line performance
Article Type: Editorial From: Measuring Business Excellence, Volume 19, Issue 1
Organizations have long and necessarily emphasized on the so-called bottom line performance, where the bottom line has traditionally referred to financial results. Financial performance is and has been a surrogate indicator of such varied and important elements as firm valuation, shareholder confidence and credit rating.
In recent years, the pressure on organizations to perform has not lessened and may indeed be more extreme than ever, in part because demands on organizations have diversified in ways that – taken at face value – do not always seem mutually congruent and in-fact, often seem to be in conflict with one another. Driving this change are the many and interacting faces of climate change and social strain, the role of organizations in their creation and the obligation of organizations to derive and deploy solutions to these so-called wicked challenges (Churchman, 1967).
We see then, pressure on organizations to deliver capital in the form of performance and impacts that are socially equitable (the people dimension), environmentally responsible (the planet dimension) and economically sound (the profit dimension). Since the landmark work, Cannibals with Forks (Elkington, 1997), these have been referred to as the triple bottom line domains of people, planet and profit.
It is naïve to assume that positive triple bottom line performance and impact will result consistently from good intentions alone. The approach taken herein then is one of intentionally linking triple top line strategy and governance (McDonough and Braungart, 2002) to performance and impacts via appropriately formed and deployed policies, partnerships, practices and processes – an approach that is essential to sustaining an organization’s competitive advantage (Porter and Kramer, 2006).
Contributions to this special issue examine this process from both end-to-end and closed loop perspectives. The objective is to explore and establish enterprise systems that provide feedback and foresight aimed at one-time improvements or that may contribute to a spiral of both incremental and radical improvement in one or more of the triple bottom line performance and impact domains. As such, the contributions to this issue identify various strategies and enablers of triple bottom line performance and impacts with perspectives that range from sweeping to supply chain to organizational to methods levels. Similarly, industry-specific examples are provided, as is a national approach to society sustainability garnered through lifelong learning.
Wicked challenges and the importance of the enterprise
In Wicked Global Challenges: Sustainability in the Enterprise Crosshairs, readers are introduced to the Anthropocene Age (Steffen et al., 2011) as the era in which we live – one in which at individual and corporate levels humankind is wholly or partially responsible for complex and entwined social, environmental and economic woes. Many such issues are referred to as wicked challenges where, among other characteristics, wicked challenges (Batie, 2008; Waddock, 2012):
are intractable and difficult to define;
are multi-causal and possess complex interdependencies;
generate conflicting stakeholder perspectives that may be driven by strong ethical, moral, political and social dimensions;
sit astride ecological, societal, enterprise and other boundaries; and
are associated with chronic policy failure.
Of specific interest in this special issue contribution are wicked challenges to which enterprises have contributed and that enterprises must help solve. Because wicked challenges are by nature boundary spanning, solution approaches that move multiple levers of change are equally apt to produce performance and impacts in multiple areas. The likelihood of this occurring is increased through use of approaches designed with the intent of producing improved triple bottom line performance and impacts.
Sustainable enterprise excellence, resilience and robustness (Edgeman and Williams, 2014) or SEER2 is presented as a measurement-based approach to such an approach. SEER2 derives from an integration of business excellence and sustainability modeling approaches, so that those acquainted with models and criteria such as those behind America’s Malcolm Baldrige National Award, the EFQM Excellence Model, Global Reporting Initiative (GRI), the ISO 26,000 Social Responsibility Standard or ISO 14,000 Environmental Management Standard will find its approach a familiar one. SEER2, which relies heavily on both general and social-ecological innovation (Edgeman and Eskildsen, 2014) as enablers, is such that an enterprise is regarded as:
Sustainable to the extent that it creates and maintains economic, ecological and social value for itself, its stakeholders, society and policymakers.
Excellent when its governance, leadership and strategy, as deployed through people, processes, partnerships and policies deliver superior performance and impact.
Resilient relative to its capacity to self-renew through innovation by adapting its responses over time to negative shocks and challenges.
Robust to the extent it is resistant or immune to shocks and challenges.
Enterprise human ecology, general and social-ecological innovation, financial policy, data analytics and intelligence and supply chain management are cited as among interrelated enablers of enterprise sustainability, excellence, resilience and robustness. Althogh each of these are discussed in the contribution, special attention is dedicated to social-ecological innovation that includes biomimetic approaches, supply chain management and big data analytics and intelligence using energy and related wicked challenges for illustrative purposes.
Performance measurement effects on organizational responses to threats
The pace of change in our world is quickening in many areas: socially, technologically, environmentally. In some instances, a quickening pace of change is desirable, as, for instance, when social, political or economic reforms are introduced. Similarly, technological or other innovations may produce radical improvements. An accelerating pace of change brings with it inherently greater turbulence, and with greater turbulence comes greater vulnerability to more, and generally less well-understood threats.
This contribution to the special issue – Performance Measurement Effects on Organizational Responses to Threats – demonstrates that, in the face of such threats, carefully crafted and creatively applied performance measurement practices can render an organization both more robust and sustainable. Important to this is the realization that performance measurement and management systems generally involve assessment of past performance for the purpose of managing future performance. When there is little environmental turbulence, this approach can work relatively well. When significant turbulence exists, threats arise that are largely the result of executive judgments of the possible losses in changing and, hence, unfamiliar environments (Dean and Sharfman, 1996; Nutt, 1993; Wally and Baum, 1994).
In this regard, author, George Huber, notes that two types of measurement systems are relevant:
the systems that the organization uses to detect and analyze threats; and
the systems that the organization uses to assess and improve its performance in the face of threats.
Huber goes on to systematically pursue:
determination of how an organization’s performance measurement systems can influence its responses to threats;
identification of shortcomings in performance measurement systems; and
suggestions for how such shortcomings can be remedied.
In particular, Huber explores these issues in light of three different types of threats, with examples of each provided: evolving environmental threats, commitment to program threats and competitor threats (Chattopadhyay et al., 2001). Each type of threat carries with it particular types of problems. For example, evolving environmental threats are associated with possibilities of not accounting for information processing limitations, not accounting for creeping abnormality, not accounting for threat-obscuring phenomena, not testing possible explanations for declining performance and not testing for alternative explanations for declining performance. Similarly, managerial denial and organizational escalation are associated with commitment to program threats just as other issues are linked to competitive threats. This special issue contribution provides valuable direction as to how to remedy or mitigate these threats.
Social issues and sustainable supply chains
Measuring Social Issues in Sustainable Supply Chains addresses the growing and important trend of examining business performance beyond a focal firm to the supply chain. Supply chains may be miniscule or massive and may be extraordinarily nuanced, so that supply chain performance measurement and management can present complex challenges (Hult et al., 2004; MacBryde and Radnor, 2006; Trkman et al., 2010; Wu and Pagell, 2011).
At the same time that attention to supply chain performance is increasing, so too is attention beyond economic performance to social and environmental performance and impacts at both the firm and supply chain levels (Andersen and Skjoett-Larsen, 2009; Gold et al., 2010; Mueller et al., 2009; Wong et al., 2011). Attention in this special issue contribution is dedicated to sustainable supply chain management, defined as:
[…] the creation of coordinated supply chains through the voluntary integration of economic, environmental, and social considerations with key inter-organizational business systems designed to efficiently and effectively manage the material, information, and capital flows associated with the procurement, production, and distribution of products or services in order to meet stakeholder requirements and improve the profitability, competitiveness, and resilience of the organization over the short- and long-term (Ahi and Searcy, 2013).
As can be seen from the preceding definition, creation and execution of sustainable supply chains address salient elements key to transformation of triple top line strategy and governance into triple bottom line performance and impacts. Identification and use of a flexile set of performance measures is critical to this transformation. Of particular concern in this contribution is identification of measures relevant to social performance of sustainable supply chains, where social issues in the supply chain are defined as “product or process related aspects of operations that affect human safety, welfare, and community development” (Klassen and Vereecke, 2012). Social performance measures identified in this contribution divide into quantitative metrics, qualitative metrics, absolute metrics, relative metrics and context-based metrics.
Although such measures aim to increase supply chain efficiency, effectiveness and accountability (Parmigiani et al., 2011), it is commonly the case that such measures do not map uniquely to social considerations, but to interrelated environmental or economic ones as well. For example, a measure such as customer satisfaction or loyalty that can be linked to social performance will be commonly correlated to economic performance. Similarly, a metric related to equitable access to or distribution of water may also be related to environmental considerations. As such, management of performance via measures that positively impact social performance might also prove to be positive levers of environmental and/or economic performance.
Identified in this special issue contribution are 53 social performance metrics for sustainable supply chains that address safety, welfare and community-related issues that were gleaned from a review of the scholarly literature. Although not examined for similar purposes, additional sources of inspiration for sustainable supply chain social measures include corporate sustainability reports, ISO 26000 Social Responsibility Standards, various elements of the GRI and the ten principles of the United Nations Global Compact (Castka and Balzarova, 2008; Helms et al., 2012; Kell, 2013; Kumar et al., 2012). Although not all sources of inspiration have been examined, this contribution has identified a substantial launching pad for improved performance measurement and management of sustainable supply chains and, hence, improved triple bottom line performance.
A lean deployment application in New Zealand
Most business excellence and radical improvement approaches seek to generate new social, economic or environmental capital. Lean enterprise approaches in contrast seek to reclaim value or capital sacrificed to poor practices, partnerships and processes. The list goes on ad infinitum with successful implementation of lean methodologies able to recover value across one or more of these triple bottom line domains.
Exploring Lean Deployment in New Zealand Apple Pack-Houses examines the applicability of lean approaches in a specific industry. Although low levels of lean knowledge and implementation were found, the exploration itself identified a number of largely context-independent lean approaches that may be transferable not only to apple pack-house or other horticultural environments, but to many others.
The result is a special issue contribution that begins to fill a gap in an industry essential to triple bottom line performance and impacts on a regional and global bases (Godfray et al., 2010; Hinrichs, 2013): food production and distribution. It is an industry with strong relationship to poverty alleviation (Bhattacharya et al., 2004), health (Stuckler and Nestle, 2012), human security (O’Brien, 2012) and conflict (Shultz et al., 2005).
Lean practices alone will not feed the people of this planet, but certainly lean approaches can contribute to solving this critical issue on local, regional, national and global levels.
Merciful and effective elderly care performance measurement practices
Owing to declining fertility and improved health care access the median age of the world’s human population has steadily risen (Centers for Disease Control and Prevention, 2003). This has many important and sometimes conflicting implications (>Kinsella and Phillips, 2005), among which are the following:
Although there is evidence to the contrary, it is widely reported that – other things being equal – an aging population places greater demands on health-care systems (Evans et al., 2001).
Coupled with migration, this has contributed to rapid population declines in Japan and various Eastern European nations (Bermingham, 2001; Faruqee and Mühleisen, 2003).
Rising retirement ages as a necessity for maintaining pension funds and tax bases and (Hall, 2014; Kulik et al., 2014), in turn leading to fewer youth employment opportunities.
Rapidly rising global populations that threaten to breech global carrying capacity (Ehrlich and Ehrlich, 2013).
To be sure, aging populations have impacts across the dimensions of the global triple bottom line.
In caring for the elderly, it is incumbent upon those providing the care to be merciful, not mercenary (Edgeman, 2002) whether that is at individual, institutional, agency or national levels. Pursuit of elder care that is merciful, not mercenary, requires care for the system that is itself providing the care, and care for the system requires attention to performance management practices.
This latter element is the subject of this contribution to the special issue: Merciful Yet Effective Elderly Care Performance Management Practices. In particular, the contribution examines management practices that provide the complementary benefits of cost efficiency and service quality improvement. The topic is a complex one composed of varied considerations that include balancing standardization with individualization (Rostgaard, 2012), attending to the metal strain that elder caregivers are commonly subject to (Zacher et al., 2012), pay for performance (Simpson et al., 2011), intensive employee recruitment approaches (Bishop, 2014) and among other strategies for marketization of eldercare ones aimed at balancing local autonomy with central authority (Vabø et al., 2013).
In all, this special issue contribution provides an understanding of management practices applied in eldercare home. The study covers the extent of development with the operations, targets and incentives domains. This understanding provides value – especially with respect to the social dimension of the triple bottom line to a segment of society that most of humanity aspires to attain.
The performance prism in higher education
Universities are major economic engines in the communities they inhabit, and contribute to general and scientific innovation and to the fabric of society. They annually turnover a large percentage of their students, most of whom go on to contribute to society at various levels. As with most other organizations, universities, whether they are publicly or privately funded, are under extreme pressure to improve their performance. Inextricably linked to improved performance is the selection of measures employed in the performance management system.
Neely et al. (2001) introduced the Performance Prism measurement framework with its five interrelated facets: stakeholder satisfaction, strategies, processes, capabilities and stakeholder contribution. Each facet involves various actors, activities and functions. The performance prism is a second generation performance management system. In many ways, it augments the work of the balanced scorecard (Kaplan and Norton, 1992), doing so by providing a systematic approach for identifying and aligning performance measures that can, in turn, be employed in scorecards that reflect changing contexts. For example, this combination provides an effective means of aligning triple top line strategy with subsequent triple bottom line performance as an alternative to, e.g. the sustainability balanced scorecard (Figge et al., 2002).
In Evidence for the Performance Prism in Higher Education, the applicability of the performance prism in higher education is explored. Revealed in this exploration is that there are negative implications of neglecting to consider the needs and perspectives of all stakeholders in planned change initiatives. As a case application, transformation of the undergraduate experience at a large university in the USA, as carried out through a newly formed division in which there is no distinct mission or common history is examined. A dashboard approach to management was applied in isolation, without reference to the Performance Prism and without, e.g. consideration of the varying perspectives of differing stakeholder segments – something that is explicit to use of the Performance Prism. The Performance Prism was then used to provide a post-hoc review of the process. This review revealed numerous areas where application of the Performance Prism would almost certainly have improved management performance – and, hence, would have delivered improved stakeholder value.
Unified communications as an enabler of workplace redesign
Mobile devices and unified communications are transforming the world in nearly innumerable ways. With impacts that range from banking and purchasing options, efficiency of market relationships, health behavior, knowledge access, transportation, human safety and security, warfare and defense and peace advancement the world of today is a very different one from that of Alexander Graham Bell, Guglielmo Marconi, Philo Farnsworth – inventors of the telephone, radio, television or even the world of Vint Cerf, Bob Kahn and Tim Berners-Lee – fathers of the Internet (Edgeman et al., 2013; Geser, 2006; Heinzelman et al., 2011; Heron and Smyth, 2010; McNeill, 2013; Pratt et al., 2012; Tenhunen, 2008; Wright, 1997). It is a world with technologies only hinted at in Star Trek (Dourish and Bell, 2014).
Not least among impacts of mobile and unified communications are workplace design ones, and this is the topic of this contribution to the special issue – Unified Communications as an Enabler of Workplace Redesign, which uses Microsoft Corporation as a case study organization, an opportunity enabled by the status of one author of the contribution as a former Microsoft senior executive. Unified communications strategy, intentionally or otherwise, can assume a triple top line structure with commensurate triple bottom line performance and impact.
Among identified innovations resulting from use of unified communications at Microsoft were increased productivity, improved talent attraction and retention, reduced use of sick leave, reduced communications costs, reduced information technology and administration costs, lower real estate costs, reduced training costs, reduced travel costs and reduced carbon footprint. Each of these improvements are easily mapped to triple bottom line performance with clear health and family implications associated with the social domain, reduced carbon footprint in the ecological domain and reduced costs aligned with improved economic performance. At the same that benefits are realized across these dimensions, the case study also highlights that there is an associated cost in work–life balance, so that moving forward requires collaboration between the organization and the individual to establish a healthy work–life integration model.
Lean lifelong learning as a means of sustaining Sweden’s competitive position
Lifelong learning is often cited as important, although not a failsafe enabler of long-term individual employability and economic viability (Coffield, 1999; Field, 2000; Hughes and Tight, 1995), as crucial to practice of effective citizenship (Hoskins and Crick, 2010), as supportive of psychological well-being and self-esteem (Gouthro, 2010; Hammond, 2004). Equally, lifelong learning is seen as critical to the social-and-economic equity dimensions of sustainable development (Cortese, 2003; Dudziak, 2007; Kilpatrick et al., 2003) at community, regional, national and multi-national levels (Cooke, 2001; Goodwin et al., 2005; Hassink, 2005). From an even more expansive perspective, lifelong learning is also seen as a potential path toward planetary stewardship (Salonen and Åhlberg, 2012).
In addition to sustainable development, lifelong learning is also considered to be an enabler of raising and sustaining economic competitiveness, one that is strongly related to creativity and innovation (Bontis, 2004; Jessop, 2012; MacLeod, 2000; Sahlberg, 2006). It is at this latter level that Sustaining Sweden’s Competitive Position: Lean Lifelong Learning is intended, using university-provided, net-based education as a national delivery platform. Significant to this study is that it comes during an era of austerity wherein both higher education institutions and governments are faced by increasing levels of public scrutiny and must allocate resources with care. In such instances, lean management principles and practices provide a source of wisdom as to content and delivery of lifelong learning, including use of massive open online course enrollment. Results of this study have important ramifications for universities and organizations alike.
The world we live in is a changed one – both for the better, and for the worse. Technological advancement has eased the burdens of life for many, yet human activity has created substantial social strain and influenced climate change.
We are left with a complex topography with many peaks and valleys and the pressure on organizations to respond appropriately has perhaps never been greater. In particular, organizations are expected to produce socially equitable, ecologically sensitive and economically sound performance and impacts – that is, they are expected to produce superior triple bottom line results. If the delivery of such results is to be other than serendipitous, then triple bottom line results must derive from superior triple top line strategy and governance that is executed via supporting policies, practices, processes and partnerships.
Contributions to this special issue of Measuring Business Excellence provide examples of full or partial transformation of triple top line strategy into triple bottom line performance and impacts. Among examples included herein are ones related to sustainable supply chain management, unified communications, lifelong learning in Sweden, lean implementation in an agricultural environment in New Zealand, elder care performance management and performance management in higher education. Broader contributions examine the nature of enterprise response to wicked global challenges, and the impact of performance measurement systems on the organization in the face of differing types of threats.
Across these contributions, various enablers of the transformation of triple top line strategy into triple bottom line performance are identified. Among identified enablers are lean practices, lifelong learning, supply chain proficiency, leadership and governance, unified communications and both general and social-ecological innovation.
Rick Edgeman, Jacob Eskildsen and Andy Neely
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About the authors
Rick Edgeman is a Professor of Sustainability and (Enterprise) Performance at Aarhus University (Denmark) and holds a secondary appointment at Uppsala University (Sweden). Prior positions include Professor and Head of the Statistical Science Department at the University of Idaho, QUEST Professor and Executive Director of the QUEST Honors Program at the University of Maryland, Professor and Director of the Center for Quality and Productivity Improvement at Colorado State University and Visiting Professor positions at Luleå University (Sweden) and the Università della Svizzera Italiana (Switzerland). He is a Six Sigma Black Belt with more than 200 publications spanning sustainability, enterprise excellence, quality management, Six Sigma, innovation, statistics, and wicked challenges. The American Society for Quality cited him as one of 21 Voices of Quality for the 21st Century, one of only six academic globally so identified. Rick is a former editor of Measuring Business Excellence and is an associate editor of Total Quality Management & Business Excellence. Rick Edgeman is the corresponding author and can be contacted at: mailto:RLEDGE@ASB.DK
Jacob Eskildsen is a Professor of Business and Quantitative Methods and Head of the Department of Business and Technology at Aarhus University (Denmark). Professor Eskildsen is a research faculty member with the Interdisciplinary Center for Organizational Architecture as well as the AIROD, CCP, Mindlab and Design-EM research groups and projects. He is the author of numerous research articles that appear in such journals as the Strategic Management Journal, Total Quality Management & Business Excellence, TQM Journal, Measuring Business Excellence, International Journal of Productivity and Performance Management and Business Strategy and the Environment. He is the Editor of the journal, Total Quality Management & Business Excellence. His research addresses performance management, applied statistics, big data analytics, customer and employee satisfaction measurement and lean six sigma.
Professor Andy Neely is Founding Director of the Cambridge Service Alliance and the Royal Academy of Engineering Professor of Complex Services. He is widely recognized for his work on the servitization of manufacturing, as well as his work on performance measurement and management. Previously, he has held appointments at Cranfield University, London Business School, Cambridge University, where he was a Fellow of Churchill College, Nottingham University, where he completed his PhD, and British Aerospace. He was Deputy Director of AIM Research – the UK’s management research initiative – from 2003 until 2012 and was elected a Fellow of the Sunningdale Institute in 2005, a Fellow of the British Academy of Management in 2007, an Academician of the Academy of Social Sciences in 2008 and a Fellow of the European Operations Management Association in 2009.