Operational impact on Triple bottom Line (TBL or 3BL)

All the organizations have different shareholders and each one of them rates the performance differently. Most of the time out of all stakeholders, only we get to see the performance report for shareholders. This report generally contains financial reports & some highlights/strategies of operations. However, this report does not show the 360-degree performance of the organization. Below are the list of shareholders and their perspective on performance measurement:-

  1. Internal:-
    1. Top management:-
      1. Acceptable profit
      2. Return on investment
      3. Low risk of failure
      4. Future innovation
    2. Staff:-
      1. Fair wages
      2. Good working condition
      3. Personal/career development
    3. Staff representative bodies:-
      1. Conformance with national agreements
      2. Consultation
  2. Periphery/External
    1. Government:-
      1. conformance to legal requirements
      2. Contribution to economy
    2. Society:-
      1. Minimize negative effects from the operation (noise, traffic etc.)
      2. Maximize positive effects (jobs, local sponsorships, etc.)
    3. Shareholders:-
      1. Return on investment
      2. Stability of earnings
      3. Liquidity of investments
    4. Lobby groups:-
      1. Alignment of the organization’s activities with whatever the groups are promoting
    5. Regulatory bodies:-
      1. conformance to regulations
      2. feedback on the effectiveness of regulations
    6. Suppliers:-
      1. Early notice of requirements
      2. Long-term orders
      3. Fair price
      4. On-time payment
    7. Customers:-
      1. Acceptable price
      2. Good service
      3. Quality offerings

We can see that there are so many performance criteria based on which stakeholder we are talking about. To cover the broader performance of an organisation, one common term used is “Triple Bottom Line” or “TBL” or “3BL”. It is also known as ‘people, plant & profit’ or ‘ people, planet & profit ‘. “A sustainable business is one that creates as acceptable profit for its owners, but minimizes the damage to the environment and enhances the existence of the people with whom it has contact.”  (Operations management-Nigel slack, Eighth edition,44). TBL relies on a simple idea to measure how sustainable a business is financially, socially & ecologically.

  1. The Social bottom line:- Social bottom line simply talks about the impact businesses has on the quality of people’s life. It is obvious that operations will have some involvement with society and thus society will be impacted by it. What this bottom line especially focuses on that how the business actions are having an impact on society (as a group and individual both) and they bear the responsibility for the same. It’s about what they are measuring & what we plan to do to deliver more even if it means allocating some financial resources from profits to promote overall social & individual well-being. Below are some ways in which the operations can impact the societal bottom line/performance of an organisation:-
    1. Customer safety from product & services
    2. Employment impact of an operation’s location
    3. Employment implications of outsourcing
    4. Repetitive or alienating work
    5. Staff safety and workplace stress
    6. Non-exploitation of developing region’s supplier
  2. The Environmental bottom line:- “Ensuring that the overall productivity of accumulated human and physical capital resulting from development actions more than compensates for the direct or indirect loss or degradation of the environment”  (world bank) is known as Environmental sustainability. it does not just take into account how much negative/positive any operation is impacting the environment (air pollution, waste generation, deforestation etc.) but also looks into bigger issues such as global warming. As Nigel Slack says, ” It is often operational failures which are at the root of pollution disasters and operations decisions (such as product design) which impact on long term environmental issues”.  The environmental bottom line can be influenced by operations in the following way:-
    1. Recyclability of materials, energy consumption, waste material generation
    2. Reducing transport-related energy
    3. Noise pollution, fumes & emission pollution
    4. Obsolescence & wastage
    5. Environmental impact of process failures
    6. Recovery to minimize the impact of failures
  3. The Economic bottom line:- In layman’s language, “The profit”. This report talks about the overall economic health of the company, profits, loss and how much economic value creation has been done. This gives direction to the operations manager on utilizing the resources with the best optimal output possible to increase the bottom line. Operations have a direct impact on the economic bottom line of the factory, sow of the ways are listed below:-
    1. cost of producing products and services
    2. Revenue from the effects of quality, speed, dependability and flexibility
    3. Effectiveness of investment in operations resources
    4. Risk and resilience of supply
    5. Building capabilities for the future

 

 

An article by:-

Ankur Kumar Pandey