Publications & Resources
November/December 2009
Focus: Directors Issues
Strategic Planning for an Uncertain Environment
By Philip K. Smith
Today’s regulatory and economic environment underscores the need for directors to focus on strategic planning. This environment proves an effective strategic plan is an important component of an organization’s operations. Although strategic planning is not a new concept, the current environment requires a new way of thinking. Unfortunately, a number of boards have not embraced this new process. These boards use traditional strategic planning methods and continually make the same common mistakes in their strategic planning sessions. The following highlights some of these common mistakes and points out new areas where directors should focus for the short term and the long term.
1. Not understanding the role of strategic planning.
A number of bank boards simply do not understand the role of strategic planning. To properly understand strategic planning, it helps to understand what strategic planning is not. Strategic planning is not budgeting, developing a set of unattainable goals, a document prepared solely for the regulators or bonding time only for the directors. Instead, strategic planning is a time for the directors to ask and answer important questions such as: Who and where are we? Where do we want to be? How are we going to get there? Who is responsible for making sure it gets done?
2. Developing the wrong strategic plan.
Traditionally, a comprehensive strategic plan included a SWOT analysis, mission statement, the organization’s key objectives and an action plan. While these plan components may have served well in the past, they are no longer the product of an effective strategic planning session.
Today’s strategic planning sessions should focus on a number of key areas, including a realistic analysis of the organization’s condition, thorough discussion of the key issues pertinent to the organization, consensus decisions on how best to address those issues, assignment of responsibility (action items), development of a timeline and specific follow-up methods. Incorporating each of these components into a strategic planning session allows a board to develop a strategic plan that accurately reflects the organization’s current condition and provides specific steps to obtain its goals.
3. Wasting time during strategic planning sessions.
A number of boards waste time during their strategic planning sessions. The time spent on strategic planning sessions is valuable and should not be spent on activities which, no matter how well done, are not value-enhancing activities, such as “wordsmithing” the organization’s mission statement, budgeting for the upcoming year, and not addressing “real issues”. These activities, although they may seem important, provide very little kick to an organization’s bottom line.
4. Not being honest (with yourself and others).
Successfully implementing and executing a well thought-out strategic plan is tough. The task becomes almost impossible if the strategic plan is based on discussions and thoughts that don’t accurately reflect an organization’s current situation. Unfortunately, this happens all too often.
A number of boards have a tough time facing their organization’s economic realities. These boards are often in denial about the organization’s asset quality, earnings and future prospects. They often look at the organization through rose colored glasses instead of reality. Doing this during strategic planning sessions has the result of producing a strategic plan that is of little value because the plan is made for a company with characteristics that are strikingly different than the organization’s characteristics. It is much like trying to repair a Ford using a Chevrolet manual.
5. Not making the event enjoyable.
Too many organizations hold their strategic planning sessions in their bank and only provide time to complete bank business. Strategic planning sessions should occur away from an organization’s headquarters and should involve time “away from the table.” A portion of the strategic planning session should be set aside so directors have the opportunity to interact on a personal level. These times should be focused not solely on the organization, but on the directors personally and professionally outside the bank. These activities are often thought of as a perk which directors enjoy. More importantly, this gives directors an opportunity to build relationships apart from their positions, which often translates into a stronger board.
The current economic and regulatory environment points out the need to have an effective strategic plan. Unfortunately, a number of boards are making the same common mistakes in their strategic planning sessions. By making these mistakes, these boards are making it difficult for themselves to formulate effective plans. Each and every director should be on the lookout for these common mistakes and, if spotted, should point them out so the board makes the most efficient use of its valuable strategic planning time.
Philip Smith is president and a member of the board of directors of the Memphis-based law firm of Gerrish McCreary Smith, PC, and its affiliated bank consulting firm, Gerrish McCreary Smith Consultants, LLC. He may be reached at 901-767-0900.
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