Strategic Planning for Credit Unions - Keeping up Momentum

Last week I spoke with a member of a credit union management team that I’d worked with doing strategic planning a few years back. We got along well, and I thought the team came up with a great strategy for growing their credit union. She mentioned that there was a new CEO, and that the CEO I had worked with left the credit union about two years ago.

When I asked how the strategic plan was working for the credit union, I was a bit disappointed to find that nothing had been done with strategic planning since the old CEO left. Once again, the credit union’s strategic planning had fallen back into the old model – a brief weekend retreat with the board where strategy is discussed vaguely but with little input (or support) from the management team. Naturally, the credit union had done well with its intitial thrust with our strategies – but I sensed that they have also reached a new plateau and were wondering where to go next.

Dropping the ball with strategic planning – or going back to the less-effective “board retreat” model – may look like a good idea at the time. After all, you will save time and money, and the impact on the organization may take years to become noticeable. Rest assured, however, that – from the outside – it is usually very apparent to me when a credit union is moving forward and when it is just treading water, waiting to be steamrollered by the next unforeseen event in the credit union market. Which kind of credit union do you want to be?

Who Should NOT Be On My Team?

There are some people you may be tempted to put on your strategic planning team who should not be there. This is not because they wouldn’t add some valuable input, but rather, it is because their role (or roles) call for a different relationship with the strategic planning process.

One of the trickiest people to include - or exclude - from you strategic planning is board members. There are some good reasons to have a SHORT strategic planning session with the board. After all, the overall governance of the organization is the board’s responsibility. That being said, most board members have little (if any) relationship to the day-to-day operation of the credit union. What this means, in practical terms, is that board members will not likely have as much information about member behavior as the active management team – and their commitment, while crucial, will not actually cause the real nuts-and-bolts implementation of the plan. I discuss some of the reasoning behind who should and should not be on the team in my earlier strategic planning book, "Simplified Strategic Planning".

What we recommend for board involvement in strategic planning is pretty simple. In between meeting one and meeting two of the process, you should plan to have a board retreat (typically one or two days) where you review the existing data (the worksheets from sections 1-4 will mostly be done by this point – and they are perfect for this) and discuss a set number of issues that will require board discussion. A good idea for this short meeting is for the CEO to canvas the board well before the meeting and create the list of issues himself, possibly in conjunction with the strategic planning team leader. This approach will give the board ample opportunity to provide input to the second strategic planning meeting, where the strategies, goals and objectives will be further refined in order to drive implementation.

Bite Off Only What You Can Chew

In recent strategic planning sessions I've witnessed overly exuberant staffs and boards review a list of goals and objectives they had on prior strategic planning documents. Be careful not to try to overload your organization with too many goals and objectives, because too many of them will be given a less than desirable effort simply in order to check it off the list.

Depending on the size of the credit union, what has recently transpired, or will be forthcoming should be taken into account on strategic planning focus. One client had a terrible situation of executive theft which lead to extensive firings and court cases not to mention, the loss of revenue and write offs for "friend" loans. Another client is pondering a merger and being acquired. These are significant strategic items that need complete focus and a check of where are we now and where will we be in 12 months.

I fully endorse a multi-year strategic plan and focus unless so much is dramatically going to change within the next few months it's hard to imagine have a healthy plan with many goals and objectives until the big issue becomes resolved.

If your credit union is comfortable in your locations, have solid reviews and feel properly position to attack member, asset and loan growth, then this is the time for multi-year focus and aggressive goals and objectives. However, still keep in mind too many projects will not get done properly in a timely manner because the available resources of time and talent of your executives can only be spread so far.

If you are a credit union that isn’t as comfortable as the aforementioned one, you still have a great need for a focused plan to build on the strengths you have in the marketplace. The focus on only a few items to dramatically improve will serve your members better and your team will be able to generate greater success.

-- Russell

Giving the Credit Union Direction

Strategic planning is a key tool for putting direction into the management of your credit union. While it is possible for a credit union to survive by focusing on operational excellence in areas like customer service and marketing, you will seldom see a credit union truly thrive without a clearly defined strategy. Strategic planning is a process that requires you to define the future direction of your organization. Without such a direction, you are likely to find your credit union drifting – staying afloat, possibly, but not really going anywhere. In strategic planning, we ask the question “Where do we want to go?”

We answer this big question by addressing the truly strategic issues in your business. Ultimately, these issues revolve around three more specific questions:

-What will we sell?

-To whom will we sell it?

-How do we beat (or better, avoid) competition?

At first blush, these questions may seem easy to answer. In reailty, many of the strategic issues you face as a credit union can be boiled down to one of these three, basic questions. For example, the easy answer to "what will we sell?" is "personal financial services". But how well does your credit union provide all of these services? Many credit unions will struggle to provide "one stop shopping" to their members - and then face escalating costs as they are required to add infrastructure which is only fractionally used. Perhaps there are some services we should provide - and others we should simply make available to our members through a strategic alliance with another organization? Which services should be self-performed - and which should be outsourced - is a truly strategic question for many credit unions.

From the Branch: It's Quiz Time

How well does your staff know your products and services? A client has been reviewing a series of products with his staff so they can better cross sell them. I put them to the test. I put the employees in small groups and asked them to list the five products they had reviewed and what the main features and benefits of each were.

The groups struggled a bit and they decided to go get the manual. I stopped them right there. If you are going to serve your members at your strategic best, the information needs to be well known and not recited from a manual.

It takes too much time, seems too insincere, and it becomes selling for the sake of the sale and not for the sake of helping out the member with a financial need.

When all employees understand the most important products that fit the strategic focus of the credit union, and fully understand the benefits and features of those products, then the credit union has a defined message, member approach, and can really focus on what the strategic competency is.

Test your staff. Take your best selling five products and ask them to list the benefits (what the members get out of using the product) and features (what the product does for the member) from memory. No notes needed. This will give you some insight to your sales process, your strategic focus on the front lines, and how well you are serving your member's financial needs daily.

-- Russell

Strategic Planning - The Role of Culture

Quite a few executives I’ve met would prefer to treat strategic planning as an inorganic black box that, given certain inputs, flawlessly produces expected outputs. Many people who think this way about strategic planning are otherwise brilliant people with strong quantitative backgrounds – which probably explains the tendency to want to treat management as an engineering problem. Now, to be sure, we can often benefit from the objective treatment of our strategic issues as dynamic systems to be tinkered with, but we must never forget that our strategies, in the end, rely upon the behavior of people.

People are wonderful – at their best, bright, creative, and thoughtful. People are also unpredictable, and in groups, their behavior is rarely as manageable as we would like. Within any organization, employee culture can be either and asset or a hindrance to strategy – so it’s very useful to look at steps we can take to create a culture that works with our strategy, rather than against it.

-Robert

5 Choices for Market Segment

Market segments fall into categories such as cash cow, dog, star, etc. Once you’ve identified where your market falls in these categories, you have five different options in taking action. Not every market you are currently involved in should have a strategy to grow and expand, in fact, some markets after close analysis might be best to completely leave. Select one market segment you currently serve and decide which of the following approaches you want to take.

1. Expand

Analysis of the selected market segments indicates this market has great net income growth potential, or could be an under served area with minimal competition. When you decide to expand you want to take an aggressive approach to market share growth and penetration. Expansion in a market means you want to grow your share of the market more so than the growth of the market itself. For example, your market share for this exercise is college students for the university you serve. You have determined that there is great opportunity to grow in good income generating products in this market even though the student enrollment at the university is expected to be stable. The market itself is not growing significantly, but your presence and number of members served can expand significantly.

2. Maintain
   

Maintaining market share does not mean ignore it and hope everything stays the same. In fact, market share maintenance might take a vigorous defense strategy if a new competitor has entered the market, if the market segment is shrinking, or if due to lack of effort in previous years your name in the market place isn’t top in the minds of the members. The goal for this approach is to expect to hold steady the current position in the market and at least grow at the same pace as the market is growing.

3. Contract
   

Credit unions at times offer products and services with minimal benefits to the credit union or the membership as a whole. To contract would be to shrink product offerings yet maintaining more profitable products and services while increasing new income from the market. Selectively eliminating those products and serves is a scaling back yet still growing in net income.

4. Milk
   

To milk a market segment is to say you have reached your maximum growth potential, have a solid return on your investment in serving the market and you simply want to have minimal investment of resources while continuing to maximize your returns. Some markets that have been served for a long time and are going through the maturing process are best served by milking.

5. Withdraw
   

Withdrawing from a market is exactly what you think; pulling away completely over a period of time. If you are involved in a market that no longer fits your credit union profile, has no growth potential, or is shrinking fast then the best strategy is to look in a different area and begin the process of getting out. Credit unions are not required to go down with the ship, so to speak, and it is the wise leader who knows when its time to make a choice to withdraw before any significant damage is done to the credit union.

-- Russell