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Is Your Strategic Planning Session Strategically Planned?

If done appropriately, strategic planning can help guide a credit union toward making necessary decisions for the credit union’s future.  Strategic planning session(s) can outline where the credit union is now, determine where the credit union wants to be in the future and brainstorm how to get there.

Below are some questions to consider when implementing strategic planning:

  • Does everyone know their part? Sometimes, participants in a strategic planning meeting do not understand why they are there.  They may be in the meeting because someone asked them to attend, but they don’t understand that their opinion might be valuable.  Everyone should feel comfortable speaking up, asking questions and pushing back when appropriate.  To do this, everyone in attendance should know why they are investing their time in the meeting
  • Are personal agendas left at the door? Some participants might believe that a strategic planning meeting is the perfect opportunity to include their personal agendas in the credit union’s future plans.  For instance, a participant might want to beef up technology for personal ease of banking.  But if the credit union’s target market and chief source of profitable income abhors technology, then this agenda should be left at the door.  Setting decision filters that are kept top of mind as strategic decisions are made can help keep the group focused
  • Is the group abiding by the agenda? To make best use of everyone’s time, the group can self-monitor discussions to make sure they continue to be productive—even if they have diverted into a tangent topic.  As long as the discussion furthers the credit union’s goals, it can sometimes be healthy to veer from the agenda.  But if the group’s strategic discussion has dissolved to off-topic items that do not benefit the goal of the meeting, it may be time to refocus or take a quick break

Credit unions must strike a delicate balance between serving members and being profitable.  Strategic planning that is strategically planned can help guide decision-making as you strive to achieve that balance.

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Preparing For Strategic Planning

As you prepare for strategic planning with your credit union, consider carving out time to go through a structured strategic thinking process.  There are many scenarios to test drive.  Test driving helps you rehearse tomorrow today.  The objective of a structured strategic thinking process is to expand thinking and imagination – not necessarily to make decisions during this process.  Following is just one example scenario many credit unions are test driving.  We have listed a few questions to consider.

Test Drive: It’s 2017 and it is clear that most consumers prefer minimal verbal communication when addressing their banking needs.

Questions:

  • What would be the credit union’s measures of success in this future?
  • What would be the credit union’s value proposition in this future?
  • How has limited verbal interaction impacted the credit union’s ability to create member loyalty?
  • How is the credit union effectively cross selling in this future?
  • How is the credit union acquiring new members from its target market in this future?
  • What is the role of physical locations in this future?
  • How has it changed recruiting, training and retention of employees, management and board?
  • How is the competition taking advantage of this strategy?
  • What verbal communication was considered “sacred cow” and left untouched?
Keep in mind the more you delve into the questions, the more questions you may have.  That’s expected!
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To Grow Or Not To Grow—What? Is The Question

For credit unions that are growing deposits faster than they are growing loans, the question often asked is “what do we do with the money?” Perhaps the question should be changed to “should we have the money in the first place?”

While it may seem that no matter how low deposit rates are taken money still flows in, are deposit rates really that low?

Consider a credit union paying 25 basis points (bps) on money markets.  While that may sound low, recent yields on some of the largest uninsured money market mutual funds have been between about 1 to 4 bps, according to Bloomberg.  By comparison, this “low” rate paid by the credit union is about 6 to 25 times greater than what the consumer can get in the market—and it’s insured.

The point isn’t that credit unions should drop their money market rates to the same level as the mutual funds, but to point out that, even at these low rates, 25 bps can still be attractive considering the alternatives.

Some credit unions have instituted relationship pricing, rewarding members who participate in the cooperative and encouraging those who don’t to leave.  Others have identified that the growth is coming from their target market(s) and feel that they have the net worth ratio to “ride it out” for a while.

If your credit union is growing deposits faster than loans, at least two things you should know about the growth is:

  1. Who is bringing in the money?
  2. Why?

Growth that is coming from the target market(s) can provide opportunity, if not now, then in the future.  Growth that is coming from members parking funds may be money that should be discouraged or limited.

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A Few Questions To Consider Regarding Branch Strategy

What is your credit union’s long-term branching strategy?  That might be a tough question to answer for many institutions.  As margins have decreased, many credit unions have had to take a long and hard look at the effectiveness and profitability of their branch network.  While the bulk of new memberships, loans and deposits originate in branches, many institutions have considered shifting toward a model more geared toward e-services.  There are a multitude of questions that could be considered with respect to credit union branching, a few of which are outlined below:

  • How does the branch strategy align with the overall strategic direction of the credit union?
  • Can your institution afford to operate one or more branches that consistently have a negative overall contribution to the credit union?
  • Are branch location decisions based on where your current members live, or where members of your desired target market live?  Answering this question could lead to different decision-making regarding where to position future branch locations
  • Does your institution have the technology to allow for reduced member reliance on branch locations?  If not, how quickly are your technology offerings improving, and at what cost in terms of dollars and resources?
  • What might be the unintended consequences of your branching decisions?
  • How does the credit union measure branch success?
  • If the credit union is moving toward a model that relies less on physical locations, how will your organization effectively cross sell to members or prospective members?
  • Does the strategy fit with the financial realities your organization is facing now, or could face in the next 3 to 4 years, especially if rates remain low and loan demand is slack?
Continued margin pressure is likely to increase the importance and timeliness of these types of decisions.  Meanwhile, members are increasingly asking for more from their financial institutions which makes this a tricky balancing act.
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Mobile Banking And Strategic Resource Allocation

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The Credit Union Times recently released an article titled Mobile Banking Report: Credit Unions Lagging Banks.  In the article, Mary Monahan of Javelin Strategy & Research cautions that institutions that lack mobile banking risk losing valuable customers to those that offer it.  She enforces that many credit unions still do not offer mobile banking apps and that is what users want with a particular emphasis on the younger generation.

There is certainly an argument to be made that the younger generation is faster (not necessarily more prone) to adopt new technologies.  Consider that 45% of those ages 64 to 72 use home banking, compared to 57% of those 18-32 according to a 2009 Pew study; the margin is pretty slim.  The “Silent Generation” may not have been the first to adopt home banking, but technology often catches up with all generations.  Beyond age, a number of other demographic and behavioral factors will play a role in usage and adoption rate within your credit union’s unique market.

The question remains, however, are most credit unions positioned to compete with the technology of the nation’s largest financial institutions? And the more important questions:  Is mobile banking necessary for your unique credit union right now?  If not, when?

A credit union will benefit tremendously by having a deep understanding of its business model (including target market(s), value propositions, core competencies and sources of profitability) when contemplating any new product or service.  In our strategic planning work with credit unions, we encourage credit union leaders to create Decision Filters focused on the credit union’s unique business model to help allocate finite resources.  Few if any businesses can afford to be all things to all people—and with margins that continue to be squeezed by sluggish loan demand and extended low interest rates—strategic allocation of resources is critical.

Source:  Mobile Banking Report:  Credit Unions Lagging Banks, CU Times, 2/7/12