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The triple-bottom-line approach

Kelli Boylen Published on 25 September 2015

Managing for the “triple bottom line” can lead to success on your operation, according to Joshua Dukart, a holistic management-certified educator operating out of Bismarck, North Dakota.

What is the triple bottom line? It is one functional unit of economic viability, environmental stewardship and social responsibility – or as he says, “Make money, regenerate your natural resource base, and have fun.”

These three elements make up holistic management.

“Holistic management is bringing resource management, financial management and people together in optimal balance,” Dukart says. “It’s not so much a goal or objective as a context, a direction, a way to work and live.”

He says, “We all have goals and objectives – like wanting a certain amount of money, acres or animals – and commonly we focus on that one thing. Holistic management keeps us grounded by knowing that all three components are important.”

Holistic management gives us a way to live out our social values, Dukart explains. We can live from one crisis to another putting out fires, being part of the rat race, or we can manage our lives with resources, finances and people all managed on an equal level.

Changing your philosophy to holistic management “won’t suddenly flip a switch,” Dukart says. “It’s more about moving in the direction you want to go. When you start to think holistically, you start to think about how to actually solve problems rather than simply address symptoms.”

Dukart says before adapting holistic management, he approached things differently when working with producers. For example, if a parcel of land wasn’t producing as much as desired, he would have asked things such as, “When was it planted?” or “How much fertilizer was used?”

Part of managing holistically, he explains, is asking “why.” Are things such as weeds, insects, poor animal performance or low forage production the problem, or are they symptoms of a larger issue?

“Asking why and getting to the root of the problem is a good start,” Dukart says. “Ask the right questions to figure out what is going on. All problems have a financial, resource and people aspect to them. Be sure to ask about all three aspects rather than just what is obvious.”

Solving problems at their core is a way to make progress and often not have to deal with that particular problem again. “We are trained to look at symptoms and then ask ourselves what we can do to make what we don’t like go away. It can often work much better to simply ask ‘why’ as many times as needed until we can figure out the root cause,” Dukart says.

Finding ways to let nature do the work can often be a solution. For example, producers could plan for calving in January and February. This requires more feed to be stored because of the increased nutritional needs, more facilities to store that feed have to be acquired, shelter is needed for calving, increased labor is needed, etc.

Dukart says, “Putting the reproductive cycle of the animals in sync with the forage cycle makes a lot more sense so the cows have optimal nutrition available on pasture at the time they have the highest nutritional requirements. The cows are doing the work themselves – getting the nutrition they need at the time they need it most.”

This solution is also less work for the people, works well with resource management and makes sense financially.

Nature not only can be the solution for some farm issues, it also serves as a reminder of how holistic management works. Soil, plants, animals, microbes and people have a reciprocal relationship, all depending on one another. Dukart says, “You can’t manage for any one thing and maintain balance.”

Dukart said holistic financial planning focuses on profit rather than production.

The traditional way to look at finances is:

Income - Expenses = Profit

Holistic financial planning instead uses the formula:

Income - Profit = Expenses

“This equation flips the above simple accounting formula on its head. But math is math, and this rearrangement is not only legal but also accurate. This version now gives more credit to profit. Since it is on the left side of the equation, we are now saying that we have some control over its amount and are actually going to determine it for ourselves … This is one of the key ingredients in putting together a successful financial plan.

With this formula, instead of determining what level of expense will bring forth a certain profit, we are going to determine that, at a certain level of profit, how much expense we are allowed to incur.”

Dukart says we traditionally are willing to assign values to income and expenses, but instead profit should be treated as the priority that should be “paid” first.

Dukart says the equations I-P=E versus I-E=P are rather simplistic, but which one you use says a lot about your financial vision and what kind of attitude your financial plan has.

Holistic financial planning also breaks down expenses as top priority, liabilities and maintenance.

Regular monitoring of finances is also very important. Dukart says, “All the planning in the world doesn’t do much good unless we see that what we are doing is keeping us on track rather than waiting until the end of the year and seeing if it was boom or bust.”

He says, “Once you consider your profit as off-limits – not that it is there to take money from whenever you need it – you quickly get much more creative on how to take care of expenses.”

Another aspect of holistic financial planning is constantly looking for an operation’s weakest financial link. There are three essential links on any operation: resources (converting soil, sun and seed to feed to raise animals), products (gather or harvest finished products) and marketing (converting your product to money).

“At any given moment, one of these is your weakest link. Even if you have a great operation, you have a weakest link that you should be looking at,” Dukart says.

Dukart encourages producers to think about resources, finances and people when asking themselves:

  • What’s the best place to use your next dollar?
  • What’s the best way to use your next hour of time?
  • What action will lead you toward your long-term goals?  FG

Kelli Boylen is a freelance writer.