Be Sure Your Strategies are Supported by Commitments

A credit union wants to take on an aggressive approach on targeting marketing toward the teachers in their membership (a large market segment.) The marketing people work up a campaign, begin verbally designing ads for print and other media, and then they find the board has trimmed their marketing budget to unusable levels for any type of meaningful campaign.

The year hasn't even started and spirits are dampened and an opportunity is lost. Sound familiar? Strategies are not just good ideas and wishful thinking. They are components of a well-planning and established vision that needs the proper financial support and commitment.

Another commitment needed by all portions of a strategic plan is the commitment to make it happen. I've worked with credit unions that have a great planning document and it rarely gets looked at again until the next planning retreat approaches. This is a bad idea and a waste of time. The plan must have the commitment of those responsible for getting things done and executives actually taking on the action plans as a meaningful part of their daily work program.

College football teams like to start with a first game patsy, to get off on the right foot with a convincing win, build some confidence and gather momentum in necessary commitments for when the tough opponents come to play.

The same approach can be used when building commitments to your planning process. Start with the easy victories first. Demonstrate progress by accomplishing action plans and showing quick results. This gathers momentum for the staff to support and make commitments to the plan, the board seeing success and progress becomes easier on the financials as long as they know good progress (winning) is happening.

What are the easy victories? Small projects and visible projects are the best early wins. One credit union client wanted a new marquis that was programmable and had lots of active motion as an attention getter. The board approved it and it was quickly purchased and installed. As a "test" of the programming the first couple of days ran a scroll of a thank you to the board for their foresight to approve the project. The marquis was a piece of a larger marketing initiative to be more visible. Did thanking the board the first day help? It didn't hurt at all!

Commitments from the board and executive team for the proper funding and the proper work output is critical to giving your strategic plan a fighting chance for victory.

-- Russell

Why should your strategic plan be written by a team?

There are just two key concepts that make the team the best way to create a strategic plan: input and commitment. The people who create the plan should be the people whose functions in the credit union give them the best perspective to give quality input to the strategic planning process - and they should be the people whose commitment to the resulting plan will be most critical to its success.

What this means, in simple terms, is that you want to involve people who have day-to-day management responsibilities in three areas of your credit union: sales/marketing, operations, and finance. Specifically, I'd suggest considering the following people for your strategic planning team:

-CEO (always)
-Business Development
-CFO/controller
-IT
-Human resources
-Member relations

While this is not an exhaustive list, it's a pretty good starting point. For reasons of creating good group dynamics, we've found that the ideal strategic planning team is made up of 5-10 people, so you will probably choose to have one or two more or less than the suggested titles above.

You probably have also noted that we did NOT list the board members. The board should have a strategic planning meeting - but its purpose should be to digest the plan created by the management staff and make suggestions to the CEO on how best to implement the strategic. In my experience, board-generated strategic plans inevitably flounder because they lack the two key elements - input and commitment - that should be required of every participant in your planning team.

-Robert

What is Your Strategic Focus?

The key word here is focus. Ever work with an organization that seemed scattered and each day felt like you were heading a new direction? This is not uncommon in the knee-jerk reaction times we see today in business and in credit unions. Sometimes we forget, it is possible to very good at one thing if you stay focused on it.

A friend of mine was a phys. Ed. teaching in an elementary school and he put the entire class on one side of a tug of war rope, and he stood on the other side. He thought he’d have fun and play with the kids pulling against him before finally winning with a good pull. Much to his surprise the kids were very focused on winning and with each of them pulling with focus he couldn’t beat them! The same goes for credit unions, when we focus and have a team that is focused we can beat a much bigger opponent.

In credit unions we win by gathering talent, focus and intensity to an issue critical to members, and do it better than anyone else in the market. This is how to become a specialist in certain areas and escape from the commodity mentality. Just matching the competition leaves members to select their financial institution based on rates alone and this takes away net income and dilutes any loyalty we want to build in our members.

Two important questions to be answered when establishing your focus will guide your management team on where the credit union needs to be heading and focusing.

What do you sell? Who are your targeted members or prospective members?

By taking the time to delve deeply into these questions you will find the focus you need to be taking as you plan out your strategies.

-- Russell

Who are the Competition and How Do They Impact Us?

You are not alone. You have competition all around you. Some you readily recognize and some you may have forgotten about, or not even known about. A common mistake among credit unions over the last ten years has been to try and copy the competition and offer the same products and services they do. You want members and prospective members to find a reason other than low fees and better rates for choosing you as their primary financial institutions.

You want to understand competitive strengths and weaknesses, and a solid knowledge of other factors affecting the business environment at a national, state and local level. Figuring out the competition is knowing where to avoid stepping toe to toe in their strengths and exploiting their weaknesses. It’s all in how you want to position your credit union. In some cases you will attract members because they prefer you and where you’ve positioned yourself; on the other hand, you may also drive some members away. Both results are ultimately good for everyone involved.

Right now the market is becoming even more volatile than ever before. Mortgage companies are going out of business, and the credit market is shifting causing all kinds of ripples for credit union executives to be in tuned to. As this situation continues to shake out and foreclosures and bankruptcies level off, everyone is going to be looking for the opportunities that have opened up in this shifting landscape. In some cases this will level the playing field and provide a short-term window of opportunity. Be ready! The more you understand your competition and the climate of the financial world, the less energy you will have to expend and the greater the opportunity to grow market share will be.

Information is power and that has never been more true than in the strategic planning process. You need good reliable information in order to win the battle for market share and membership growth.

-- Russell

Assumptions Are a Necessary Part of the Planning Process

Assumptions are temporary estimates about some probable future event or development over which you have no particular control. When you make an investment in a stock you assume it is going to give you a positive return. Maybe you based that assumption on the historical track record of that stock. Maybe you based that assumption on a reliable tipster. Either way you are making an assumption about the future.

Some assumptions are as easy as assuming the sun will rise in the morning and others are as complex as predicting the economic outlook for the next ten years. If it is so difficult to make accurate assumptions, why even bother? Because assumptions are necessary for a good plan, and better assumptions make a better plan.

In credit unions you have to make assumptions of future trends in order to prepare for those trends now. Because the credit union industry is changing so rapidly some credit unions are choosing not to make any assumptions and maintain the status quo, each year refreshing the same game plan over and over without making any significant changes. This doesn’t solve their problems and leaves them exposed for a number of negative possibilities.

Assumptions built on experience, awareness and research are the guide for actions and strategic initiatives. For example, if the mortgage lending environment is becoming quite restrictive, how will that impact your loan growth and delinquency rates over the next 18 months? How should you shift your actions today to prepare for those assumptions becoming a reality?

Wishful thinking is different from assumptions. A CEO can be so excited about the new branch he is building that he is convinced everyone in the area will leave their current bank to come to his beautiful new branch. When confronted with the response by the competition who are vigorously working harder to retain their customers, only then does he realize he was thinking more along the lines of wishful thinking that a proper assumption of the situation.

Drill down into the details when making assumptions. Proper assumptions are based on solid facts. The deeper you get into the details your instinct and historical information will form a clearer assumption of future activities.

-- Russell

Define Your Strategic Competency

A strategic competency is rarely if ever a single thing. It is usually a mix of three elements:

Skills: A skill is any manual or mental activities that result from talent, training or practice.

Process: A process is any manual or mental systematic series of actions that are directed toward some end. Include any significant "know-how" resident in your credit union.

Knowledge: Knowledge includes any information, data, or understanding of facts, or principles resident in your credit union.

A strategic competency must be strategic in nature. For example, if you are the best at how to hold an employee birthday celebration, it doesn’t have much strategic value, because such celebrations are not going to directly improve your relationship to your members, or your competition.

A strategic competency is something that can be used over a long period of time, and it usually knowledge based. It is something that should elevate you above the industry norms and provide an advantage in the marketplace.

A strategic competency must pass four specific tests:

Is it a combination of skills, process and knowledge?
Does it differentiate the credit union from the competition?
Does it create strong value for the member?
Is it difficult to copy?

If you don’t get a resounding "yes" to each of these questions, you should be skeptical that you have a strategic competency.

-- Russell

Why Do You Sell What You Sell?

When I ask this of my clients and their boards of directors, I see a few blank stares, I get a moment of two of silence and then I hear generic justifications. I don’t want justifications, I am asking for you to look at your product and service line and one by one explain why this is being offered to your membership.

This exercise should cause other questions to be raised. Such as:

When did we start offering this and why?

How does this fit with our future direction?

Is this a profitable product or actually a drain of resources?

How well do we sell this?

How well can our front line staff explain the features and benefits?

What percentage of our membership actually uses this product or service?

Do we want more members using this product?

If yes, how do we make that happen, if no, why are we still offering it?

Sometimes in the evolution of a credit union products should be dropped and new ones added. I see many credit unions holding on to products because back in 1982 it was a hit and some of the board members remember those days. That product may no longer apply to the markets you are currently going after.

There is no advantage to offering everything. Strategically, it is much better to offer fewer products and services you do extremely well, than to divide your efforts too thin across areas with minimal return.

One client doing this exercise realized, of the 80 products and services they were offering; only about 35 really were of benefit to enough members that made it justifiable to keep in the credit union. Streamlining your products and services not only help your focus, but makes it easier for your front line employees to be better acquainted with what you are offering so they can more comfortably sell it to help the members with this financial needs.

-- Russell

The Next 15 Years are Only 5 Years Away

It’s 1992. The internet is barely in the public eye, cell phones are still for the rich and famous, the youngest president since Kennedy is taking office, and the recession is about to give way to a booming era of commerce. Looking back 15 years, how much has your business changed?

What shifts have you seen in your marketplace, technological leaps, your member expectations, your employees’ need for information? I think most of us would agree the last fifteen years have brought about a huge amount of change in how we do business. Many credit unions made the correct decisions and projections to still be able to be in business and some didn’t. Some credit unions are barely hanging on to their position they held against the competition fifteen years ago and some credit unionsw have risen to the top of their fields, commanding respect and getting increased market share and profits. How did those credit unions do it?

Three basic factors determined their success and those same factors will impact the success of credit unions over the next 15 years, which will happen in the next 5 years..

1. Accurate projections

The ability to project future trends of the marketplace, members and employees is to have an upper hand on most competition. Typically, when working with credit unions on their strategic plans I ask executives to project fifteen years out what the industry will look like. What changes are required to be successful. And, those projections usually come true…in five years.

The key to effective market projections is to be tuned in. Some CEO’s focus their energies on the day to day, getting caught up in the problem-solving of the organization and lose the bigger view, thus projections are short-sighted and inaccurate because they are not focusing in the correct area of their role as lead executive.

What cutting-edge knowledge are you listening to, accessing, and learning through seminars that keep you in tuned with future trends? Executives need to be retooling their knowledge every bit as much as the front line supervisor does to work with the new generations of workers. Proper projections give you advanced notice (although not nearly as much as you think) to prepare and make the proper developments for the new trends once they arrive.

Making accurate projections, even if they happen in one third the time you think they will, give you the opportunity to be proactive and make advances on your competition.

2. Taking the risk

Once a CEO has confidence in his or her team’s ability to make good projections, action has to be taken in order to make those accurate projections to pay off. This is the gut check. I’ve heard many executives talk about their abilities to make things happen, yet when it comes to putting up the money to make it happen, their confidence heads south and they are filled with excuses for not taking action. Executives need to decide if they are playing to win or playing not to lose.

Assume your projections of an industry shift in fifteen years will dramatically affect your business. Knowing that it most likely will take only five years for this shift to happen, are you ready to take the risk today to be proactive and prepare for that shift? Is your board of directors supportive of this action? If not, do you care if you job is on the line if you are wrong?

The “corner office” is no place for the weak at heart. Confidence is required to take risks. Risks are required to be proactive. Being proactive is required to be at the top of your industry. Take the risk based on confidence your projections are accurate and reap the rewards while the excuse makers continue to play safe and fight fires of their own making just to survive.

3. The luck that comes with preparation

Every successful business has been blessed with a lightening strike of luck at some point along the way. There is no doubting the lucky seem to keep getting luckier. Without going in to the whole law of attraction tangent (which I do believe in by the way) the reason luck comes to those who are lucky is because they expect it and they are ready for it. Preparation for the big windfall is critical in making the windfall a success. Some companies can actually grow too fast when hit with the lucky break to the point of bankruptcy because they weren’t ready for their good fortune. Some companies don’t get the luck because they never saw it coming and never say it pass them by.

The TV show Friends made superstars out of its six main cast members. Were they simply lucky? What about the actors who turned down the opportunity when those roles were offered to them? Simply unlucky or were they unwilling to take a risk for a new type of programming? Those that accepted the roles were prepared to grab at the opportunity. They projected it would be good, were willing to take the risk and were prepared when the opportunity was presented.

Success as an individual or as a credit union requires these three elements to work in harmony to achieve the best you can become. They used to say it takes fifteen years to become an overnight success, at the pace of today’s world; it’s only five years away – if you are ready to make it happen.

-- Russell