Here’s a favorite post of mine from our old Yahoo group …
I was presenting a workshop in Darwin (Australia) recently when the manager of a (government-funded) organization objected that our methods focus only on the financial bottom line — and that they are not conducive with the concept of triple-bottom-line management.
Now, I must have had my head in the sand for some time because, up until then, I had never heard of this peculiar concept.
The idea is that an organization shouldn’t strive to improve just one bottom line (the financial one), rather it should also pursue the improvement of two (equally important) additional bottom lines: an environmental one and a social one.
Now, thinking readers will have already recognized two obvious objections to the triple bottom line:
- Division of labor (As Adam Smith pointed out, the economy as a whole benefits most when organizations specialize).
- Practicality (there can be no single standard of ‘environmental good’ or ‘social good’; only multiple measures that will ultimately conflict with one another)
But the argument that I presented in Darwin was simpler — and I suspect stronger — than either of these. And it it was pure TOC!
In TOC terms, the concept of the triple bottom line amounts to an argument that the organization should pursue multiple goals.
Is this possible?
Well, we know that a business is a system (a goal-seeking system). This means that a business is not a collection of independent parts — all the parts are connected (directly or indirectly) to one another (a part that wasn’t connected one way or another would not be part of the system).
We know that each of the parts of the (business) system has finite capacity: accordingly, the system has a whole has finite capacity. (If this wasn’t the case, it would have achieved it’s goal in the instance in which it came into existence!)
So, with these facts in mind, let’s think what happens when a business attempts to pursue multiple goals simultaneously. Inevitably, the pursuit of each goal requires a different allocation of resources from that finite resource pool. (This is called ‘resource contention’.)
The only way to resolve resource contention is to rank the three goals in order of priority.
The only way to perform this ranking is to nominate one of these goals as The Goal, and the others as Necessary Conditions. There is simply no other alternative in a finite-capacity system.
For this reason, I propose that a business cannot pursue multiple goals and that the notion of a multiple-bottom-line is discredited!
In the TOC world, the following definitions apply (my wording):
The Goal: the output the system is designed to produce (measured in units called Throughput).
Necessary Conditions: conditions that must be complied with in order for the achievement of the goal to be valid.
Necessary conditions are bi-modal (you either comply or you don’t). If we’re dealing with a typical business, the goal is to maximize the return on shareholder funds. An example of a necessary condition is ‘cashflow’. Maintaining adequate cash-on-hand is critical. More cash than that which is adequate provides no additional benefit.
Sadly, the workshop delegate was not happy with my answer. He left (in a huff) in the lunch break. By the way, he was correct to object that our method is not conducive with triple-bottom-line management. It isn’t. But neither is reality!