Much to the chagrin of certain strategy firms and facilitators, there is no single “best practice.”  The best strategy is the one that accomplishes clearly stated and defined objectives. It is also a realistic and achievable plan of action given the parameters of the financial institution.  Strategy is an art striving to be a science, which is heavily supported by facts, market data and quantitative analyses. The true test of the strategy is in assessing whether or not it has achieved the desired results.

In a broad sense, developing a strategy produces a picture of what a financial institution wants to look like in the future. The strategic plan becomes a roadmap for how and when a financial institution or business unit will transition from the current state and achieve the future state, resulting in a framework for decision-making to respond to economic, financial and market changes. In the end, the strategy must provide focus and articulate:

• an organizational vision that provides direction from the leadership team down to the individual employee.
• goals and objectives that must be achieved across the “breadth” of the financial institution.
• key measures that management needs to adopt in order to achieve the vision, including “leading” indicators that predict future performance and “lag” indicators that identify results.
• the critical initiatives in which management should invest available financial and human resources.

There are a number of reasons to engage in planning ranging from regulatory requirements to board mandates.  No matter what the reasons, there are several questions that are central to an institution’s decision to embark on a planning exercise:

• Has there been a significant amount of time since the last planning effort or an executive-level change in leadership?
• Has there been a significant change in the market or in your institution’s “value proposition”?
• Is leadership committed to strategic planning, and is the organization ready to align resources against strategic needs?

Efforts to develop a strategy without consensus, commitment and ownership are doomed to fail. The planning process must be bound by the following tenets:

• Create an environment for discussion through open and candid dialogue among all participants. This requires that everyone leave ranks and titles at the door.
• Facilitate and stimulate conversation regarding the institution’s current and proposed strategies and initiatives by asking challenging and probing questions substantiated by market and financial data.
• Challenge the current status and business model with results oriented analysis.
• Develop and obtain consensus on factually-based initiatives.
• Establish clearly defined tactical initiatives and action plans by assigning sponsorship, accountability, responsibility and target dates for implementation.
• Obtain consensus and commitment across the organization to implement the plan.
• Establish monthly/quarterly review dates and planning update meetings to monitor progress and offer changes, as required.

Constructing the strategic plan requires a “building block” approach utilizing relevant and topical industry research, local/regional market data, and comparative historical financial information and industry metrics.  In this fashion, one can explore both the internal and external drivers – market, economic and financial – that will have the most significant impact on the institution’s strategy, business model and financial performance during a three-year timeframe.

The key questions underscoring the planning process are: Where are we now? Where are we going? How do we get there? Are we on track?

Phase One: Where Are We Now?

The initial phase of the planning process explores the internal and external influences that impact the institution’s operations and financial performance.

Phase Two: Where Are We Going?  

The second phase marks the beginning of the offsite retreat and planning session and involves group participation to review, digest and discuss the external and internal forces that will offer challenges and opportunities.

Phase Three: How Do We Get There?

The expectation at the completion of this phase is a series of consensus-driven and actionable items with clearly defined outcomes. The parts of the strategic plan that produce consensus and commitment among all participants will be the only aspects of the plan to move forward to the next stage and be deemed a tactical initiative.

Are We on Track?

The final phase of the planning effort is the preparation and adoption of the strategic plan. The planning document will include a mission statement, SWOT analysis, market research, peer financial analysis, statements of strategic direction, tactical initiatives/action items and a tracking report.

Upon completion, management and the board will have a factually based, results-driven strategic plan — a living document that should change as conditions warrant.

For information about RFG’s strategic planning process, please click here to download a sample presentation.

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