Chia-Li Chien | Dec. 06, 2012
As business owners, we must ride the boom and bust of any economic cycle. Only a few successful companies will stand the test of time. So while thinking about business success, it seems like a good time to explore Triple Bottom Line.
The first use of this term can be found in books from Ken Blanchard. In working with clients and observing how they operate their successful businesses, my own definition of the Triple Bottom Line simply means External Performance Indicator (EKI). The EKI comes from choices made by your company’s 1) Customers, 2) Employees and 3) Investors (including you the owner.)
Sara (not her real name) has enjoyed organic growth on an average of 15% annually. She realized that she had hit the maximum capacity and capability in her business. Throughout the fifteen years of her business, she often brought in high power consultants for fixes in her organization. However, nothing really could be sustained over time or internalized within her business of 300+ employees.
To meet a new aggressive growth goal of 20% annual growth over the next three years, Sara realized that something had to change. Her need went beyond just adding people to the team—she needed a solid structure and foundation to sustain and capture on balance sheet value—pure financials and off balance sheet equity value—the innovations or technology unique to her company—with or without her in the picture.
Sara’s organization in general demonstrated a top down approach. Whatever Sara said to do, her team did it. The majority of her team leaders and teams were what some would call “YES” men and women. Many of the employees had complained, “Why hire consultants? We know exactly what to do and don’t need outsiders to tell us so!”
There was obviously a lack of communication channels or platforms to allow employees to present their ideas, even though they were the people on the ground in the field day in and day out working with customers closely. I totally agreed that they knew exactly what to do. The only means of communicating their ideas had just been a “comment box” and nothing else. A communication platform is not just to capture these ideas. It has to closely align to the overall strategy with proper priority, resources (funding, people, technology, etc.) and timeline to execute.
Together, we followed our Triple Bottom Line process to create high-level entity business models. In Sara’s case, for legal compliance, she had to create another legal entity to satisfy current regulation. That meant business models, or two entities, to strategize with her key management team. Although Triple Bottom Line was a new process to them, Sara and her team continue to follow through.
For the first time in fifteen years, Sara conducted her first strategy session with her 10-people key management team. This created her first real business plan, which in turn creates business equity value. Not only does this help her team visualize the long- term business goals but it also to encourages the team’s input and ideas for innovation.
You see the effective use of the Triple Bottom Line to capture “on” and “off” balance sheet business equity value is not something most entrepreneurs would do. Not because they don’t want to, but because “they don’t know what they don’t know!”
The triple bottom line is the process you follow to sustain equity value over time.
How do you get started with Triple Bottom Line?
- Revisit your business model to ensure it is properly aligned and communicated with your team. Help them understand your business model. Please keep it a living model—it will change depending on your industry or general economic condition. Engage your team to be part of the overall design and input.
- Use the business model to break down each functional team strategy plan—their implementation plan so to speak. This helps your key manager execute the plan as well as measure performance. Keep them accountable for what they commit to in their annual plan. They can use this same functional team strategy to hold their team accountable too.
- Periodically monitor the health of internal performance indicators such as KPI’s (Key Performance indicators) that your key managers must set for their team. Adjust and act accordingly.
- Practice effective communication among functional teams at the key manager level as well as employee level. People want to feel they are valuable to you, so talk with them. Let them know they are needed. You may never know the innovation that can come from your own team unless you give them the opportunity within a ready platform.
Sara did not conduct an internal strategy session as a symbolic act. The gains will benefit all stakeholders including 1) Customers 2) Employees and 3) Investors. This not only meets Sara’s business revenue goal, but it also helps her achieve the personal goal of “freeing up” her time 25% in the first year, 50% in the second year and 75% in the third year.
After following the Triple Bottom Line process, Sarah’s business now runs without her, making her business a solid investment for any interested investor or potential buyer.