After interviewing both CEOs involved in the recent Lionbridge acquisition of Bowne Global Solutions and the SDL acquisition of TRADOS, Jaap van der Meer, the Director of TAUS (Translation Automation User Society), concluded that language services providers should “forget the language – it is all about technology and process now.”

There are times in the history of each industry sector that significant changes in technology and/or process changes the business scenario of that industry. The language services industry is no different. Viewed from the technology perspective, TM (Translation Memory), MT (Machine Translation), CMS (Content Management Systems) and GMS (Globalization Management Systems) have totally changed the way we perform translation and localization. On the process side, ISO 9000, Six-Sigma, PCMM (People Capacity Maturity Model), CMMI (Capability Maturity Model Integration), and BSC (Balanced Scorecard) have enabled companies to improve and scale their business performance.

For the purposes of this article, we will use BSC as the example to illustrate how a business process model can be applied to companies within the localization industry, and what this implies.

BSC Model: A Short Introduction

According to mainstream economics theory, enterprises always set maximum profit as their utmost objective for all of their activities. Hence, during the early stages of a company’s growth, managers usually rely on traditional financial measurements to understand their business. These metrics include revenue, pre-tax profit, after-tax profit, cashflow, etc. For publicly listed corporations, measurements such as earnings per share (EPS), assets per share (APS) and return on assets (ROA) are often used. However, financial metrics only tell the story of past events, and therefore are perhaps only useful and adequate for industrial age companies.

As time goes by, the market situation will also change. An enterprise will tend to invest more and more in building long-term capabilities and customer relationships. The latter are becoming extremely critical for companies to be successful in the information age. In addition to financial metrics, a successful enterprise must now add customer satisfaction metrics.

In this new environment, relying exclusively on financial metrics is inadequate for guiding and evaluating the journey that companies must make to add value by way of investing in customers, suppliers, employees, processes, technology and innovation.

To address this inadequacy, Professor Robert Kaplan (Harvard Business School) and David Norton (President of Nolan, Norton & Company, a Massachusetts-based information technology consulting firm) put forward a new approach to strategic management in the early 1990’s. They named their approach the Balanced Scorecard (BSC). The term balanced was chosen to communicate the need to adjust and compensate for the shortcomings of the traditional metrics that focused only on the financial perspective.

To balance the financial angle, BSC adds three more facets:

Customer
Learning and Growth
Business Processes

This results in a four-in-one evaluation system, as shown as Figure 1.

The core of these four aspects is in fact the vision and strategy of the organization. The vision and strategy form the foundation of the organization – they define why the organization exists and what it wants to become. Starting from the vantage point of vision and strategy, we can ask questions to examine the following issues:

1. Customer Perspective: How do customers see us?

2. Internal Business Perspective: What must we excel at?

3. Innovation and Learning Perspective: How can we continue to improve and to create value?

4. Financial Perspective: How do we look to shareholders?

Source: Robert S. Kaplan and David P. Norton, The Balanced Scorecard – Measures that Drive Performance, Harvard Business Review, Jan-Feb 1992.

Viewing the organization from these perspectives, we can break down vision and strategy even further into objectives, measures, targets and initiatives. We can then develop metrics, collect data and analyze the information relative to each of these perspectives. This system helps top executives set corporate strategy and objectives and then translate them into a coherent set of measures, transforming strategy into a continuous process owned by everyone. Employees know not only what to do, but why.

BSC thus becomes a powerful tool to evaluate the implementation of corporate strategy, i.e., a Strategy Management Tool. Since the BSC Model first appeared in the 1990’s, organizations from many different sectors have implemented it, including banks, universities, power companies, government departments, IT firms, health services companies, and so on.

Case Study: A Localization Services Provider

Localization services providers can also use this method to implement strategy management and performance evaluation. We have implemented BSC at Transco, and we would like to share with readers what we have learned in the process.

Founded in 1998 and based in Beijing, Transco is an Asian localization services provider, offering a range of localization and translation solutions for Asian languages, including Chinese, Korean and Japanese. Naturally, our management methodology has evolved as our business has grown. By mid-2002, we had set up a quality management system according to ISO 9001 standards. This enables every process to follow a pre-defined, documented guideline. To expand the scope of the management system from quality to corporate performance, we implemented the BSC Model in June 2004. We wanted to integrate it in order to take full advantage of its capability to reflect corporate performance more quantitatively.

To set up a metrics system based on the philosophy of BSC, we analyzed the four aspects outlined above in relation to our business. We used the following publication as our guide: Putting the Balanced Scorecard to Work, Robert S. Kaplan and David P. Norton, Harvard Business Review, Sept-Oct. 1993.

Since Transco has several departments, each department was instructed to break down the company vision and mission into measures that were closely related to the department’s core business. To simplify the departmental structure, only three key units (Project Management, Production and Quality Assurance) are shown in Figure 2 below.

The Project Management (PM) Department at Transco is responsible for communication with clients and for passing the customer’s requirements onto production teams of translators or DTP engineers. Translators or engineers work according to the requirements and then submit files to QA for testing. QA then checks the quality and comments on the overall quality. The production team then applies fixes according to QA’s instructions and then submits the final files to the PM Department for delivery to customers.

Taking the PM Department as an example, the BSC metrics can be applied as follows.

Customer Perspective: How do customers see us?

An organization in and of itself is a virtual entity. In other words, the customer forms opinions of Transco through his/her direct contact with the actual person with whom they are working. In most cases, this is the Project Manager (PM), or Account Manager (AM). Therefore, the quality of service rendered by the PM/AM will directly affect the customer’s experience and eventual opinion of the company.

Seen from the point of view of the customer, the most important metrics are Timely Delivery and Order Acceptance. In most cases, a customer prefers to do business with a one-stop, full-service localizer so that it can save on project management costs. Customer satisfaction can be improved if more project requests can be met. The first step in this process is to have the capability to meet the customer’s project requirements. The next step is to deliver files according to an agreed schedule. If there are defects in the deliverables, the customer will usually complain. However, some dissatisfied customers will not complain, but instead stop buying services. To the localization provider, a customer complaint is an important indicator that is easily tracked. Practical experience tells us that a repeated defect will result in an extremely dissatisfied customer, so this metric is also included in this perspective.

Internal Business Perspective: What must we excel at?

As the PM is the interface between the external customer and the internal team, s/he must excel at ensuring the integration of a customer’s requirements into the work of the production team at Transco. One way to improve this is for the PM to reduce the number of errors in information transmission during this phase. Another way is to reduce the amount of time between customer hand-off to the PM and the team’s starting work on the project. We have labeled these metrics Number of Misplays and Cycle Time.

Innovation and Learning Perspective: How can we continue to improve and create value?

Under this market-driven model, the PM should know as much as possible about production in order to improve service to the customer. Problems caused by differing versions of localization tools, file/code formats and hardware limits always have the potential to impact negatively on final delivery. Therefore, the PM must continually update his/her knowledge by attending workshops.

In order to increase business volume, the number of PMs must also increase. And since the PM is the first one to experience the customer’s latest expectation and/or dynamic requirements, s/he is often the source of new product/service ideas for the production team.

Financial Perspective: How do we look to shareholders?

After the PM delivers the project to the customer, his/her work is not yet over. S/he must confirm that payment can be collected by ensuring that the appropriate purchase order (PO) has been received and processed into an invoice by the accounting department. This is critical since the date of the PO is not the same as the payment date. Generally, 30 to 45 days will pass before a PO becomes real money in the company’s bank account.

One PM usually has responsibility for more than one customer and more than one project at the same time. This means that it is very common for a new project to arrive around the time that a previous one is being delivered. Therefore, the PM’s attention is often focused on the new project, and payment collection will suffer as a result. However, a delay in obtaining the proper PO from the customer will result in the same delay in obtaining final payment. This, in effect, increases the invisible financial burden of the organization. Therefore, the timely procurement of a PO is very important to the interest of shareholders.

In summary, Table 1 below shows the BSC metrics used to measure the PM Department at Transco.

Using the same model, the same type of metrics matrix was developed for each business unit. Beginning in June 2004, Transco Department Managers started to analyze and set up the BSC index matrix, using the Domino platform as the database backend. It was a process of trial-and-error, with some indices having to be altered or removed from the matrix since they did not fit into the database design. We also needed a balance in the index matrix between different departments. Only the 2-3 major indexes that best integrated departmental objectives and that best reflected the organization’s vision and mission were kept.

The database system was finalized in December 2004. The next step was to collect the data and to calculate the values. As of June 2005, accurate index values were available for different departments, and they were providing valuable information to enable managers to make business decisions at all levels.

Although the BSC is still at the preliminary implementation stage, it has proven very useful to the sustainable growth of Transco.

Barriers to Integration of the BSC Model

To fully integrate the BSC Model, two potential barriers must be considered during implementation. First, BSC requires effective measurement of an organization’s activities. However, the activities must be defined clearly in advance. A business will find it difficult to implement BSC if it does not have its processes clearly defined. Companies meeting ISO 9001 or CMMI Level 3 or higher will find that they may greatly leverage their investment in these systems when adopting the BSC Model.

Second, the BSC Model requires a highly efficient information system for collecting, aggregating and reporting data. This information system can be developed in-house or bought commercially. However, compatibility of the commercially available BSC software with an organization’s specific business processes must be considered before implementing the system.

Conclusion

Technology and process will more and more determine the future of the language services industry as a whole. For the many diversified localization service providers in this growing industry, how to optimize and upgrade their internal processes is of strategic value to their survival (assuming that they are at the same level technologically). The BSC Model, like many other management models, is a generic, but valuable, approach that is applicable in many industries, including language services. It provides a well-defined framework for organizations to break down their vision into manageable tasks that can be measured. By combining BSC with their own company’s strengths, a company will be more likely to achieve leadership in this fragmented market, i.e., more like to be the early bird that gets the worm!

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Vic Dickson is the CEO and Founder of Transco, a leading localization provider of Asian languages based in Beijing. He frequently contributes articles on issues that affect the language services industry and writes a blog at www.BetterLocalization.com. Dickson holds a Master’s Degree in managerial economics. He can be reached at Vic@Transco.cn.