Compass Manual v09-1

The Compass of
Local Competitiveness
Manual Version 0.9
mesopartner
local economic delivery
Version of Thursday, 20 November 2008
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Table of Contents
1 Introduction 1
2 Why use a Balanced Scorecard-based approach to LED? 2

2.1 The background of the Compass 3
2.2 Features of the Compass 3
3 What are the key elements of a Compass? 4
4 What are the considerations and activities involved in the preparation of a

Compass of Local Competitiveness? 6
5 Different types of Compass Workshops 7
6 Structure of a Compass Workshop 9
7 What happens after the Compass Workshop? 13

7.1 Action planning 13
7.2 Creation of a monitoring system 13
7.3 Implementation of LED activities 14
7.4 Follow-up Compass Workshop 15
8 Step-By-Step Explanation of Compass Workshop: Tables 17
9 Annex 1: An Example of the Application of the Compass of Local

Competitiveness in a Subsector: An Upgrading Project with Fresh
Vegetable Producers in Gampola, Sri Lanka 33
10 Annex 2: Documentation of a Compass workshop – Investment promotion

in Baybay, Philippines 38
11 Annex 3: The Paper Computer 42

Summary
The Compass of Local Competitiveness is a tool that delivers five results in the context of lo-
cal and regional development initiatives:
1. Capture the results of completed and ongoing activities
2. Create alignment among stakeholders about vision and strategy
3. Identify critical success factors for the development of a location or a specific sector or
cluster therein
4. Formulate indicators to track progress
5. Define new activities and responsibilities for their implementation
Whereas an external development agency would be interested in all five results, local
stakeholders tend to be particularly interested in the third and fifth result. As local
stakeholders notice the usefulness of the Compass to deliver these results, they tend to be
willing to make the necessary time available to participate in a one-day Compass workshop.
The Compass is an adaptation of the Balanced Scorecard. While the BSC tends to result in
complex, costly software systems, the Compass subscribes to the intention initially underlying
the BSC, i.e. to provide a comprehensive yet simple and straightforward performance man-
agement approach.
The Compass can be applied in four different ways:
Action-oriented exercise Comprehensive exercise

Overall LED One-day workshop that involves One-week exercise, consisting of
effort stakeholders from various subsec- workshops with local stakeholders
tors. Recommended only in loca- and a separate effort to define indi-
tions with a strong, cohesive LED / cators and set up a system to track
RED effort them.
[4] [1]
Sector or value One-day workshop that involves One-week exercise, consisting of
chain initiative stakeholders from one subsector or workshops with local stakeholders
value chain. Has a strong business and a separate effort to define indi-
focus and helps business people to cators and set up a system to track
better understand their business them.
environment
[2]
[3]
The most straightforward and easy to facilitate format is No. 3. In a mature LED / RED proc-
ess, the most adequate approach would be to combine Nos. 1 and 3.
The Compass of Local Competitiveness 1
1 Introduction
The Compass of Local Competitiveness is a tool for performance management in territorial

development / Local Economic Development (LED) initiatives. It is based on the Balanced
Scorecard (BSC) method. Whereas BSC has been designed for the use in companies and other
organisations, the Compass is specifically designed to cater for the needs of territorial devel-
opment initiatives.
The Compass of Local Competitiveness is a tool that gives you

• a clarified perception of the vision and objectives of territorial development,
• a process of strategic alignment among the stakeholders involved in an initiative,
• the identification of the critical success factors of a territorial development programme
and of specific initiatives within this programme,
• the definition of key performance indicators and specific targets you want to match,
• the definition of specific activities to achieve these targets.
At what stages of an LED process would you consider to use the Compass? In principle, the
Compass can be used at any stage, including the very outset. It is ideally suited for use in a
constellation where LED activities have been going on for some time, say six months or a
year. It can also be used at a later stage, and it is amenable to being used in a steady rhythm,
such as once per year.
In our experience, a Compass can be elaborated in a participatory workshop with local

stakeholders under the guidance of experienced facilitators. Elaborating a Compass of Local
Competitiveness can be the outcome of a single workshop. In case a comprehensive perform-
ance management system is needed there is the option to have a sequence of three workshops.
The total duration of a single workshop is less than a day. The sequence of workshops can
still be concluded within a week.
Elaborating a Compass of Local Competitiveness involves a reasonably representative group

of stakeholders around the LED programme or initiative and a skilled facilitator with experi-
ence in applying the Compass. It presupposes the buy-in of these stakeholders so that they
make the necessary time available. Getting relevant stakeholders to participate in a workshop
is sometimes a challenge, and this is one of the reasons why the Compass works particularly
well in a robust LED process that enjoys the genuine support of stakeholders.
2 Why use a Balanced Scorecard-based approach to LED?
It is a widespread phenomenon both in industrialised and in developing countries that LED is

conducted with little concern for monitoring and evaluation (M+E). There are a number of
reasons for this:
• It is often no easy to get LED activities going, and in particular it is a constant challenge
to involve the private sector in LED. Accordingly, there often is little to monitor in the
first place. If LED activities are going on, stakeholders are so busy managing them, or
keeping them going on at all, that little time and energy is left for proper M+E.
• LED is often conducted in a pragmatic and ad-hoc way that makes M+E difficult. It is not
a constant production or service delivery process, like in a company, but rather a sequence
of targeted individual activities. Once a given problem has been fixed, the actors involved
often don’t see the point in monitoring and evaluating this.
• M+E takes time and effort. It can become costly, it can become bureaucratic, and ulti-
mately it can distract from actually doing LED. Given the fact that they always suffer
from time and budget constraints, LED players often prefer to devote their scarce re-
sources to doing things, expecting that successes will speak for themselves and assuming
that managing LED implicitly includes monitoring anyway.
Looking at these strong reasons against M+E in LED, we need very convincing arguments to
persuade LED actors to do M+E nevertheless. Some such arguments are the following:
• We need convincing success stories of substantial outcomes of LED to get sustained sup-
port, including funding, for LED. We only get documented success stories if we do M+E.
• LED involves a learning-by-doing process. M+E provides us with the means to make im-
plicit learning explicit and thus transferable, so that over time the effectiveness and effi-
ciency of LED improves and experiences becomes transferable between individuals.
• Ongoing, revolving M+E provides us with evidence that helps us to cope with the 80/20
problem, i.e. the fact that we often spend 80% of our effort for activities that only deliver
20% of the outcome. M+E can help us to identify and terminate those activities that have
an unfavourable effort/outcome ratio and focus our energy at those activities with a fa-
vourable effort/outcome ratio.
Why do we suggest a BSC-based approach for M+E in LED? The main reason is that the
BSC appears superior to conventional performance management frameworks. Elaborating and
monitoring a Compass is more efficient, and it is, well, balanced. Moreover, and more im-
portantly, the Compass is more than just an M+E tool.
2.1 The background of the Compass
The BSC approach was originally developed for the corporate sector. It was based on a simple
observation: Actors in an organisation behave according to the incentives they face, and the
incentives are shaped by performance indicators. If their performance is measured against fi-
nancial indicators, they will optimise such indicators – even if the short-term optimisation of
financial indicators may come to the detriment of the long-term growth potential of the busi-
ness. The key idea of the BSC approach was to introduce a wider, more balanced set of per-
formance indicators that is not one-sidedly looking at financial indicators but also at other,
more qualitative indicators that address the long-term growth perspective of the business.
The rationale for using BSC in public and public-private LED efforts follows the same line of
reasoning. Conventional performance monitoring frameworks for territorial development tend
to look one-sidedly at economic indicators, such as GDP growth, business growth, start-up
performance and employment growth. The problem is that newly launched LED initiatives
take some time to deliver substantial results against these indicators. The indicators may even
deteriorate despite a dynamic LED process, for instance in a region that suffers from the de-
cline of old industries, or in a setting where macro-economic framework conditions are ad-
verse. A BSC takes a wider perspective, including more qualitative indicators of successful
LED. From a pragmatic perspective, it is important to note that a BSC can include a number
of indicators that can be improved on a short-term time-line.
The purpose of a BSC for LED is to define the critical success factors (CSFs) of the LED ef-
fort at large and of specific LED initiatives / projects and to work out the key performance in-
dicators (KPIs) that permit you to assess the impact of your LED effort and specific activities.
The purpose is not to come up with a complex set of statistical indicators that takes a lot of ef-
fort in gathering and updating, but rather a straightforward set of indicators that permit the as-
sessment of the impact of LED.
In past approaches (like in the case of development assistance donor organisations) unrealistic
or not clearly defined objectives (like “The SME sector is becoming more competitive”) were
matched with indicators which primarily focused at activities rather than on impact. The BSC
opens new pathways to the definition of impact-oriented indicators even for intangible factors.
2.2 Features of the Compass
The Compass has often been used by development organisations in the course of their activi-
ties. From the perspective a development organisation, assuring monitoring and evaluation is
an important goal. Local stakeholders tend to be much less concerned about this. Fortunately,
the Compass is more than an M+E tool. It is also effective in catalysing a process of align-
ment among stakeholders about the overarching goal and the strategy. In fact, one can use the
Compass to achieve five different goals:
1. Assess the results of completed and ongoing activities
2. Create alignment about vision and strategy
3. Identify critical success factors
4. Formulate indicators to track progress
5. Define new activities
From the angle of a development organisation, all five goals are relevant. From the angle of
stakeholders, at least two of the goals (identify critical success factors, define new activities)
are relevant. As long as the Compass delivers on these two goals, local stakeholders will be
reasonably satisfied.
3 What are the key elements of a Compass?
The conventional BSC, developed for use in companies, looks at four types of factors:1
1. financial indicators 2. the customer perspective
To succeed financially, how should we appear to To achieve our vision, how should we appear to
our shareholders? our customers?
4. the learning and growth perspective 3. the internal process perspective
To achieve our vision, how will we sustain our To satisfy our customers and shareholders, what
ability to change and improve? business processes must we excel at?
The BSC concept suggests to address these four factors counter-clockwise: create proper in-
centives for learning and growth that will lead to constant upgrading of internal processes that
will satisfy the customer, so that you have a convincing financial performance as the ultimate
outcome.
When translating the BSC concept from a corporate setting into the LED scenery, we intro-
duce it as the Compass of Local Competitiveness with four core factors that are similar to
the corporate BSC but better adapted to the reality of LED:
1 Kaplan, Robert S., & Norton, David P. (1996): The Balanced Scorecard. Boston: Harvard Business School
Press.
Economic and financial achievements Relationships with external players

(growth, business growth, start-ups, employ-
How do we need to interact with other
ment, ...)
stakeholders (other local stakeholders, investors,
customers/tourists, funding agencies, ...) to make
What is the impact we need to deliver to keep our
LED a success?
voters / our citizens happy?
The learning perspective (alignment of under- The local process perspective (interaction
standing of LED, alignment of expectations, between core players, governance pattern, ...)
role definitions, ...)
How do we have to organise our LED process and
How can we make sure that we constantly up- effort internally to assure its effectiveness?
grade our understanding of our economic reality
and of LED?
A compass can, and indeed should, not only be elaborated for the overall LED effort but also
for the specific sectors, value chains or initiatives:
• You may want to have a top-level compass that addresses the overall LED effort in a
given location. In this case, you elaborate CSFs and KPIs that address the overall LED
process, rather than the performance of specific sectors. For this exercise, you would need
the involvement of political decision makers, since they are ultimately responsible for set-
ting the goals that the LED effort is supposed to achieve. Note that elaborating a top-level
compass only makes sense if you have a genuine LED process, i.e. a shared understanding
among stakeholders that there is one LED process in the location rather than parallel
sectoral development activities. As long as stakeholders are only interested in their re-
spective subsector, it is not advisable to elaborate a top-level compass. In cases where you
have, for instance, a municipal LED unit, it is an option to elaborate a compass for this
unit, and to invite a few stakeholders who represent different subsectors to participate in
the elaboration of this compass.
• At the next level you elaborate compasses for specific initiatives, preparing a set of spe-
cific compasses. Each of them would look at a the LED activities in a given sector, clus-
ter, value chain or around a key catalytic project (landmark project). Elaborating the com-
pass at the sector / cluster / value chain level creates an opportunity to align the various
activities in a given sector towards a shared goal and set of performance indicators. At this
level you would involve business people, representatives of supporting institutions, LED
practitioners and other relevant stakeholders, but not the top political level. It also makes
sense to elaborate a Compass for, say, an LED Agency or a municipal LED unit.
• It is even possible to go one level further down and prepare a compass for each activity
within a given sector, cluster or value chain. However, you want to check whether the
time and effort involved may is in an adequate proportion to the relevance of the project.
At the level of a sector, cluster, or value chain, the Compass gets a stronger business focus. A
sector focus might look as follows:
Financial results (access to credit, cash flow, Relationships with external players
...) and economic results (market share,
growth, profitability, ...) How do we need to interact with customers and
stakeholders to succeed in the market? Which
What is the result that we need to deliver to keep support services do we need to pull in to improve
our shareholders, investors and creditors happy? our performance?
The learning perspective (upgrading of com- The local process perspective (interaction
panies and supporting institutions, market in- between core players, governance pattern, ...)
telligence, ...)
How do we have to organise our upgrading proc-
What can we do to better understand our busi- ess and effort within and between firms and or-
ness? ganisations?
In the elaboration of the compass, we suggest not to elaborate the “strategy maps” in the way
suggested by Norton and Kaplan.2 We have experienced that the simple unilinear causality
that they suggest does not reflect the reality of interrelationships and feedback loops between
CSFs in the different quadrants, especially for organisations or networks of actors who are
primarily involved in production. We rather suggest the use of the paper computer to analyse
the interrelationships between CSFs and identify the CSFs with the strongest leverage.
4 What are the considerations and activities involved in the preparation of a

Compass of Local Competitiveness?
The Compass workshop may be a useful tool in an early phase of an LED effort, since it
seems to open the perspective of stakeholders to the wide scope of activities that territorial
development can involve. In particular, it works at an early stage when and if some activities
have already been going on that can be interpreted as LED.
The main application, however, will usually be in a sequence of activities after an initial diag-
nosis has been conducted, practical territorial development activities are going on and
stakeholders are interested in clarifying their strategy and defining performance indicators.
For instance, the Compass works well as a focused exercise after an initial PACA Exercise,
typically between six and 12 months after the exercise. At this stage, the Compass is useful
• to capture the learning process of local actors regarding the objectives of their territorial
development process, and to align the vision,
• to gauge the progress that has been made already, and to define indicators to measure fu-
ture achievements,
2 Kaplan, Robert S., & Norton, David P. (2000): Having Trouble with Your Strategy? Then Map It. Harvard
Business Review, No. 5, pp. 167-176.
• to identify and prioritise a new round of practical activities.
Given the prominence of the Pareto method (see below) in the workshop, it is important that
the composition of participants is fairly representative:
• Both the public sector, the private sector and other relevant actors should be represented.
• The different sectors that are involved in the territorial development effort should be rep-
resented.
• Participation should be balanced, since otherwise the results would be biased.
In order to successfully invite stakeholders to the workshop, proper management of expecta-

tions is crucial.
• Local stakeholders need to be informed that the purpose of the workshop is to align the vi-
sion on LED, to identify critical success factors and prioritise them, to define indicators to
measure the impact of LED activities, and to identify additional LED activities.
• Local stakeholders need to be made aware that the outcome of the workshop will have a
strong impact in terms of guiding future LED, so that the workshop is a good opportunity
to advocate their views and interests.
• Local stakeholders must be informed that the workshop involves a logical sequence of ac-
tivities. Cherry picking and hopping in and out is not an option.
It is also an option to play to the curiosity of the stakeholders and use the novelty of the for-
mat as a special attraction.
5 Different types of Compass Workshops
The elaboration of a Compass is primarily based on structured workshops with local decision
makers and stakeholders. Before planning an exercise to elaborate a local Compass, the LED
champion has to take key decisions:
• Will the exercise only address the public sector or involve both public and private / non-
governmental players? This question may appear silly – obviously, LED must involve
private / non-governmental players, and they ought to be involved in any effort that aims
at goal alignment and the elaboration of performance indicators. At the same time, there is
the practical matter that non-governmental players are suffering from serious time con-
straints anyway and often are unwilling to devote time to an exercise that ultimately aims
at M+E. It may also be the fact that non-governmental players have not really bought into
an LED effort, so that effective activities involve the public sector and beneficiaries; in
this case, representatives of the beneficiaries would have to involved.
• How far do we want to drill down? Do we want to elaborate the Compass at the top level
and the sector / cluster / value chain levels, or do we want to go deeper, also looking at in-
dividual activities / projects? And to what extent do we want to formulate indicators? Lo-
cal stakeholders tend to be not very excited about formulating and tracking indicators,
unless they operate in an organisational culture that has already adopted the consistent use
of performance indicators. In most cases, we have found that local stakeholders are neither
interested nor experienced in indicators, so that one would consider to involve only those
stakeholders who are interested in indicators in their formulation.
The organisation of the Compass Exercise can only proceed once these questions have been
answered, since only then it is clear who needs to be invited to the different workshops. Com-
bining the different options gives us four different types of approaches which are summarised
in the following matrix.
Action-oriented exercise Comprehensive exercise
Overall LED One-day workshop that involves One-week exercise, consisting of
effort stakeholders from various subsec- workshops with local stakeholders
tors. Recommended only in loca- and a separate effort to define indi-
tions with a strong, cohesive LED / cators and set up a system to track
RED effort them.
[4] [1]
Sector or value One-day workshop that involves One-week exercise, consisting of
chain initiative stakeholders from one subsector or workshops with local stakeholders
value chain. Has a strong business and a separate effort to define indi-
focus and helps business people to cators and set up a system to track
better understand their business them.
environment
[2]
[3]
[1] At the top-level Compass workshop, you set the stage for a process of aligning the over-
all goals and expectations around LED. You would probably not assume that the different
stakeholders who are involved or interested in LED already have a common understanding of
what LED is all about. You need to allocate an adequate amount of time to address this issue.
We advise against introducing a search for a vision, since the outcome is too often a generic
“wealth & happiness for everybody” statement. We would rather ask: What do we want to
achieve with our LED effort until the local government elections? And what is the medium-
term goal of the LED effort, i.e. what do we want to have achieved by the subsequent elec-
tions? This would take us to the formulation of one or a limited number of goals. This would
then be the basis for the elaboration of CSFs, and after that of KPIs. The next step would be
the definition of activities and responsibilities to meet those indicators (to the extent that they
are not yet in place or planned – which may take us back to a re-definition of KPIs and CSFs
if we realise that we don’t have the resources to launch the activities needed to meet the indi-
cators), as well as the definition of activities and responsibilities to actually gather the data
needed to monitor those indicators. This workshop would go beyond the activities addressed
as part of PACA activities. A realistic time frame for this type of workshop is between less
than 1 and up to 2.5 days, depending on the chosen format, the number of participants, and
their degree of alignment.
[2] and [3] At the sector or project Compass workshops, you would also address the issue
of goals and expectations. However, at this level the discussion would be less political / philo-
sophical, more practical and more business-focused. Apart from that, the sequence of activi-
ties would be the same as above. These workshops may focus at the ongoing PACA activities
and involve the actors identified and involved during the PACA Exercises. This kind of work-
shop can be conducted in one day. Initially, format No. 3 is the most adequate, since busi-
nesses are keen on action, not on indicators. As they mature, you would consider to move to
format No. 2.
[4] This format is a theoretical possibility, but practically it is unlikely to happen. At an early
stage of a territorial development process, local stakeholders find it difficult to identify critical
success factors except for the Southeastern quadrant of the Compass, i.e. process manage-
ment. And even there, you confront the problem that actors from one subsector don’t neces-
sarily see that their effort is linked in any way to what is going on in another, in their view un-
related subsector. Once the LED / RED process matures and stakeholders’ perceptions
change, you would move to format No. 1 which highlights the importance of formulating and
tracking indicators.
Ideally, the outcome of a Compass workshop is the definition of new and additional LED ac-
tivities and the elaboration of a set of KPIs that can be used by the LED champion to monitor
the ongoing LED effort. After the initial round of workshops, we advise to have follow-up
workshops at a six- to twelve-months-rhythm to involve the stakeholders in the assessment of
progress and in the assessment of the Compass itself, as we would expect that stakeholders
want to adjust CSFs as the LED initiative progresses.
6 Structure of a Compass Workshop
This section discusses the steps involved in a Compass workshop. It looks at Type 3 as intro-
duced above, i.e. a one-day workshop at the level of a local sector or cluster. This is a highly
robust format that can easily be applied by facilitators with some understanding of LED.
The elaboration of a Compass of Local Competitiveness essentially involves the following

steps:
• Participants present themselves
• Explain the objective of the workshop
• Explain the structure of the workshop
• Explain the Compass

• Framing: What exactly are we talking about?
• Look back: What have we achieved so far?
• Objective: What are the overall objectives of the object of the Compass?
• Revisit framing
• Brainstorming on critical success factors
• Brainstorming on key performance indicators
• Definition of targets and accountability
• Matching
• Identifying gaps
• Brainstorming on activities
• Action planning
These steps can be conducted in a single workshop, though that is not necessarily a good idea.
Practical experience has shown that the definition of KPIs is an activity that often does not
work well in a workshop, especially when participants have little or no experience with the
concept and practice of indicators.
The following table looks in more detail at the sequence of steps in a Compass workshop.
Step 1 to 11 are a standard sequence in any Compass workshop. After Step 11, there are two
different options on how to proceed further. One includes the formulation of indicators, the
other does not.
Step Objective Activity

1. Presentation of Participants know each Simple Mesocard exercise: Name, or-
participants other ganisation, involvement in LED
2. Explain the objec- Make sure that each Local champion or facilitator explains
tive of the exercise participant understands objectives: Who and what exactly is it
three main objectives: about?
1. track progress Objectives are written on a flipchart
which remains visible for the rest of the
2. identify CSFs
workshop
3. define activities
3. Explain the struc- Participants know the Quickly go through the steps, don’t get
ture of the work- sequence of activities in lost in details
shop the workshop
4. Explain the Com- Participants understand Brief oral explanation, complemented
pass the method used in the with visual representation of Compass
workshop
5. Framing: Clarify Define two points: Put information on the object onto flip-
the object of the chart. Keep flipchart visible through the
1. What exactly is X?
exercise. What entire workshop.
Clarify the borders
precisely are we
of X (system / envi- Note actors on mesocards, organise
talking about in this
ronment) them as insiders / outsiders
workshop?
2. Who is involved in
X? Clarify the actor
structure (we /
them)
6. Look at activities 1. What have we done Option 1: Participants call out, facilita-
and achievements so far? tors note on flipchart (may be quicker)
since PACA Exer-
2. What have we Option 2: Participants write on cards
cise or start of ac-
achieved so far (=
tivity
outcome and impact
of activities)?
(If possible, try to
capture data)
7. Clarify the “vision” Clarify the overall ob- Mesocard brainstorming: What is the
jectives of the object of impact / outcome / benefit we aspire
the Compass with X?
8. Revisit the framing Verify framing Check that the object of the exercise
was defined properly. If necessary, ad-
just.
9. Critical success Identify the factors that Mesocard brainstorming: What are the
factors make or brake X critical success factors that determine
whether X achieves its mission? What
are the factors that shape the success of
X?
10. Organise the cards Assure that there is • Economic and financial factors
into four quadrants balance between the • Relationships with customers and
identified CSFs external players
• Internal process, internal relation-
ships
• Knowledge and learning
11. Prioritise the CSFs Pareto
The following steps can be conducted and sequenced in different ways:

Brainstorming on Measure the progress Mesocard brainstorming, CSF by CSF

key performance in terms of addressing
(option: split into working groups)
indicators (KPIs) each CSF
(note: doing this in a workshop is only
advisable if the participants are familiar
and comfortable with the definition of in-
dicators – otherwise, you may want to
delegate this step to a core group, i.e. a
small working group of experienced
practitioners who meet separately to de-
fine KPIs, while in the workshop you
move directly to the brainstorming on
activities)
Definition of targets Put numbers to the in- Option 1: Working groups in the work-
and accountability dicators, define respon- shop
siblity for monitoring
Option 2: Delegated to core group, done
in separate workshop
12. Matching Match CSFs or KPIs Identify “orphan KPIs”, i.e. indicators
and ongoing or planned without a corresponding LED activity
LED activities
13. Identifying gaps Identify which CSFs are Discussion
not adequately ad-
dressed
14. Brainstorming on Define activities related Option 1: Mesocard brainstorming
activities to each CSF
Option 2: Match ongoing activities with
CSFs, identify gaps / mismatch
Option 3: Paper computer
15. Action planning Pfeiffer’s six questions Continuation of Option 1 of step before
on each activity
As mentioned before, our experience has shown that it will often not be practical to include
the definition of KPIs into the participatory workshop, and this for several reasons. First,
many stakeholders tend not to be familiar with the concept of indicators. Second, many
stakeholders tend not to be particularly interested in indicators. Third, at that stage, the Com-
pass workshop has already gone on for some hours, and participants tend to be tired. In order
to keep the flow going, it is often preferable to move directly to matching, in this case by cre-
ating a matrix that has CSFs on one axis and ongoing activities on the other axis..
7 What happens after the Compass Workshop?
A Compass Workshop must be more that a once-off event. The workshop itself can be a very
insightful and to some extent even exciting event, and participants will take important learn-
ing out of it. This applies in particular to sector workshops, which often give the participants a
much better understanding of their business environment. Yet it would be unsatisfactory if the
Compass workshop was not followed by concrete action planning, the creation of a monitor-
ing system and the implementation of LED activities.
7.1 Action planning
We have often observed that towards the end of a Compass workshop the energy level among
participants is too low to engage in detailed action planning. It is possible to have a brain-
storming to generate ideas on how to address those CSFs that are not yet sufficiently ad-
dressed. Yet refining those ideas, looking at the connections between them, and planning their
implementation in a detailed way is better left to a separate meeting.
In this subsequent meeting, there are two options regarding the format. One option is to refine
ideas for action, prioritise them, and then plan their implementation, asking the six questions:
How exactly are we going to do this? Who will take responsibility? Who will collaborate?
Which resources do we need? When do we start? How will we know that we have started?
The other option is to use the Paper Computer in order to identify those activities which have
the strongest leverage effect. The Paper Computer is a tool that looks at the interrelationship
between activities in a systemic way and allows to identify those activities that promise the
biggest impact, in particular in a somewhat complex setting where cause-effect relationships
are not obvious. The Paper Computer is explained in detail in Annex 3.
7.2 Creation of a monitoring system
During the Compass workshop, or during a meeting of a smaller group of LED stakeholders
who are familiar and comfortable with the concept of indicators, a set of KPIs is formulated.
These criteria need to fit with the SMART criteria (see below). As there must be no more than
four CSFs per quadrant and no more than three KPIs per CSF, the maximum possible number
of KPIs is 64. However, it would be preferable to end up with a lower number of KPIs since
tracking 64 of them might involve a very significant effort.
Table 1: The SMART Criteria

S Specific & specific to the issues which are intended to be changed, and sensitive
Sensitive to the changes induced
M Measurable measurable, objective and unambiguous - not easily blown off course
by unrelated developments, and not easily manipulated
A Attainable & attainable by the policy measures, and applicable to measure prog-
Applicable ress towards achieving objectives
R Relevant measuring factors which are related to the policy and reflect the objec-
tives
T Time-bound & Varying over time, reflecting at what point in time changes can be ex-
Trackable pected and do happen. Indicators can be easily tracked, preferably the
required data are already and frequently available, or are not too
costly to track
Source: Metz / Groetschel, Training Manual on Monitoring Policy Impacts, prepared for FAO and GTZ, 2002
A practical way of testing the robustness of a proposed indicator against each of the SMART
criteria is by scoring it: 1 means “no”, 2 means “to some extent”, 3 means “definitely”, and
then the five scores are multiplied. Only scores higher than 50 indicate a robust indicator.
Apart from the formulation of the indicators, it must be defined who tracks each one of them,
and with what frequency. Some indicators can easily be tracked on a monthly basis (for in-
stance, number of registered and liquidated businesses). Other indicators may be captured
every quarter.
When designing your system to capture and process indicators, stick to the KISS principle –
“Keep it simple, stupid!” Do not try to come up with a highly sophisticated, scientific ap-
proach since this would maximise the risk that the whole effort collapses after a brief period.
7.3 Implementation of LED activities
The planning of activities at the end of the Compass Workshop (and possibly in a follow-up
workshop, since you may run out of time at the Compass Workshop) should be guided by six
questions:
1. How exactly are we going to implement this?
2. Who will be responsible?
3. Who needs to collaborate?
4. What are the resources that we need?
5. When do we start?
6. How do we know that we started?
It is useful to agree on a certain reporting rhythm, for instance by posting monthly or quarterly
reports on each activity at a website.
7.4 Follow-up Compass Workshop
If the Compass is properly implemented, there need to be repeat Compass Workshops. At the
level of LED at large, an annual rhythm would be adequate. At a sector level, stakeholders
may decide to have more frequent Compass Workshops.
8 Step-By-Step Explanation of Compass Workshop: Tables
Time Activity Description Tool Basic rules / mesocard questions to be Observations
asked
Step 1 Presentation All participants Mesocard 3 cards per person: name, organisation, Good opportunity to introduce
present them- involvement in LED the basic Mesocard rules: 1
15‘
selves statement per card, write legi-
bly, 3 lines per card
Step 2 Objective Explain that the Oral, supported Explain the objective of the workshop: Can be done by local champion
objective of the with cards or or by facilitator
10’ 1. Track progress on developmental
workshop is to flipchart (pref-
activities in a location, or a subsector Don’t use technical language
look back and to erably not mul-
in a location, or a value chain
look ahead timedia projec- Refer back to event that initi-
tor) 2. Define additional activities ated local activities (e.g. PACA
Exercise, launch of LED Forum,
Explain that a Compass is a device that
etc.)
tells you where to go.
Step 3 Schedule Explain the Flipchart or Point out the different steps in the work- Quickly go through the steps,
structure of the mesocards shop. don’t get lost in details
5’
workshop
Step 4 Compass Explanation of Oral and flip- Briefly explain the background of the Keep a flipchart with an expla-
the Compass chart Compass in the balanced scorecard nation of the 4 Quadrants visi-
5’
method. ble throughout the workshop
Step 5 Framing Clarify the object Statement by Define two points: Put information on the object
of the exercise: champion of onto flipchart. Keep flipchart
15‘ 1. What exactly is X? Clarify the bor-
What precisely the activity, al- visible through the entire work-
ders of X (system / environment)
are we talking ternatively by shop.
about in this facilitators 2. Who is involved in X? Clarify the
Note actors on mesocards, or-
workshop? actor structure (insiders / outsiders)
ganise them as insiders / out-
siders
X = the object of the Compass, i.e. the LED initiative, or the cluster initiative, or sector initiative, or project
Time Step Description Tool Basic rules / mesocard questions to be Observations
asked
Step 6 Look back Look at activities Flipchart or 1. What have we done so far? Option 1: Participants call out,
and achieve- mesocards facilitators note on flipchart
30’ 2. What have we achieved so far (=
ments since start
outcome and impact of activities)? Option 2: Participants write on
of LED or activity
(If possible, try to capture data) cards (does not give you sto-
ries!)
Consider to capture partici-
pants’ statements as audio /
video recording
Step 7 Overall objec- Clarify the overall 1. Mesocard 1 – 2 cards per person Don’t use the term Vision. This
tive objectives and leads to cloudy, fuzzy discus-
30‘ 2. Organise Question:
deliverables of X sions.
cards hier- Why do we spend time and effort on this
archically initiative? What do we want to achieve? Organise the outcome. Try to
define a hierarchy, i.e. highlight
Alternative: If in two years‘ time some-
the ultimate outcome and below
body enquires about X, what will we
it the factors that will contribute
point at to indicate its success?
Many cards will come that actu-
ally are CSFs or KPIs, and they
should be put up again at the
appropriate step
Assure that the Vision is visible
during the subsequent activities
Step 8 Revisit fram- Verify the fram- Open discus- During the look back and the
ing ing for the work- sion vision steps, it may have ap-
5’
shop peared that the frame was not
defined or worded properly
asked
Step 9 Critical suc- Brainstorm on Mesocard No limit to number of cards per person Check whether all four quad-
cess factors the factors that rants are adequately ad-
30' Questions (put them all up!):
make or break X dressed. Often one of the top
• What are the factors that determine quadrants gets only few cards.
the success of X? In that case, explain the rele-
• What are the factors that decide the vance of the quadrant and ask
success of our effort to build a com- participants for additional cards.
petitive location / sector / value
chain?
• Which elements need to be in place
so that we can build a competitive
location / sector / value chain?
Step CSF into Organise the Facilitators, as- 1. Economic / financial factors Make sure that each CSF is
10 quadrants CSFs into four sisted by par- clearly understood by all par-
2. External relationships (with non-
quadrants ticipants, or- ticipants, possibly insert a step
30' LED-stakeholders / external actors /
ganise cards in the process to verify and re-
customers / ...)
into 4 quad- phrase each CSF. A CSF like
rants 3. Internal process and organisation of “diversification” is useless be-
LED inside and among the organisa- cause it is too unspecific.
tions involved
One way of looking at the CSFs
4. Knowledge and learning (including is by introducing Quadrants 1
research, training, ...) and 2 as external factors and
Quadrants 3 and 4 as internal
factors.
Step Prioritise Identify two to Pareto Quadrant by quadrant
11 four decisive
CSFs per quad-
10'
rant
asked
The next step in the standard Compass process relates to the elaboration of Key Performance Indicators and the definition of activities.
It may, though, not be useful to do this in a workshop setting, especially with participants with little experience in the formulation of
objectively verifiable indicators. Below, you will find three different options (Plan A and Plan B, where Plan B again involves two dif-
ferent options).
Plan A Plan B
What to do Inverse sequence: Standard sequence:
• Match CSFs with ongoing activities • Define Key Performance Indicators
• Define activities related to CSFs that remain un- • Define responsibility to track KPIs
matched
• Match KPIs with ongoing activities
• Define additional activities
When to apply Participants have little or no experience in formulating in- Participants have some experience with indicator formu-
dicators. lation.
Variations Have an additional meeting of a core group where you 1. Use the Paper Computer to prioritise possible action.
define KPIs and determine who is responsible for tracking
2. Have only a first brainstorming on KPIs, then form a
them.
team to elaborate them, then have another workshop to
• present and discuss the elaborated KPIs
• define responsibility for tracking them
• match KPIs with ongoing activities
• define additional activities
asked
Plan A
This sequence applies in workshops with participants with little experience in the elaboration of indicators.
Step Matching Do we have Matrix Create a matrix with the ongoing activities Proceed as follows: Every par-
12 activities going on the vertical axis and the CSFs on the ticipant receives a card with the
on that contrib- horizontal axis. Verify, together with the numbers 0 to 3 – 0 = no influ-
30’
ute to all participants, whether any given activity ence, 1 = weak influence, 2 =
CSFs? contributes to the CSFs. The assumption is some influence, 3 = strong in-
that many activities will contribute to more fluence. You ask “Does Activity
than one CSF. 1 address CSF A?” Each par-
ticipant then indicates his/her
score by holding up a number.
The facilitator forms an average
of the scores. Encourage dis-
cussion when participants come
up with three or four different
scores.
This system assures that all
participants actively participate,
rather than a few dominating
the scoringnd the others giving
in to the temptation to have a
little nap.
Step Identify gaps Which CSFs Oral discussion Verify: Which CSFs are not matched with
13 are not activities? Add up the scores in each col-
matched with umn. Probably all CSFs are at least some-
10’
activities? what addressed. Focus the discussion at
those CSFs that come out with a low score
sum, and in particular those that did not re-
ceive a single score of 3 (which means that
no activity is really focussing at this CSF).
asked
Step Brainstorm- What are the Depends on Option 1: Mesocards. Various rounds of If you choose Option 1, you
14 ing on activi- activities that option brainstorming / cluster / Pareto / brain- need to make sure that partici-
ties we need to im- storming on highest priority pants prioritise activities that
30’
plement to are actually doable. For in-
Option 2: Paper computer (see annex)
make progress stance, you can distribute red
with respect to dots so that participants can
the CSFs? mark those proposals they
deem unrealistic before doing
the Pareto.
Step Determine Pfeiffer’s six Mesocards Six questions: It may be useful to create
15 responsibility questions on 1. How exactly will we do this? (unpack working groups for this step.
for imple- each activity activies)
60’
mentation of
2. Who takes responsiblity?
activities
3. Who has to collaborate?
4. Which resources do we need?
6. How do we know that the activity
started?
Step End of work- Thank the participants for their time and in- Make sure that you have a clear
16 shop puts. Explain what will happen next. communication structure, so
that every participant can easily
track the progress of imple-
mentation.
asked
Plan B
This format applies in workshops where participants are familiar and comfortable with the elaboration of indicators
Key perform- Brainstorm on Mesocard Pick the highest scoring CSFs (two to Consider to divide the partici-
ance indica- the indicators four per quadrant) pants into working groups:
60 – Pareto
tors that measure the
180‘ Go through the CSFs one by one - Go through the first quad-
degree of prog-
rant CSFs in the plenary
ress towards Pareto the KPIs, CSF by CSF; a satis-
each CSF factory outcome is one where no more - then go into working groups
than four KPIs are prioritised (in working
Introduce participants to
group scenario, the Pareto is done by all
SMART principle: Indicators
participants after they have visited the
should be Specific, Measurable,
result of each working group)
Achievable, Relevant, Timed
At this stage, the initial participatory workshop may or may not terminate. There are different options in terms of how to proceed. The
following steps are based on the assumption that the Compass Exercise is concluded in the same workshop, and in a very comprehen-
sive manner:
60 – Targets Definition of a Mesocard Indicator by indicator, each participant Consider to divide the partici-
180‘ number and writes his/her estimate of a realistic indi- pants into working groups, each
deadline for each cator onto a small circular card working on one or two quad-
indicator rants
Results are discussed, result is deter-
Discussion mined by consensus
asked
45 – Accountability Definition of a Open discus- Indicator by indicator, call for individuals Definition of accountability is
90‘ person or or- sion to resume responsibility for tracking the done in plenary
ganisation who is indicator
accountable for
Define one actor who is in charge of
tracking the Indi-
consolidating the data on indicators on a
cator
bi-annual basis
30’ Matching Do we have ac- Matrix Create a matrix with the ongoing activi- The assumption is that many
tivities going on ties on one axis and the KPIs on the activities will contribute to more
that contribute to other axis. Verify, together with the par- than one KPI.
all KPIs? ticipants, which activity contributes to
which KPI.
90 – Activities Brainstorming on Mesocard Proceed CSF by CSF Consider to divide the partici-
240’ activities to pants into working groups, each
Keep CSFs and KPIs visible at all times
match each CSF working on one or two quad-
and achieve the Refer participants back to the vision rants
KPIs statement, to make sure everybody is
still on track
asked
120 – Determine re- Discussion in Pfeiffer’s six Make sure that each question is an- Six questions:
240’ sponsibility plenary questions on swered properly 1. How exactly will we do this?
each activity (Possibly unpack activity
into complementary ac-
tivies)
2. Who takes responsiblity?
3. Who has to collaborate?
4. Which resources do we
need?
6. How do we know that the
activity started?
The complete duration of this workshop is between 9 and 18 hours or 1.5 to 2.5 days. In other words, applying this format with real
stakeholders will only work under exceptional circumstances.
asked
There is also another option, which would be more focused and less time-consuming. It would employ the papercomputer to identify
the CSFs with the highest leverage factor and focus the brainstorming on activities on those CSFs. This would proceed as follows:
90’ Papercom- Look at the in- Papercomputer see annex Strong recommendation: Before
puter terrelationship applying the Papercomputer,
between CSFs make sure that each CSF is
clearly understood, e.g. by de-
termining what two opposing
incarnations of each factor
might look like1
45’ Activities Brainstorming Mesocard Identify the CSFs in south-eastern quad- It is rare that more than two or
on activities to rant. three CSFs end up in the south-
Pareto
address the eastern quadrant
Keep the KPIs linked to each CSF visible.
critical / lever-
age CSFs Brainstorming, CSF by CSF: What are ac-
tivities to match each CSF and achieve the
KPIs?
90’ Determine Discussion in Pfeiffer’s six Make sure that each question is answered Six questions: see above
responsibility plenary questions on properly
each activity
45‘ Targets Definition of a Mesocard Indicator by indicator, each participant
number and writes his/her estimate of a realistic indica-
deadline for tor onto a small circular card
each indicator
Results are discussed, result is determined
Discussion by consensus
1 Example: Diversification might come up as a critical success factor. First. clarify what kind diversification is meant – diversification of products, of distribu-
tion channels, of final customers? Second, determine two opposing expressions: highly diversified distribution channels (e.g. more than 5), little diversification
of distribution channels (three or less).
asked
In a situation where a substantial number of stakeholders is involved in the workshop, and in particular in a situation where several of
those stakeholders suffer from time constraints, so that even a 1.5 day workshop may border the impossible, there is the option to go for
a sequence of three workshops:
Workshop Objective Participants

1. Brainstorming Workshop: All steps un- Define CSFs and KPIs of LED programme or Representative group of stakeholders in-
til the definition of KPIs specific initiative within an LED programme volved in the programme or initiative
2. Technical Workshop: Core group re- Match CSFs and KPIs with ongoing activities Small group of stakeholders with a par-
visits and defines KPIs and targets ticularly keen interest; LED officer, Cham-
Identify gaps in programme / initiative
ber official and similarl
Define targets
3. Way-forward Workshop: Core group Agreement on targets and accountability Representative group of stakeholders in-
presents results to wider group. KPIs volved in the programme or initiative
Agreement on next steps regarding identified
are validated. Activities are defined.
gaps
asked
Things to prepare
Moderation materials Cards and flipcharts
Minimum: brown paper, cards, masking • Cards with the questions for each step
tape, markers
• Cards with the titles for the four quad-
Optimum: moderation panels, brown paper, rants
cards in at least four different colours, pins,
• Flipchart with sequence of workshop
masking tape, markers
• Flipchart that indicates the four quad-
rants of the Compass
• Flipchart with SMART criteria
Step-By-Step Explanation of Compass Workshop: Additional Explanations

[This section is work in progress – please share your insights and comments with Jorg Meyer-
Stamer, jms@mesopartner.com]
Step 1 -- 15‘ -- Presentation
Step 2 -- 10’ -- Objective
Step 3-- 5’ -- Schedule
Step 4 -- 5’ -- Compass
Briefly explain the background of the Compass in the balanced scorecard method for
corporate strategising:
1. financial indicators 2. the customer perspective
To succeed financially, how should we ap- To achieve our vision, how should we ap-
pear to our shareholders? pear to our customers?
4. the learning and growth perspective 3. the internal process perspective
To achieve our vision, how will we sustain To satisfy our customers and shareholders,
our ability to change and improve? what business processes must we excel at?
Step 5 -- 15‘ -- Framing
Step 6 -- 30’ -- Look back
Step 7 -- 30‘ – Overall objective
Phrase the question in such a way that it neither generates to vague and fluffy a result (a “vi-
sion” in the negative sense of the term) nor responses that are too focused at “here and now”.
The participants should not get the impression that you are asking for the next activities that
need to be formulated.
It can be helpful to limit the number of cards to 1 per person.
Organise the outcome. Try to define a hierarchy, i.e. highlight the ultimate outcome and be-
low it the factors that will contribute. Example:
Step 8 -- 5’ -- Revisit framing
Based on the conversation you had regarding the overall objective, you may find that the
framing is not entirely adequate and that you want to word it differently. Make sure that the
reworded framing is visible for all participants.
Also, in Step 7 you asked a question that included the term “we”. While revisiting the fram-
ing, you may want to ask: Do we all agree on who is “we”? And also, who is “them”?
Step 9 -- 30' -- Critical success factors
Step 10 -- 30' -- CSF into quadrants
At this step, your Compass may look This is, quite obviously, a very unbal-
like this: anced Compass. The majority of cards
ended up in the “process” quadrant,
which reflects the current state of mind
of local stakeholders: they are very con-
cerned about the challenges involved in
getting their collaboration effectively
organised. As a facilitator, you would
not accept this result but rather ask to
consider the other quadrants as well:
Are there more CSFs regarding knowl-
edge and learning, such as conducting
market research and upgrading local
skills? Are there more CSFs regarding
customer satisfaction and relationships,
and relationships to other external ac-
tors? Are there more CSFs regarding fi-
nancial and economic issues?
You would hope that participants come up with more CSFs for the other quadrants. If they
don’t, this may imply a serious lack of understanding of the issues involved in their business
field and in the successful development of their sector or location.
Step 11 -- 10' – Prioritise

Step 12 -- 30’ -- Matching
The rationale for the Matching step is that local stakeholders are already implementing some
activities and have more or less specific ideas about activities they would like to launch. It is
crucial to match the ongoing and planned activities with the CSFs and to verify that all CSFs
are properly addressed.
The picture below illustrates how the matching may look like. The horizontal row indicates
the CSFs, the column the ongoing activities.
Step 13 -- 10’ -- Identify gaps
Step 14 -- 30’ -- Brainstorming on activities
Step 15 -- 60’ -- Determine responsibility for implementation of activities
Step 16 -- End of workshop

9 Annex 1: An Example of the Application of the Compass of

Local Competitiveness in a Subsector: An Upgrading Project with
Fresh Vegetable Producers in Gampola, Sri Lanka
This section summarises a workshop conducted in 2006 as part of the Sri Lankan - German
Economic Strategy Support Programme (ESSP). ESSP has used the PACA methodology
since 2002. In 2004, it conducted a PACA Exercise (or as it is called in Sri Lanka, a LOCA
Exercise) in Gampola division, a municipality in the Central Province. The PACA had a
strong focus on agriculture. One of the sectors with particularly strong activities after the
PACA was the production of fresh vegetables, where local stakeholders were especially moti-
vated and dedicated.
The Compass workshop documented below involved a group of stakeholders from the fresh
vegetable sector as well as representatives of supporting institutions.
Structure of the workshop
The planned format was supposed to involve the following steps

1. Clarify the objective and the object of the exercise: Who and what exactly is it about?
2. Look back: What have we done and achieved so far?
3. Clarify the vision, i e the overall objectives of the object of the Compass
4. Brainstorming on critical success factors (CSFs)
5. Brainstorming on key performance indicators (KPIs)
6. Definition of targets and accountability
7. Brainstorming on activities related to each CSF.
In this workshop, the brainstorming on activities had to be cut short as we had run out of time.
A number of first ideas on activities were ventilated. The ESSP facilitators and the
stakeholders agreed to have a follow up meeting to define the details of those activities.
Documentation of the steps in the workshop1
1 Vision
Contribute to improve the local economy through increasing productivity of the vegetable
cultivation
1 This section has been captured by Jayalal Chandrasiri, a consultant under contract with ESSP to conduct an
impact assessment on ESSP’s LOCA activities.
2 Objective
Achieving higher income through market aimed, organized vegetable production
3 Critical Success Factors
Economic and Financial External Relationships
• external financial facilities available • better institutional and personal re-

lationships
• stable market
• good quality seeds available in the
• satisfactory price for the produce market
Knowledge and Learnings Internal Processes
• acquire technical knowledge • minimised cost of production
• developed new varieties • minimised post harvest losses
• planned cropping cycles
4 Key Performance indicators
Economic and Financial
1. Number of credit facilities to farmers from agrarian services centers with a grace pe-
riod
2. Financial support extended to farmers by ESSP
3. Prices for produce
4. Percentage increase of income of producers after a given period of time
5. Continued growing market
6. Percentage increase of the business of vegetable buyers
External Relationships
1. Training programmes increased due to linkages with government and other organisa-
tions
2. Input costs reduced
3. Wider use of quality seeds
4. Number of shops selling quality seeds in the market
Internal Processes
1. Percentage decrease in cost of production within a given period of time
2. Percentage increase in production within a given period of time
3. Percentage increase in higher quality, higher shelf life, fresh vegetable products
4. Percentage increase of producers engaged in planned cultivation
5. Percentage decrease in excess stocks in the production process
6. Percentage increase in maximum utilisation of limited croplands
7. Percentage increase in the use of good agriculture practices in production
8. Percentage decrease in wastage at the market
Knowledge and Lessons Learned
1. Percentage decrease in rejected quantity of produce in a given period of time
2. Percentage increase in production of producers after a given period of time
3. Percentage increase in producers who have released their produce as a finished prod-
uct to the market
4. Percentage increase in producers who are using new varieties
5. Percentage increase in quality and quantity of produce after a given period of time
Photos taken during the workshop

The stakeholder group

involved in the project
Deciding which quadrant

a critical success factor
belongs
The completed Compass

Working groups of
stakeholders elaborate
the Key Performance In-
dicators (KPIs)
One of the stakeholders

presents the KPIs his
group has elaborated
At this point, it was mid-afternoon and participants indicated that they had had enough work-
shopping for that day. Thus, no time was left to progress to the formulation of activities. After
this workshop, we actually decided that we needed the Plan B outlined above, i.e. moving
from the CSFs directly to activities and leaving the formulation of indicators to the ESSP spe-
cialists.
10 Annex 2: Documentation of a Compass workshop – Investment promotion in

Baybay, Philippines
As usual, some of the participants ar-

rived early, some on time, and some
were late. Facilitators engaged those
stakeholders who had arrived early in
conversations, which is a practical way
of both creating a nice atmosphere and
generating some relevant information.
The workshop then starts with a self in-

troduction by all participants. The fa-
cilitators explain the purpose of the
workshop, and they explain the Com-
pass.
Participants then agree on the framing

of this Compass workshop, meaning
they define what exactly is the focus of
the workshop.
They also clarify who is us and who is

them, which stakeholders are relevant
and which are actively involved in the
initiative that is addressed in this Com-
pass workshop.
Participants then look back: What have

we done, and what have we achieved
so far? The next question is: Why are
we doing this anyway, what is the ulti-
mate purpose of our initiative? Partici-
pants respond on cards, which are or-
ganised in a hierarchical way, with the
overarching purpose on top and the
factors contributing to it organised be-
low.
The next question: If we want to

achieve what we just declared to be our
intention, what are the critical success
factors that we need to address? The
critical success factors are first pinned
up and then organised into the four
quadrants of the Compass.
The participants then apply the Pareto

method, theyvote quadrant for quadrant
for the most important critical success
factors.
In the next step, the participants match

the critical success factors with the on-
going or planned activities. A matrix is
put up. For each activity, the facilitators
ask: Does this activity address critical
success factor A, B etc.? Participants
give scores between 0 (not at all) and 3
(strongly).
In this case, at first glance it would ap-

pear that all critical success factors are
addressed. However, a closer look re-
veals that three critical success factors
receive no or just one “3”, which means
that they are mostly addressed in an
indirect way (and probably not all that
much, since stakeholders tend to be
somewhat optimistic in their scoring).
Thus, the critical success factors on top
of the first three columns should be ad-
dressed more consistently.
It is really striking that in spite of the 0

to 3 vote, all scores are very close to
each other. Is this a pattern?
The next task is to identify activities.

However, at this stage, participants
tend to be tired and low on energy and
creativity. Thus, the following brain-
storming exercise on activities that
would address the under-matched criti-
cal success factors is only a first at-
tempt, to be followed by a further work-
shop with a more systematic brain-
storming and action planning.
The last step in the workshop is either a

detailed action planning or an agree-
ment on the next meeting to be con-
ducted for action planning.
11 Annex 3: The Paper Computer
The Paper Computer is a tool which may be useful in a Mini-workshop setting. It is particu-
larly practical when it comes to identifying priority action, like in the Results Workshop or a
Way-forward Workshop. It is very powerful in persuading local actors to ignore, at that stage,
some issues that figure high on their list of priorities but that are very difficult to address, or
to make a difference.
The elaboration of a Paper Computer involves the following sequence:
1. Conduct a card-writing-based brainstorming on a question like: What are the factors

which influence the success of our organisation?
2. Organise the cards. Eliminate duplicates. Prioritise them (Pareto: no. of cards : 5 = num-
ber of points per participant)
3. Take the top seven to ten highest scoring cards. Pin them underneath each other. On each
card, ask: “What are opposing expressions for this factor?”
For example: The initial question was “What are the critical success factors of a Genesis
exercise?”
One high scoring response was “Facilitators have an understanding of the location before
starting the exercise”. Opposing expressions would be:
“Facilitators locate information (reports, studies etc.) on location and read it” and
“Facilitators stumble into the Genesis exercise without digesting any information on the
location”.
The purpose of this step is to make sure that everybody understands the factors in the
same way.
4. Take six to ten cards with highest priority. Write each item onto a second card. Create a
matrix like this, A being the first high priority card, B the next, etc.:
A B C D E F G Active
sume
A X How How etc.
does A does A
influence incluence
B? C?
B How X How
does B does B
influence influence
A? C?
etc. X
Passive X
sume
Note: The values can be between 0 and 3. Negative values are not allowed (i.e. we don’t dis-
tinguish between a constructive and a destructive influence).
Participants often find it difficult to distinguish the directions of influence, especially when
factors are mutually influential. However, if A influences B strongly (=3), this does not nec-
essarily mean that B influences A also strongly. It rather depends. The depth of the river you
wade through influences how wet you get, while the wetness you can personally generate will
have next to no influence on the depth of the river. The facilitator will have to emphasise this
point repeatedly.
Perhaps you want to give an example, for instance: What is the relationship between the
weather and the wetness of my feet? There clearly is a relationship. It is strong. What is the
influence of the wetness of my feet on the weather? It is zero.
5. Add the numbers horizontally (active sum) and vertically (passive sum). The result may
look as follows:
A B C D E F G Active
sume
A X 3 1 0 2 2 1 9
B 1 X 2 3 0 0 1 7
C 2 3 X 3 2 1 0 11
D 3 3 2 X 3 3 2 16
E 2 2 1 1 X 3 1 10
F 2 3 2 2 1 X 1 11
G 3 3 2 3 3 3 X 17
Passive 13 17 10 12 11 12 6 X
sume
6. Prepare a scatter diagram. The horizontal axis takes the active values, the vertical axis the
passive values. Each factor has an active value (on the right of the matrix) and a passive
value (at the bottom of the matrix). Locate each factor according to its active and passive
value in the matrix. The result may look like this:
Passive
B
15
A
12 F D
E
C
9
6 G
7 10 13 15 17 Active
7.
8. Calculate the mean for the active and the passive sums (in this case, it is 11.5). Draw an
according vertical and horizontal line in the scatter diagram. For example:
Passive
B
15
A
12 F D
E
C
9
6 G
7 10 13 15 17 Active
9. The resulting matrix is labeled as follows:
Impact: Complex:
Factors which are receiving a lot of in- Factors which receive a lot of influence and which are ex-
fluence, but who are exerting little influ- erting a lot of influence. Many stakeholders may want to
ence. You can ignore them for the time attack those, but this is actually very difficult since each
being. factor is so heavily interconnected with other factors.
Posteriority: Leverage:
Factors which receive little influence and Factors which receive little but exert a lot of influence.
exert little influence. These are the factors which you want to attack initially,
since they offer you the best leverage point.
In our example, factor “G” would be the one with the strongest leverage factor.
10. Option: Conduct card-writing brainstorming exercise about the factor(s) which are located
in the leverage square, asking: What can we do to strengthen / leverage this point?
Preparation
Materials you need Cards, flipchart-paper or brown paper, markers
Things you can prepare
Typical problems and errors
Problem / error Solution
Confusion between active Convince participants that, at one stage, they are exclusively to
and passive side look at the influence of factor A on factor B, and that they will
look at the inverse relationship later. At no stage we ask spe-
cifically for interaction / mutual influence / reinforcement be-
tween two factors.
Participants insist that the Convince participants that positive or negative influence is not
influence is a negative one. the issue here. It is all about the strength of the influence.
Examples
The evolution of the Compass is based on the collective effort of a Community of Practice
that includes, but is not limited to, the following individuals:
Name Country Email
Desiderio Belas Philippines pdbelas@yahoo.com
Shawn Cunningham South Africa sc@mesopartner.com
Wolfgang Demenus Ecuador wdemenus@web.de
Anura Ekanayake Sri Lanka emaekanayake@yahoo.com
Sonja Ende Germany info@sonja-ende.com
Aruna Gunasinghe Sri Lanka essp_aruna@sltnet.com
Ulrich Harmes-Liedtke Argentina uhl@mesopartner.com
Kgomotso Matthews South Africa kgomotso@netactive.co.za
Jörg Meyer-Stamer Germany jms@mesopartner.com
Deepabandhu Ratnayake Sri Lanka 2000.dr@gmail.com
Christian Schoen Vietnam cs@mesopartner.com
Volker Steigerwald Sri Lanka volker.steigerwald@gtz.de
Gabriele Trah South Africa gabriele.trah@gtz.de
Frank Wältring Germany fw@mesopartner.com
This document was written by Jörg Meyer-Stamer.

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2 Why use a Balanced Scorecard-based approach to LED? 2

3 What are the key elements of a Compass? 4

4 What are the considerations and activities involved in the preparation of a

5 Different types of Compass Workshops 7

6 Structure of a Compass Workshop 9

7 What happens after the Compass Workshop? 13

8 Step-By-Step Explanation of Compass Workshop: Tables 17

9 Annex 1: An Example of the Application of the Compass of Local

10 Annex 2: Documentation of a Compass workshop – Investment promotion

11 Annex 3: The Paper Computer 42

1. Capture the results of completed and ongoing activities

2. Create alignment among stakeholders about vision and strategy

4. Formulate indicators to track progress

5. Define new activities and responsibilities for their implementation

The Compass can be applied in four different ways:

Action-oriented exercise Comprehensive exercise

The Compass of Local Competitiveness is a tool for performance management in territorial

The Compass of Local Competitiveness is a tool that gives you

In our experience, a Compass can be elaborated in a participatory workshop with local

Elaborating a Compass of Local Competitiveness involves a reasonably representative group

2 Why use a Balanced Scorecard-based approach to LED?

It is a widespread phenomenon both in industrialised and in developing countries that LED is

2.1 The background of the Compass

2.2 Features of the Compass

1. Assess the results of completed and ongoing activities

2. Create alignment about vision and strategy

3. Identify critical success factors

4. Formulate indicators to track progress

5. Define new activities

3 What are the key elements of a Compass?

1. financial indicators 2. the customer perspective

4. the learning and growth perspective 3. the internal process perspective

Economic and financial achievements Relationships with external players

4 What are the considerations and activities involved in the preparation of a

• to identify and prioritise a new round of practical activities.

In order to successfully invite stakeholders to the workshop, proper management of expecta-

5 Different types of Compass Workshops

6 Structure of a Compass Workshop

The elaboration of a Compass of Local Competitiveness essentially involves the following

• Explain the Compass

Step Objective Activity

The following steps can be conducted and sequenced in different ways:

Brainstorming on Measure the progress Mesocard brainstorming, CSF by CSF

7 What happens after the Compass Workshop?

7.1 Action planning

7.2 Creation of a monitoring system

Table 1: The SMART Criteria

7.3 Implementation of LED activities

1. How exactly are we going to implement this?