The winners in today's relentless and unforgiving competitive climate think many steps ahead. They make every move count, and always position their institution to have the advantage. Here's how to ensure your strategic planning session doesn't leave your financial institution bleeding to death from self-inflicted wounds.
For many financial institutions, strategic planning meetings often include "blue sky" sessions alternating with rounds of golf. They may make everyone feel upbeat, but they seldom result in any meaningful change.
Mark Weber, CEO and Chairman at Weber Marketing Group, has seen this pattern of behavior time and time again. He knows what he's talking about. He's been conducting strategic planning sessions with senior leadership teams at banks and credit unions across the U.S. for the last 35 years.
"It's astonishing how often millions of dollars of capital and operational funding really have no strategic purpose," says Weber.
For Weber, many strategic planning mistakes boil down to "opportunity cost." Without a plan that lays out concrete steps to future success, financial institutions will suffer fiscally and hemorrhage critical resources.
Many experts like Weber believe banks and credit unions are wasting both time and money on strategic planning sessions. Some institutions fail to focus on the right topics. Others waste time on items that are unessential.
For instance, Susan Mitchell, CEO at Mitchell, Stankovic and Associates, says far too much strategic planning time goes to discussions about regulatory compliance, taxation, and operational issues.
Many senior leaders are hazy about the process. They are hold strategic planning meeting because… well, "isn't that what you're supposed to do?" Tragically, they don't know how to conduct a productive strategic planning session, nor what one should really accomplish.
Often what prevents a financial institution's strategic planning from producing more than an expensive unused tome are the "elephants in the room" — factors or assumptions that the participants don't see, or won't acknowledge. These may be people, shared attitudes, culture, or methods.
Outsiders often see them readily.
One elephant in the room that banks and credit unions typically don't address has to do with their culture.
"Quite often new strategic priorities demand different — or expanded — skill sets and a more agile decision-making and operating environment," says Joe Sullivan, President and CEO at the Market Insights.
But changing an institution's culture takes more than ordering cool t-shirts with "Agility!" printed on them or starting a Twitter account.
"Deliberate effort is required to shift aspects of a culture to bring it into alignment with strategic priorities," Sullivan explains.
Jeff Marsico, EVP at The Kafafian Group says C-level leaders in the banking industry could be better in two key areas: project management, and an appetite for failure.
"Without a bigger appetite for failure, we only move forward with 'sure things,' which creates tremendous drag on innovation," Marsico says.
The typical planning meeting or strategic planning retreat is usually replete with voluminous reports loaded with colorful charts and extensive presentations by both executives and outside speakers. But according to experts, strategic planning as currently practiced in the financial industry is rife with outdated, useless, repetitive, and counter-productive practices.
For instance, Jeffrey Gerrish, Chairman at Gerrish Smith Tuck Consultants, says the old strategic planning standard, the "SWOT analysis" (Strengths, Weaknesses, Opportunities, and Threats) has had its day. It's time to retire it.
Marsico points out that SWOT discussions can also be exercises in sheer fiction — where hubris wins over facts.
For Joe Sullivan at Market Insights, too many institutions dwell on the past.
"Something that often receives more attention than it should, is looking backward at prior years' plans and performance metrics instead of moving forward," says Sullivan.
One of Sullivan's financial clients recently shared a planning packet with him that ran 50 pages, including dozens of the obligatory graphs and tables.
Kilmer says that inundating boards with volumes of immaterial information can dilute or suppress the discussion that should be taking place.
"Kill fewer trees and spend the resources elsewhere," Kilmer advises.
While outside facilitators can address some of these issues and stimulate discussion, Kilmer says financial institutions must avoid a common trap: the strategic planning gadfly.
Getting to the heart of a challenge and identifying potential solutions takes time, and the initial point of discussion may not really be where the matter should stop.
"Often institutions are not asking the real question behind the question," notes Susan Mitchell. She says there are issues and initiatives that are important to big banks or the industry as a whole, but aren't meaningful for community banks or credit unions — at least not worth addressing within the limited block of time set aside for strategic planning sessions. Take regulatory compliance — that won't be solved in strategic planning meetings no matter how much you talk about it — but increasing profits that can offset such costs will help.
Several experts stress the need to guide discussions onto things that the institution can improve and control. Strategic planning shouldn't bog down in matters better suited to trade association meetings. Even concern about examiners should be limited.
While there should be freedom of discussion and expansive thinking, strategic planning shouldn't venture so far into "blue-sky territory" that the end result doesn't provide direction to those who have to make the actual improvements happen.
Setting realistic goals should not result in a mindless mathematical exercise either. Sullivan says he's see that kind of robo-planning happen.
"Too often, setting growth goals is an exercise in applying a random percentage across the balance sheet without considering the internal and external drivers that will determine whether or not goals are met," Sullivan says. "Applying the same arbitrary goals for loans and deposits to each branch without considering the profile or product fit for households in each market." Nor does it acknowledge how quickly consumer behavior, markets, and competitors evolve today.
The other side of goal setting is accountability. Several commenters pointed out that without specifically assigning someone the duty of following through from the plan and hitting the goals set, the result can be a jump ball where nobody grabs.
"Strategies must have specific internal champions that take ownership for their implementation," says Sullivan.
How much should be on somebody's plate at a time? Or, more broadly, on the institution's plate?
Most experts agree that the duration of a plan shouldn't be matched to a pre-set calendar, but to the strategic tasks the institution has committed to. They also stress the importance of reviewing plans regularly to make sure they remain realistic and appropriate.
Recommendations for the right strategic planning time frame vary, but typically range between 12 months and three years — no more than five years.
Sam Kilmer says five-year plans, once a staple, don't work well anymore. However, he suggests institutions not get too hung up about time.
"It doesn't have to be an exact year count as much as a future-forward perspective that looks beyond the current operating environment," says Kilmer. However, the perspective of the plan must look beyond a year or two, otherwise the discussion becomes more tactical than strategic.
Jeff Gerrish suggests thinking in terms of rolling three-year plans, subject to annual adjustment.
Mark Weber, on the other hand, thinks five-year plans still have relevance, as long as they embrace a framework with both short-, mid- and long-term goals.
Financial executives traditionally think in terms of Return on Investment (ROI), but ROO helps assess whether an institution is getting any nearer the level of performance its plan is working towards.