Responsive by Design
Strategic Plans Must Allow for Detours on the Road to Success

You're on a road trip, and the GPS on your dashboard (or smartphone) assures you that you're following the right path. Then, you hit road construction. You can't follow the path you originally mapped out. What happens? "Recalculating…" Your GPS guides you down a different road that leads you to your intended destination. Your bank's strategic plan should follow the same philosophy: create a plan, but allow for detours. "High-level, when you're looking at the strategic plan and where you're going, you have to be open to modification," said Marc Gall, vice president at BOK Financial Institutional Advisors. "The strategic plan is a roadmap, but you need to react to the environment, too."

Plan for Spontaneity 

The key to designing flexibility into your strategic plan is to avoid pouring time and effort into creating one, only to have it collect dust on a shelf somewhere. "Get away from thinking of the strategic plan as a standalone item," advised Ed Depenbrok, principal at dbrok group, LLC and a director at Ridgestone Bank, Brookfield. "It is a part of how you run the organization." In other words, there must be a connection between the strategic plan and day-to-day activities at the bank. To forge that connection, clearly lay out the specific tactics of how each larger strategic goal will be achieved. "It's a top-down, bottom-up process," said Nate Zastrow, executive vice president - chief financial officer at First Bank Financial Center, Oconomowoc. "You have a macro strategy and the micro-strategies beneath it. It keeps us fluid and flexible." Identifying the specifics beneath the overarching goals links the strategic plan to operational items like short-term budgets.

Executing your strategic plan in this manner may require a shift in both thinking and culture at your institution. "When you're trying to work from a place of being nimble, responsive and efficient, your team has to internalize those characteristics," said Jim Perry, senior strategist at Marketing Insights. "You can't just pick those attributes off the shelf. They have to be supported in your culture." However, making the change to a responsive plan often has a positive impact on bank staff. For example, if the original plan called for an increase in agricultural business lending, but the current market doesn't allow for that, adjusting the plan prevents your lenders from feeling pressured to do the impossible. "Don't make loans just because your strategic plan calls for it," Gall advised. "The worst thing you can do for morale in an institution is stick to goals that have become unachievable regardless of what's possible in the current market."

Identify Bellwether Metrics

So how do you determine when to call an audible? The metrics laid out in your strategic plan are the road signs that tell you which way to go and when to turn. "Without fundamental information about where your market is headed, you really can't make the right strategic choices," said Perry. "Making knee-jerk reactive decisions rather than basing those decisions on timely, accurate information makes it much harder to achieve your strategic goals." Monitor the economic and demographic shifts happening in your market and compare them to your original plan. This provides the perspective you need to make the determination of when to adhere to the strategic plan and when to take a detour. "You can't just put in your strategic plan that you're going to grow loans by six percent over the next three years," said Depenbrok. "You need to know if that's possible in your market, and whether you need additional talent or products."

That perspective is why identifying key metrics and monitoring them frequently is critical to having a successful, responsive strategic plan. For example, according to Zastrow, FBFC's process involves a monthly meeting to highlight areas where benchmarks were not met, identify why, and then adjust accordingly. An investment in business intelligence technology facilitates that process. "We leverage that technology from a management standpoint so that we're not driving blind," Zastrow explained. "We have a very robust business intelligence program with analysts who can generate reports that allow us to compare and contrast where we're at with where we want to be." That analysis will also help management and the board find the right balance between following the original plan and pursuing new opportunities. "There's a balance between striking while the iron is hot if opportunities are identified, and following the strategic plan and your risk tolerance," said Gall.

Watch the Road Ahead

In today's rapidly changing banking environment, a responsive strategic plan is essential for institutions to adapt quickly and reduce overall risk, particularly with regards to technology and compliance. "You have to assess technology and regulation in your strategic plan because they're part of the world we operate in," said Depenbrok. "There are so many more fixed costs today to operate a bank, and if you don't plan for them, it's going to be even worse." A responsive strategic plan will outline when the bank needs to invest in certain areas, and allow for allocation adjustments as customer and staff needs change. "Industry-wide, if you look at the high-performing community banks, they're investing in order to grow their business and build scale," said Perry. "They know that by expending capital to bring in new technologies that will reduce expenses long-term, they're positioning themselves for growth."

Bank staff can help identify areas where operational changes can be made to increase the institution's overall productivity, according to Gall. "Many times staff haven't been given the incentive or charge to think about how they can do their daily work differently to help the bank reduce expenses and operate more efficiently," he said. In addition, a responsive plan should allow for new ways of executing the same strategy, i.e. adjusting internal processes. "When looking at what you have to shift moving forward, look first at areas where either people or processes need to be adjusted in order to improve results," said Perry. "The people and processes are the things you can immediately control, rather than external market conditions."

Finally, a responsive strategic plan should accommodate increased spending in areas banks can't control, such as regulation. "Once the rules are made, you can fight to try to change them, but that takes a lot of time and energy that could be reallocated to being the best at playing by the new rules," said Zastrow. With all of the recent change in the industry, an investment in third-party advice can be a competitive advantage, according to Depenbrok. "Change is happening so quickly in our industry from a technological point of view and a regulatory point of view, figuring it out on our own is very difficult," he said.