The Adaptive Quadruple Bottom Line Scorecard

Henk HaddersUniversity of Groningen

Accountability Through Measurement2nd National CSIN ConferenceToronto, March 2-3, 2010.

Intro

1. Organizational Sustainability

2. A new Strategic Performance Scorecard:- The Adaptive Quadruple Bottom Line Scorecard (AQBLSC)

3. A new Sustainability Measurement and Reporting Tool: - Capitals-based approach- Context-based sustainability & Context-based metrics - Quotients-based sustainability approach

OrganizationalOperations

Vital Forms of Capital

Natural ,Human, Social, Constructed

Well-BeingInternal and External

stakeholders

Social ContractStakeholders

ActualImpact on

Createflow of goods

and servicesneeded and used for

AppropriationsAffective, Evaluative

Response and behavior

Duties and obligations to stakeholders regarding impact on vital capitals(Norm)

Interaction

Adaptation

Problem Detection and

Knowledge gaps

KnowledgeProduction

Knowledge ClaimEvaluation

KnowledgeIntegration

Create new KnowledgeClaims needed forProblem solution

SurvivingKnowledge Claims

Actual impactKnowledge

on

A Reference Model

Reactive Learning

Reenacting habits

“downloading”Mental models

All learning integrates thinking and doing. In reactive learning, thinking is governed by established mental models and doing is governed by

established habits of action

All learning integrates thinking and doing. In reactive learning, thinking is governed by established mental models and doing is governed by

established habits of action

DoingThinking

Adopted from Senge, P. et al : Presence (2004)

Deeper Levels of (Creative) Learning

Thinking

Increasing awareness

of the whole

Doing

Actio

n th

at in

crea

sing

ly

serv

es th

e w

hole

Adopted from Senge, P. et al : Presence (2004)

Deeper levels of learning create increasing awareness of the larger whole – both as it is and as it is evolving– and actions that increasingly become part of creating

alternative futures.

Deeper levels of learning create increasing awareness of the larger whole – both as it is and as it is evolving– and actions that increasingly become part of creating

alternative futures.

The Adaptive Maturity Model

Thinking

Increasing awareness

of the whole

Doing

Actio

n th

at in

crea

sing

ly

serv

es th

e w

hole

Adopted from Joe Firestone (2006)

Financial Metrics

Balanced Scorecard

Adaptive Scorecard

AQBLSC

A different way of viewing organizational performance scorecards

• A life cycle approach enables managers to…– Design more complex scorecards to account for more

variables, and– Assess more types of organizational performance

• Financial• Environmental• Social • Economic• Learning • Knowledge• Organizational Intelligence• Organizational Adaptation

What is the Adaptive Quadruple Bottom Line Scorecard ?

• The AQBLSC is a tool for measuring business performance that not only considers standard metrics, such as financial, customer, business process, and employee development – it also evaluates a firm’s1. Organizational Learning and Intelligence

1. Routine learning processes2. Deeper creative learning processes

2. Social Responsibility3. Sustainability4. Adaptive Capacity

Major Benefits of the Adaptive Quadruple Bottom Line Scorecard

The AQBLSC……• Balances between internal and external impacts of the organization• Incorporates a management evaluation perspective that provides a

basis for evaluating the quality of management processes used• Provides a conceptual foundation that can enable more sophisticated

formal modeling of measures, and simulation of strategy dynamics• Offers greater applicability to account for the many ways in which

organizational complexity impacts performance• Builds a foundation for formulating more sophisticated business

strategies• Adopts a broad-view systems approach that offers a high probability of

achieving organizational sustainability and adaptability

The AQBLSC

Operational PerformanceMeasures

Intelligence PerformanceMeasures

Doing (BP) Managing (BM) Doing (KP) Managing (KM)

Financial Bottom Line

EnvironmentalBottom Line

Business Processing (BP)and Management (BM)

Knowledge Processing (KP)and Management (KM)

Outcome Impact Outcome

SocialBottom Line

EconomicBottom Line

InternalStakeholders

ExternalStakeholders

ExternalStakeholders

ExternalStakeholders

InternalStakeholders

InternalStakeholders

Outcome OutcomeImpact Impact Impact

Operational PerformanceMeasures

Intelligence PerformanceMeasures

Doing (BP) Managing (BM) Doing (KP) Managing (KM)

Financial Bottom Line

EnvironmentalBottom Line

Business Processing (BP)and Management (BM)

Knowledge Processing (KP)and Management (KM)

Outcome Impact Outcome

SocialBottom Line

EconomicBottom Line

InternalStakeholders

ExternalStakeholders

ExternalStakeholders

ExternalStakeholders

InternalStakeholders

InternalStakeholders

Outcome OutcomeImpact Impact Impact

Advocating for non-financial impact measurement, using• Capitals-Based Theory • Context-Based Metrics (CBMs)• Ecological and Social Footprints with Sustainability Quotient Method

TBL

Non-Financial Capitals and Well-Being

Available Flows of

Beneficial Goods and

Services

Available Flows of

Beneficial Goods and

Services

Appropriations by Individuals

and Collectives

Appropriations by Individuals

and Collectives

Resulting Levels of Individual

and Collective

Well-Being

Resulting Levels of Individual

and Collective

Well-Being

Natural Capital

Natural Capital

Anthro CapitalAnthro Capital

This is the capitals-based theory ofSustainability to which we subscribe!This is the capitals-based theory of

Sustainability to which we subscribe!

The 4 Bottom Lines and their Capitals

ANTHRO Capital

Financial Bottom Line

EnvironmentalBottom Line

MonetaryCapital

NaturalCapital

ConstructedCapital

SocialBottom Line

EconomicBottom Line

InternalStakeholders

ExternalStakeholders

ExternalStakeholders

ExternalStakeholders

InternalStakeholders

InternalStakeholders

HumanCapital

SocialCapitalBottom Line

Area of Impact

Adding Organizations to the Mix

Organizationalactivity

Organizationalactivity

Stocks of Vital CapitalStocks of

Vital CapitalHuman

Well-beingHuman

Well-being

managementinterventions

and impacts on organizational

activity

organizational contributions to supplies of vital capital (pos.& neg.)

quality and size of stocks

of capital

quality and volume of flows from

capital

basic needs being met ?

(yes/no)

indicatorsand metrics

Positive & Positive &

neg. impacts neg. impacts

indicatorsand metrics

indicatorsand metrics

indicatorsand metrics

indicatorsand metrics

…..and mapping indicators and metrics to this causal theory of human well-being…..and mapping indicators and metrics to this causal theory of human well-being

Adopted from McElroy (2009)

Definition of CBMs:

Measures of sustainability performance that express impacts on social and/or environmental resources in the world, relative to what such impacts ought to be in order to ensure human well-being– Grounded in the context of actual social and/or

environmental conditions in the world– Literal measures (absolute, not relative) of

sustainability performance

An Example: Water Use (w/o context)

Fortune 500 Company’s Annual Water Use

Mark W. McElroy, 2008

An Example: Water Use (with context)

Fortune 500 Company’s Annual Water Use

Mark W. McElroy, 2008

CBMs Take Form of Quotients

AN

SustainabilityPerformance =

Actual impacts onvital resources

Normative impacts onvital resources

ScoringConventions

For environmental areas, scores of < 1.0 = Sustainable

For social areas, scores of > 1.0 = Sustainable

Mark W. McElroy, 2008

I thank my US Friends

• Joe Firestone PhD, CEO of Knowledge Management Consortium International: eisai@comcast.net – the Adaptive Scorecard

• Steve Cavaleri PhD, Professor Connecticut State University: cavaleri@ccsu.edu – System Dynamics and Modeling

• Mark W. McElroy PhD, CEO of the Center for Sustainable Innovation & Director of Research at Deloitte’s Center for Sustainable Performance in Waltham, Mass, : mmcelroy@vermontel.net – the Social Footprint and the Quotient approach to sustainability

and Thank You!

For more information, contact us at

Henk HaddersUniversity of Groningen

henk.hadders@home.nl