What is an effective organization? Organizations should not be judged just on their financial performance. They do need to perform at an above average level financially in order to be considered successful, and they do need to do it over a substantial period of time, not just a few years.
Above average financial performance is no longer enough. It is not the only thing that society has the right to expect from corporations. For several decades there has been growing support for holding them accountable for the other important outcomes they produce. The cry for broader accountability gets louder every year and the ability to hold them accountable for their non-financial performance improves every year. Now, more than ever, the focus should be on what it means to be a high performing, sustainable effective organization. But, what should organizations be held accountable for in addition to their financial results?
One proposal that has received a considerable amount of attention and support is the triple bottom line approach. It argues that it is important to hold organizations accountable for their financial, environmental, and social performance. I have no problem with including these three, but I think it is appropriate to make one important change in the triple bottom line argument.
Organizations need to be held to quadruple, not triple, bottom line performance standards. They need to perform well financially, environmentally, socially, and in how they treat their employees. How they treat their employees often gets included in the triple bottom line definition of the social category, but it warrants a separate and distinct set of measures and a high level of accountability. It is an area where the impact of organizations is measurable, significant, and may be quite different than the impact on the communities in which they operate.
Today, more than ever, it is feasible to hold organizations accountable for their quadruple bottom line performance and it is possible for organizations to perform well in all four areas. In the past, it was unrealistic to expect organizations to function well in all four performance areas. Indeed, it was not practical to measure the performance of organizations in all four performance areas, but times have changed. With the new metrics that are being developed as a result of big data and the tremendous computing and analytic power that is now available, it is more and more possible to measure their performance in all four areas.
Of course measuring quadruple bottom line performance is just the first step to getting organizations to perform in a sustainable effective way. They also need the internal capabilities that are necessary in order to perform well simultaneously in all four areas. It is beyond the scope of this piece to detail what all these capabilities are and how they can be developed. But, it is important to note that there are numerous new ideas about organizing and managing organizations that can increase the capabilities organizations have and make it possible to create organizations that perform well from a quadruple bottom line perspective.
Work and organizations are going to be changing more in the next decade than they have in any other thanks to the development of computing and other kinds of technology. When incorporating the new technologies that are being developed into how organizations are designed and operated it is critical that the quadruple bottom line be the criterion against which change is conceived, implemented, and evaluated. Only if this is done are organizations going to perform in ways that warrant support by the societies that create them and allow them to exist.
Crossposted from Forbes.com.