As credit unions head into strategic planning season, the pressure is on.

Participants in planning sessions must battle a slow-growth economy, account for competitors of all shapes and sizes and keep on top of emerging technology all the while a surging riptide of seemingly endless regulations threatens to pull them under.

How bad is the compliance burden on CUs these days?

When asked what the No. 1 challenge will be in strategic planning sessions this year, Allen Gilbert, account vice president for the Financial Institution Group of San Antonio-based SWBC, recalled a recent conversation with a CEO.

"The CEO joked with me that he is in the compliance business, and does financial products on the side," Gilbert recalled. "There is so much regulation and compliance to deal with; it affects everything credit unions do."

Gilbert has been facilitating strategic planning sessions for about 20 years. In that time, he has been involved in approximately 50 different sessions with board, senior, and middle-level management, involving some 20 different credit unions. He said it is important to remember that no two CUs are the same, and they therefore must ask themselves different questions during preparation for planning sessions.

"Single-sponsor credit unions will talk about any challenges facing their sponsor, and should have a contingency plan in place if something should happen to the sponsor. Community chartered credit unions have to talk about reaching members in the community," he said. "For all credit unions, one of the main challenges is how to attract younger, borrowing members as their membership base becomes older and moves away from being a borrower."

After consulting with several CEOs he has worked with in the past, Gilbert created a list of tips and tricks CUs should consider before the sessions begin:

  • Get the directors engaged in the discussion.
  • Encourage the participants (board and management) to look at the bigger picture rather than focusing on a particular product or service.
  • Set aside the time and resources (volunteers and staff) to do planning right.
  • Determining the key areas of focus. Have everyone on the same page and prepared to answer the question "Where do we go from here?"
  • At the same time, be open to new questions and new ideas.
  • Narrow down the focus points, new and old.
  • Actually start talking (via e-mail threads and at regular board meetings) two to three months in advance of the actual planning session to have ideas ready.
  • Determining facilitation strategy: Some CUs have the CEO lead but others bring in outside facilitators or contributors.
  • Choose the right context (off site, away from home, one day vs. two days….).

Gilbert said the typical planning session he sees involves the board, the senior management and then the next level of management – the people who will be implementing on the tactical side.
Creating the Right Environment

Jeff Carpenter, VP of member relations and strategic development for CUNA, said an oft-overlooked component of preparing for strategic planning is attention to the process. He said it is very important to get the right people in the room, including board, committees, management, and the people who will be implementing.

"If the focus will be on growth, be sure to get the marketing director in there," he said. "Sometimes a third party helps facilitate the discussion."

Carpenter said there needs to be a commitment to a sufficient amount of time. He noted there are many CUs that schedule their sessions from 9 a.m. to noon on a Saturday, and then go play golf all afternoon.

"You have to get in the right environment. This does not mean going on an exotic vacation, but get outside the usual four walls. If the people are in the usual room they tend to think about what is, rather than what can be."

There is value in doing some sort of exercise at the start of the meeting to allow participants to get to know each other a little better, Carpenter suggested. One example is getting people to open up about themselves, such as talking about the first concert they attended.

Tony Ferris, managing partner for the Rochdale Group, a credit union consultancy based in Overland Park, Kan., said institutions must account for both internal and external challenges before their strategic planning sessions — and, he added, the biggest challenge is internal.

"Credit unions do not have the relevant information at their fingertips to make good strategic decisions," Ferris said. "They lack a lot of analysis and detail intelligence from the organization to make decisions. The industry does not give enough data analysis. They make decisions based on emotions and trends."

Another obstacle to proper strategic planning is the notion that it happens over a weekend. Good strategic planning, according to Ferris, must be performed on an ongoing basis rather than just a one-time view.

Externally, the regulatory environment is still the biggest issue for many CUs. Ferris said this is not simply because there have been so many extra requirements heaped upon credit unions, but because CUs do not build those into their business models.

"We allow the regulators to drive our strategies rather than figure out how to meet requirements and still do what is best for the members. Having said that, credit unions of all sizes are in sticker shock regarding the cost of vendor management as regulators look to expand the processes," he said. "That is a big hurdle to figure out, plus how to best deploy products and services in a very electronic and virtual world. Are they going to utilize technology, and how so? They need to define differentiating factors and maintain that regardless of the pass they choose for delivery of services. What really differentiates them?"

Eye on Competition

Sam Kilmer, senior director for Cornerstone Advisors in Scottsdale, Ariz. said CUs are doing a better job of looking at the competition, but he cautioned against complacency.

"Don't just assume, 'Big banks are bad so our members will not use them.' It is important to know what Chase is doing with technology, with mobile, and to know what types of resources the credit union needs to compete and compete well."

Kilmer said Cornerstone refers to the concept as "reduce and redirect" — determining what resources need to be allocated where. He noted this is vital to figure out how to fund innovation and new projects, or understanding the CU's process for vetting important strategic initiatives.

"Reduce resources in areas that are less strategic and have less future promise for helping members. Redirect those resources to new projects and new initiatives," he counseled.

Dr. Brandi Stankovic, partner at Las Vegas-based CU consultancy Mitchell, Stankovic & Associates, has seen a number of credit unions trying out a new twist on strategic planning. The CUs are having pre-planning sessions with middle-management folks prior to the board's strategic planning retreat.

"This can be a half-day meeting with division managers, or even a survey of staff asking what members are asking for that the CU is not offering," Stankovic said. "This opens up a dialogue and it gets feedback from those who serve the members."

External Review

Every expert mentioned the importance of conducting a rigorous external review. SWBC's Gilbert and CUNA's Carpenter both cited the use planning tools, including CUNA's Environment Scan, to assess needs.

If a credit union has not held a planning session in a while, Gilbert said it would be a good idea to look at SWOT: the Strengths, Weaknesses, Opportunities and Threats that will impact the success of the credit union.

"Planning tools get the board and senior management thinking about what factors will impact their credit union outside of their membership and monthly board meeting discussions," Gilbert said.

Cornerstone's Kilmer said CUs should do a "rigorous" external review – and do so with an open mind.

"Look at the economic situation and the regulatory environment, both of which are largely uncontrollable," he said. "Also look at demographics of the membership, market share trends versus competitors, and technology. Those are very healthy conversations."

Ongoing Conversations

Both SWBC's Gilbert and Rochdale Group's Ferris emphasized strategic planning does not begin and end with the planning session retreat.

Said Gilbert, "The Strategic Plan itself should be an ongoing conversation and a living document/process. It should be discussed quarterly at the least. There needs to be a plan for updates and monthly reports if major goals and objectives have been completed, including a chance to celebrate accomplishments."

As for Ferris, he would like to see credit unions "really revamp" the process.

"The actual strategic plan is bringing together what has been done well. The session is about moving toward a good vision. Wherever they are in the planning cycle, credit unions should have strategy talks on a regular basis. Determine the road map for service delivery and for lending product pricing. What do things look like?"

Our experts offered many more thoughts, here are some of the best:

Cornerstone's Kilmer: "Ask, how are we serving members and how do they want to be served? Credit unions assume their members love them, but sometimes they have to go win the business. Ask provocative questions to get lots of good ideas. Have many sources."

Also from Kilmer: "A planning session should not be presentations, it should consist of conversations."

SWBC's Gilbert: "Sometimes after the planning sessions there needs to be recognition that a goal may not have been a feasible or attainable, for whatever reason."

CUNA's Carpenter: "Customize the planning session based on the needs of the credit union. Is it looking to grow? Or looking to fix struggles? The answers take the session in different directions."

Also from Carpenter: "Realize the staff knows the membership best, and are the ones who will have to implement things."

Rochdale's Ferris: "Credit unions need to understand the differentiating factors and their vision so they hold steadfast to those as they continue to chase strategies. Really understand what the risk tolerance of the credit union is. Where can the credit union afford to fail? Sometimes an idea does not work, but it had to be tried."

MSA's Stankovic: "The biggest strategic planning failures come when the staff gets hit in the face and does not understand the 'why.' They need to know the business decisions for why the credit union does what it does. Not to mention the stories behind the people the credit union serves."

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