Page 77 - Operations Strategy

52 CHAPTER 2 • OPERATiOns PERfORmAnCE
business activity negatively impacts on the natural environment. It is clearly an impor-
tant issue, not only because of the obvious impact on the immediate environment of
hazardous waste, air and even noise pollution, but also because of the less obvious, but
potentially far more damaging issues around global warming. Operations managers
cannot avoid responsibility for environmental performance. It is often operational fail-
ures that are at the root of pollution disasters and operations decisions (such as product
design) which impact on longer-term environmental issues.
Some ways that operations can impact the environmental bottom line performance
include the following:

● Recyclability of materials, energy consumption and waste material generation
● Reducing transport-related energy
● Noise pollution, fume and emission pollution
● Obsolescence and wastage
● Environmental impact of process failures
● Recovery to minimise impact of failures

The economic bottom line (Profit) – the economic account, measured by profitability,
return on assets etc. of the operation.
The organisation’s top management represent the interests of the owners (or trus-
tees, or electorate, etc.) and therefore are the direct custodians of the organisation’s
economic performance. Broadly this means that operations managers must use
the operation’s resources effectively, and there are many ways of measuring this
‘economic bottom line’. Finance specialists have devised various measures (such
as return on assets etc.), that are beyond the scope of this book, to do this. Some
ways that operations can impact the financial bottom line performance include the
following:
● Cost of producing products and services
● Revenue from the effects of quality, speed, dependability, and flexibility
● Effectiveness of investment in operations resources
● Risk and resilience of supply
● Building capabilities for the future
We will build on these ‘economic bottom line’ issues in the next section on judging
operations performance at a strategic level.

The triple bottom line is not universally accepted
The dilemma with using this wide range of triple bottom line, stakeholders, or CSR to
judge operations performance is that organisations, particularly commercial compa-
nies, have to cope with the conflicting pressures of maximising profitability on the
one hand, with the expectation that they will manage in the interests of (all or part of)
society in general with accountability and transparency. Even if a business wanted to
reflect aspects of performance beyond its own immediate interests, how is it to do it?
According to Michael Jensen of Harvard Business School, ‘At the economy-wide or social
level, the issue is this: If we could dictate the criterion or objective function to be maximised
by firms (and thus the performance criterion by which corporate executives choose among

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