Compartamos is the largest and most profitable microfinance institution in Mexico. Follow Compartamos’ transformation through the stories of the people who make it tick.
Transforming CompartamosIn Episode 1 of this series, Compartamos staff talked about the fundamental transformation that introducing savings would entail at every level of the institution – from branch locations to operations, from HR policies to sales philosophies. With so many changes occurring simultaneously, the sanity and morale of the staff were beginning to suffer. Fortunately, management quickly realized that to make all these changes – and make them make sense to staff – they needed…A Plan.
Episode 2: The Plan
In late 2004, Compartamos’ Board of Directors decided to transform from a SOFOL (finance company) into a commercial bank – and their staff found themselves in a quandary.
“We had the One Million Client project, the new IT system, savings, insurance, transformation, training…too many projects!” explains Gonzalo Ramirez, a manager at Compartamos. “Different departments were being told to do too many different things.”
Barbara Meraz, Compartamos’ new savings manager, agrees. “In accounting they needed to do budgets, do reports, and give information to the authorities for our transformation. And in operations, they not only have to open 45 more branches this year as part of our normal growth plans, they also have to come up with new branch layouts for the future bank! We realized we were growing too fast, without control. The staff didn’t know what to do first.”
Compartamos takes a breath
In response, Compartamos launched two parallel processes designed to achieve better alignment between all of these different initiatives. First, several independent projects, including savings, were brought together and a new Bank Transformation (BT) team was formed to manage them. “All the departments have to change something,” says Carolina Velazco, BT coordinator. “This involves thinking about two things: 1) what you do right now, and 2) what you will have to do as a bank. So we’re doing a gap analysis, laying out what steps are necessary to do the new things, and how much time this will take,” she explains. “Now, we will start meeting with all the departments to see what they think of the gaps we’ve identified and the timelines, since they are the experts.” She predicts with a smile, “I imagine they will try to negotiate the dates!”
Carolina jokes about the psychological side of the transformation process, but recognizes that it is as important as the operational side.
“In March, we had a meeting with all the HQ staff to explain why we’re changing into a bank – because it’s the best way to achieve our goals for our customers,” she recalls. “We explained that they need to be flexible: have a good attitude and work as a team with different departments and the coordinating team. We also made it clear that the coordinating team was only coordinating – we are not the ones transforming Compartamos, because that would take 5 years! And we’re planning on being operational as a bank by January 2006.”
Balancing growth
Both the operational and the psychological sides of transformation are being supported by a second, simultaneous process: the development of a Balanced Scorecard.
“Alignment of all these projects to the strategy was one of the main concerns of top management,” says Ramirez, who is spearheading the Balanced Scorecard process. “They didn’t want them all going in different directions. And if you asked staff, the biggest problem was that they didn’t know what to do first,” he explains. “The Balanced Scorecard will help them answer that question. It’s a tool to ensure that all projects are going in the same direction.”
Compartamos' Strategy Map
The Balanced Scorecard is a management system that looks at an organization from four perspectives: business processes, customers, financials, and learning and growth. It attempts to create objectives and indicators for each of these areas and tie them into a continuous process of measurement that feeds back into strategy.
“We added a fifth perspective to the traditional four,” says Ramirez, “the social perspective, which talks about achieving personal development for our clients and their communities through our products and services. Then we defined the objectives for each perspective, and then figured out which ones were prerequisites for the others.”
The team illustrated these relationships with the strategy map shown at right.
“For example, from a financial perspective, one of our goals is increasing market share,” explains Ramirez. “But we can’t achieve that without increasing client satisfaction, which is one of the goals in the customer category. This also helps to align the pace of different processes and functions in different departments, like sales and systems,” he adds.
“Now we’re in the second step: how to measure all the goals,” Ramirez continues. “Right now we’re defining the indicators – how you know that this or that goal is being achieved. The third step will be defining targets for each indicator, and the fourth will be localizing our different projects – like savings, insurance, or marketing – on the map.”
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“I like it a lot, but it’s complicated,” admits Ramirez. “The map is not easy to understand. The project’s main asset is that it came from top management – otherwise, it wouldn’t have a chance.” He continues, “We had a meeting where each director brought another team member to the meeting to be in charge of disseminating information on the project, and the initial reaction was, “More work!” So we had to get the message across that this was not more work but a tool to better manage the work they already had.”
Compartamos co-directors, Carlos Danel and Carlos Labarthe, came up with a clever analogy to communicate this point. “They talked about how Compartamos was juggling too many balls, with too many in the air at once,” recalled Ramirez. “In this situation, the Balanced Scorecard will be like having another hand.”
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Back in the savings department, Meraz believes that pausing to re-organize the transformation process will ultimately save the institution time and resources.
“We don’t want to make two investments,” she explains. “We pushed back the branch piloting process until we could find out exactly what was needed as a bank, in terms of physical branch requirements. We didn’t want the authorities coming in later and saying we needed to do that and not this. Some layouts are now defined, so branch piloting should be able to start soon.”
Reflecting the institution’s new, more systematic approach, Meraz is also working on other systems to support the introduction of savings, such as piloting cashiers in the branches.
“The pilot testing of cash management will involve fundamental changes in the system – not just in the structure, but also the people working and their way of working. And this means everyone, not just the loan officers. Everybody needs to be trained in communicating – not just the branch staff.”
Meraz hopes the Bank Transformation and Balanced Scorecard projects will help with this. “Right now, everyone’s just thinking about how to survive today, but what we should be thinking about is what to do to be here tomorrow,” she asserts. “Changing this mindset is the biggest challenge.”