Transforming Compartamos: Episode 3

Compartamos Episode 3: Putting first things first

Previous Change Maker Episodes: Compartamos, Mexico Episode 1 Episode 2

In episode 2, the race to transform Compartamos was taking a toll on staff - so management decided to pause, regroup, and come up with a plan for what needed to be done first. Taking stock of its priorities allowed the institution to figure out which projects were going well and which needed help, and focus on the few tasks that are absolutely crucial to their transformation - and therefore, to eventually mobilizing deposits.

Shaken and stirred

"2005 has been the year of the crisis," says Compartamos' Strategy Director Javier Fernandez-Cueto. "It was like we put the whole organization in to a martini shaker - the end product is going to be excellent, but the process is really disorienting!"

Javier Fernandez-Cueto, Director of Strategy for Compartamos

The past 12 months have indeed been dramatic for Compartamos. In addition to adding 130,000 new clients and opening 44 new branches, headquarters has been managing the enormous task of preparing Compartamos to transform into a bank. The goal of the transformation is to enable Compartamos to diversify into deposits and other products to better meet client demand. As sweeping as these changes are, Javier asserts that they are necessary to keep pace with the industry.

"There are a lot of fast changes in the market now," he says, "A lot of interest in starting new banks targeted at specific niches. The SOFOL¹ category is changing too, so there will be many new lenders for things like housing."

To stay competitive, Compartamos is focusing on three main challenges: maintaining growth, strengthening their brand, and diversifying their products. "The strategic plan is focusing on growth and diversification of new products and services, savings being one of them. We want to create new distribution channels so we can provide as many transaction points as possible for our clients," says Javier. However, getting future depositors to use those transaction points requires something more. "We also need to make sure our brand is associated with trust, so that people use them."

But sustaining breakneck growth while fundamentally transforming your institution can be like taking a corner at full speed on a motorcycle - you can easily spin off in the wrong direction and crash. And indeed, by August of this year, many staff members were worn out by the multiple, urgent demands of these competing goals.

"We were trying to do too much at once," remembers Javier.

Some staff members also say that the sheer amount of work involved in the transformation came as a surprise. Compartamos has already been through one legal change - from an NGO to a SOFOL in 2000 - but this time, the changes are more complicated. The organization itself is bigger and more complex, with six times the clients it had then. And the changes are not only legal but operational, involving completely new lines of business. The relative simplicity of the first transformation may therefore have led to an underestimation of what this one would entail.

 

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"Putting order into the chaos"

But if that impression existed, it was shattered when a key technology project failed to complete on deadline this fall. Concerned, management decided to review all ongoing projects and found 40 separate initiatives underway in the organization - most functioning with only 80% of the resources they needed, causing multiple delays. To help prioritize those projects, they turned to the Balanced Scorecard.

"We've narrowed 40 projects down to 13," says Gonzalo Ramirez, who has been managing the development of Compartamos' Balanced Scorecard, now renamed Project SIGUE. "The technology project fell behind because there was no project monitoring department to raise the alarm early," he says. "This is one of the advantages of SIGUE: signaling when projects are going off-track, on time, so you can reorganize projects and reallocate resources."

Despite its apparent utility, Gonzalo says that getting staff to use SIGUE - the Spanish acronym for Integrated Strategy-linked Management System - was a hard sell at first. "We renamed it because 'Balanced Scorecard' was foreign - people didn't know what it meant and were just seeing it as more work."

So the team undertook a "huge internal communication effort" to make SIGUE relevant to Compartamos staff. According to Gonzalo, the internal marketing has paid off.

"Now people think of it as a tool to better execute strategy," he explains. "For example, the strategy maps are beginning to be used as main guides for weekly management and division meetings."

Strategy maps are tools produced by the Balanced Scorecard process that link activities to key strategic goals and associate each one with specific indicators to track progress.

"The big challenge now is making SIGUE process truly integral to project administration and process monitoring," says Gonzalo. "Our next concrete step is to build a project monitoring office and starting to monitor costs better, preparing for the day when resources are limited. We need to get better information, earlier on, and put all new projects through SIGUE to evaluate their importance to our overall strategic goals."

 

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Product Manager Fernando Piña discusses his involvement in Compartamos' MIS transformation.

First things first

When management examined all their ongoing initiatives through this lens, they actually decided to postpone piloting deposit collection until after all the prerequisites to becoming a bank were fulfilled. Among those prerequisites, one project stood out as critical: MIS transformation. To speed up the development process, operational staff were reassigned to the software team to act as resource people and provide a "reality check" on the new system, to ensure that it responded to the actual needs of the organization.

One of those operational staff is Fernando Piña, Product Manager for individual loans. According to Fernando, organization and communication have been the two biggest challenges that the project has faced.

"Our vendor is one of the best on the market, but wasn't adequately focused before," he observes. "But the delay was our fault too - we weren't involved enough."

Reassigned operational staff work to speed Compartamos' MIS transformation, the last prerequisite necessary for a bank license

Massive IT projects are challenging for every organization, but Fernando says that Compartamos has learned many lessons from this one. First, he recommends avoiding the common tendency to leave IT project management to technical experts. "Get involved," he says, "Make sure things are going the way you want." But involvement cannot only be on the client's schedule, he warns; clients must also make staff available when project consultants need them. Finally, he echoes Gonzalo's concern with timely information. "Make decisions early," he says, "and pay attention to problems early."

With 40 staff and consultants now working on the MIS, the pace has picked up considerably. One of Fernando's key tasks is to make sure that the new MIS can handle individual products. "The current MIS is designed for groups, so it is not able to handle individual loans well," he explains. This will also be important for savings, because you have to have an individual account."

"You know, sometimes your main strength can be your main weakness," he continues. "The village banking loans work so well, that everything, all our resources, revolve around that. But that culture will have to change."

However, Fernando is not worried about this. "What is Compartamos really good at? Changing - it's what we do!"

"It sounds contradictory: the village banking loans don't change, but we do," he continues, referring to the plans for Compartamos' future delivery mechanisms and legal status. "It's been a hard process, but what isn't? It's just a matter of doing what we have to do."

This means putting first things first, so that Compartamos clients can benefit from a full range of financial services in the end.

 

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¹SOFOL stands for sociedad financiera de objeto limitado, a type of non-bank financial institution in Mexico.