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Plan for the future: Keys to a solid strategic plan for banks (part II)

July 31, 2012
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Guest post 

By John Owens, president, and David Harrop, chief operating officer, of financial consulting services firm BCI LLC

In part I of this post, we focused on the importance of determining an organization’s values, mission, purpose and value proposition by having a clear picture of the current situation of where the bank stands in terms of market, economy, etc. Now it’s time to turn to five additional components of a solid strategic plan; these revolve around taking charge of the organization’s future.

6. STRATEGIC GOALS (The end results that will measure the success of the bank’s efforts). What are the key strategic issues you face, and what strategic goals need to be established? One goal could be “Assess our suite of loan products to determine the viability of our current products and the need for changes or additional offerings.” In our experience, the best performers have four to six key items that are focused on issues and future positions that often require multi-year efforts.

7. STRATEGIC INITIATIVES (The origination of new ideas and processes that will lead to the accomplishment of goals). In the example goal above, a related strategic initiative could include: “Develop a 1-4 family residential mortgage lending strategy that takes into account the uncertainties of the GSE’s and possible new regulations.”

What are some other typical strategic initiatives?

• Enhance risk governance and oversight.

• Improve the bank’s ability to hire, train and retain employees.

• Improve financial performance.

• Increase regulatory and compliance performance.

• Build a more effective board.

8. ACTION PLANS (What needs to be done to implement the bank’s initiatives). This area of the planning process seemingly presents the biggest challenges to most banks. The detail needs to be sufficient to guide the implementation process. At a minimum, action plans that are the most effective have the following characteristics:

1. They clearly state the strategic initiative.

2. All major events, phases, etc. are enumerated.

3. They establish the person responsible for each action item, and the supporting staff.

4. The scheduled start date and anticipated implementation period are set.

5. Resources, such as capital, operating funds and staffing hours are stated.

6. The feedback expectations and tracking are determined, such as “written progress reports monthly,” “weekly revised forecast,” etc.

Based on the strategic initiative example, action plans would include the following:

• Identify how Dodd Frank, and resulting regulations, will impact the bank.

• How will the bank prepare or react to a shrinking or more restrictive posture by Fannie and Freddie?

9. EXECUTION (The follow-through on the bank’s action plans). Several years ago, noted strategist Michael Porter noted, “The age of planning has become the age of implementation.” One of the failings of many banks is that the strategic plan is an event—sometimes offsite at a nice resort conducive to relaxation and focus. Then, upon return to the world of customers, staff, regulators, etc., the plan is relegated to the shelves of the management team until next year’s annual planning retreat.

We noted in part 1 of this post one organization’s ability to achieve high financial and organizational performance.  They focus on constant and consistent review of their plan. In today’s rapidly changing world of instant communication, it is imperative to focus in order to not get sidetracked by the noise. The convergence of rapidly changing competition, real-time communication, and smarter information technology has led to a reinvention of the meaning and practice of strategy. It’s all about rapid assessment and adaptation to a complex and rapidly changing environment that you can’t control (much like the modern day battlefield).

As Yoda said, “Do or do not… there is no try.”  Without execution, the plan is worthless.

10. MEASUREMENT AND ACCOUNTABILITY (Keeping score of the results and tracking of the responsible parties and financial goals). Traits found in banks that implement strategy well include the following:

• The management team addresses planning formally every three months or more frequently.

• They meet their implementation targets over 75 percent of the time.

• They correlate individual performance metrics for staff members to ensure implementation.

• The Board is kept involved and aware of progress toward the established goals (generally on a monthly basis).

BCI frequently conducts management studies for regulators, and as part of those, we often use a checklist for banks to assess their existing strategic plan. If you’d like to see how your strategic plan stacks up or would like to begin identifying strengths or weaknesses of your current plan, contact us for a free self-assessment checklist.

For more information on what financial institutions can do to balance each component of the CAMELS rating, download the whitepaper, Bank Examinations: Balancing CAMELS ratings.

John Owens is president, and David Harrop is chief operating officer of BCI LLC, a financial services consulting firm that helps clients resolve and manage complex business issues, streamline business practices, mitigate risk, and enhance their performance. Owens is based in Pawleys Island, S.C., while Harrop is based in Bella Vista, Ark.

About the Author


Raleigh, N.C.-based Sageworks, a leading provider of lending, credit risk, and portfolio risk software that enables banks and credit unions to efficiently grow and improve the borrower experience, was founded in 1998. Using its platform, Sageworks analyzed over 11.5 million loans, aggregated the corresponding loan data, and created the largest

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