Quick, what is the single most important item to focus on for your bank’s strategic success? What are the tactics that need to be done today to ensure that success? After that, what is your next strategic priority? Would most of your team answer the same way? In strategic planning circles, it is called “working both ends of your plan,” and it highlights a weakness in many bank’s strategic processes. The average community bank spends 276 hours per year on putting together an update to their strategic plan, but the question is what value it adds to franchise value. In this article, we look at the challenge and how banks can improve their current strategic methodology.
Often strategic initiative is at odds with each other. If a strategic goal is to improve customer engagement or satisfaction, this might conflict with your objective to lower operating costs. If your goal is to lower your cost of funds, that may conflict with your goal of driving 8% loan growth. Even if priorities are set, they may not be communicated. Even if they are set and communicated, they may not be built out enough to provide clear short-term goals for each team member to achieve.
This falls under the head of “strategic alignment” and is a process step that banks can go through to ensure everyone focuses on a single direction. Banks often spend so much time planning only to effectively put their plan on the shelf until next year where they check in to see how they did. Banks that look at their strategic planning annually will either not be effective of reaching their goals or have goals so easy to obtain that it takes little effort. To be a superior performing bank over decades, it is helpful to have a superior performing process.
Setting Your Priorities
Assuming your planning process produces a set of true strategic objectives and not just a set of budgetary goals, the next step is to prioritize the list. Having a set of limited initiatives, in prioritized order, allows all employees to have a framework for making decisions.
Once strategic initiatives are prioritized, then tactics need to be developed that help achieve those priorities.
In turn, a multitude of tasks can support each tactic.
Laying out this waterfall of strategic initiatives, tactics, and tasks helps map alignment. Conflicting goals and effort will become more apparent. Further, taking the extra time to go from a high-level strategic plan down to execution level tasks helps the organization get clear on what needs to be done.
Breaking Down Tactics
Once managers agree to a particular tactic, a “workup” follows that lists the tactic; the strategic initiative that it supports; the owner/sponsor; what benchmarks or metrics for measurement and what are the interim milestones for success.
In this manner, tactics can then be charted, measured and reported on in a systemic fashion.
The Long and the Short of It – Time
Once you have both ends of the strategic plan mapped out, then management needs to figure out the element of time. When it comes to executing a bank’s strategic plan, all periods are equal. There is no “hockey stick” effect where tactics get easier or execution becomes more rapid as you get closer to your planning horizon.
The things you do in the next ten hours impact what happens in the next ten years. Many banks have a long-term vision, but few spend time worrying about what needs to be achieved in the next ten hours to achieve that vision.
A bank’s strategic goals need to be at the forefront of everyone’s minds every day.
Once you take the time to develop a five or ten-year strategic plan, management then needs to work backward to make sure the milestones leading up to those objectives are spread out and being achieved. Milestones then need to be translated into daily or weekly metrics. If a long-term goal is to have a presence throughout the state, then each day needs to be filled with micro-goals of acquiring new customers, looking at M&A targets and increasing your mobile capabilities.
Figure out your goals for today brings you steps closer to your long-term vision.
Putting This Into Action
When a bank updates its strategic plan, it is only partway done. Good strategic plans or like good ideas – they are a dime a dozen. What sets banks apart is their execution of that plan. To help execution, having a framework to guide the bank from vision to execution and from ten years to today aids in organizational alignment. The more aligned your bank is, the higher the probability of achieving success.
Submitted by Chris Nichols on December 12, 2018