The Adaptive Quadruple Bottom Line Scorecard Henk Hadders University of Groningen Accountability Through Measurement 2 nd National CSIN Conference Toronto, 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

Organizational Operations Vital Forms of Capital Natural,Human, Social, Constructed Well-Being Internal and External stakeholders Social Contract Stakeholders Actual Impact on Create flow of goods and services needed and used for Appropriations Affective, Evaluative Response and behavior Duties and obligations to stakeholders regarding impact on vital capitals (Norm) Interaction Adaptation Problem Detection and Knowledge gaps Knowledge Production Knowledge Claim Evaluation Knowledge Integration Create new Knowledge Claims needed for Problem solution Surviving Knowledge Claims Actual impact Knowledge 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 DoingThinking Adopted from Senge, P. et al : Presence (2004)

Deeper Levels of (Creative) Learning Thinking Increasing awareness of the whole Doing Action that increasingly serves the whole 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.

The Adaptive Maturity Model Thinking Increasing awareness of the whole Doing Action that increasingly serves the whole 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’s 1.Organizational Learning and Intelligence 1.Routine learning processes 2.Deeper creative learning processes 2.Social Responsibility 3.Sustainability 4.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 Performance Measures Intelligence Performance Measures Doing (BP) Managing (BM)Doing (KP)Managing (KM) Financial Bottom Line Environmental Bottom Line Business Processing (BP) and Management (BM) Knowledge Processing (KP) and Management (KM) OutcomeImpactOutcome Social Bottom Line Economic Bottom Line Internal Stakeholders External Stakeholders External Stakeholders External Stakeholders Internal Stakeholders Internal Stakeholders Outcome Impact

Operational Performance Measures Intelligence Performance Measures Doing (BP) Managing (BM)Doing (KP)Managing (KM) Financial Bottom Line Environmental Bottom Line Business Processing (BP) and Management (BM) Knowledge Processing (KP) and Management (KM) OutcomeImpactOutcome Social Bottom Line Economic Bottom Line Internal Stakeholders External Stakeholders External Stakeholders External Stakeholders Internal Stakeholders Internal Stakeholders Outcome 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 Resulting Levels of Individual and Collective Well-Being Resulting Levels of Individual and Collective Well-Being Natural Capital Natural Capital Anthro Capital This is the capitals-based theory of Sustainability 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 Environmental Bottom Line Monetary Capital Natural Capital Constructed Capital Social Bottom Line Economic Bottom Line Internal Stakeholders External Stakeholders External Stakeholders External Stakeholders Internal Stakeholders Internal Stakeholders Human Capital Social Capital Bottom Line Area of Impact

Adding Organizations to the Mix Organizational activity Organizational activity Stocks of Vital Capital Stocks of Vital Capital Human Well-being Human Well-being management interventions 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) indicators and metrics Positive & neg. impacts indicators and metrics indicators and metrics indicators and metrics indicators and metrics …..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 A N Sustainability Performance = Actual impacts on vital resources Normative impacts on vital resources Scoring Conventions 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: – the Adaptive Scorecard Steve Cavaleri PhD, Professor Connecticut State University: – 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, : – the Social Footprint and the Quotient approach to sustainability

and Thank You! For more information, contact us at Henk Hadders University of Groningen