Is Your Business Planning Approach Focused and Effective?

Richard L. Sandenaw
August 6, 2008 | COMMENTS

Credit unions of all sizes conduct annual strategic planning sessions. Much has been written on this topic, and there are a number of consultants and industry experts who facilitate credit union planning sessions and assist with the development of strategic plans. The primary purpose of the traditional planning process is to set long range goals that the board of directors and credit union management agree are worthwhile and appropriate to direct future activities. Examples of long-range goals might include gaining new Gen Y members, becoming a mortgage lender of choice, providing superior member service to the point of a market advantage, or significantly increasing the number of products and services per household.

The annual planning process can be made more effective in meeting the board's long-term goals, and it can produce more targeted results each year for the senior management team. The purpose of this article is to introduce a focused approach to business planning for those tactical plans that are to be completed in the next one to two years. The focused approach starts with the traditional annual board strategic planning session. Then when the senior management team develops the tactical plans for each of the long-range goals, all identified projects are placed into two categories and limited in number based upon negotiated priority. Successful completion of the agreed upon projects in each category will lead to better organizational efficiency and improved strategic positioning.

After the long-range goals are defined at the board strategic planning session, management typically develops specific objectives, or tactical plans, for the upcoming calendar year. For example, if one of the strategic goals is to provide superior member service, one might expect specific tactical plans such as assessing current member service delivery, developing staff training programs to address “service gaps,” implementing new member service training programs, and rolling out an ongoing method for monitoring member service delivery. All of this planning activity is good, and it will be beneficial if it results in the completion of relevant tasks and activities going forward in time. There is no doubt a credit union will benefit if, after a year or two, member service has been improved measurably.

What if other business priorities and operational problems prevent a focused approach to carrying out tactical plans during the year that follows the board planning session? What are the odds that unforeseen problems and requirements will come up during the year? What if the tactical plans contain too many objectives to complete in a year or two? These realities indicate the need for a different, more practical approach for business planning and execution. This different approach still begins with the annual strategic planning session and the development of long-range goals. This initial planning step provides the vision for the next three to five years. It provides the long-range goals that management will strive to achieve. It documents agreement with the board of directors. And, hopefully, it provides consistency of purpose that doesn't change much during a two- or three-year period.

1. Expect the Unexpected.

So what will be different with this more focused business planning approach? The first step is the acknowledgement by management and the board that there will be ongoing business and operational requirements that must be handled routinely. Assuming that the credit union is functioning properly, members' needs and problems must be addressed day in and day out. New accounts must be opened, loans must be originated and funded, and hundreds of other tasks must be performed daily. Member service may suffer if the staff has to absorb too much change too quickly or if there are too many projects being worked on at the same time. As noted above, it is important for the senior management team to agree that new and unforeseen requirements will pop up during the year. A change in regulations, an identity theft threat, a phishing attack, or a change in a service provider's technology may require an organizational response. Resources, including staff and time, will be required to address all of these new requirement. The result of this realization is to leave some unassigned resource capacity knowing that other demands will arise.

2. Strategic versus Operational.

What else is different with this business planning approach? The second step is to identify tactical objectives that fall into two categories: “strategic improvements” and “operational improvements.” Strategic improvements, like strategic plans, are long term. They may take more than one year to fully implement, and they will change the business in a significant way. An example might be the credit union that has decided to focus on becoming a mortgage lender of choice. Depending on the starting point, this may represent a major change in business strategy. It might require adding experienced mortgage lending and/or servicing staff, implementing a new mortgage loan origination and servicing system, developing real estate lending policies and procedures, and seeking approval as a seller/servicer from Fannie Mae and/or Freddie Mac. This type of strategic improvement requires a major commitment of time and resources. It also requires project management discipline and a focus on completing task after task until the new business operation is functional.

Operational improvements are more commonplace. Examples include implementing the electronic capture of items to be transferred as images to the Federal Reserve daily, or implementing an automated loan decision system for both direct and indirect lending. These projects can usually be completed in less than a year, and are best done following project management discipline. Operational improvements are often clearly linked to the goals in the annual strategic plan. These are the projects that will improve operational efficiency and staff productivity. The results of these projects, when completed, should translate into improved member service. Credit unions are usually good at this aspect of planning so what else should a focused business planning approach include?

3. How Much Is too Much?

How many senior management teams really limit the number of tactical plans per year? Is it practical to try to tackle up to 50 meaningful projects? The third step in this business planning process is to review and discuss every tactical plan that has been identified in each of the two categories (i.e. strategic improvements and operational improvements). The purpose of this step is to clearly set priority. Specifically each of the projects under consideration should be ranked from “1” to “n” based upon importance, necessity and benefit. There can only be one “1,” one “2,” and so on. The senior management team must break any tie by deciding which project is more beneficial if only one of two competing projects can be completed. This process will take thoughtful discussion. The result will be two lists of projects, strategic and operational, with each list numbered from “1” to “n.”

4. Take the Lead.

The fourth step is the identification of qualified team members who can be assigned to lead a project. For example, the vice president of lending might be identified as the project manager for implementing an automated loan decision system on the operational improvements list. The vice president of operations might be identified as the project manager for implementing the electronic item capture system. And, the vice president of lending might be identified as the project manager for the mortgage lender of choice plan on the strategic improvements list. How many projects can one person manage and also get their regular job done? A practical limit is two, depending on the size and complexity of the projects assigned.

5. The Sky Is not the Limit.

Limiting the total number of projects is the purpose of the fifth step in focused, effective business planning. Again through thoughtful discussions, and internal negotiations, the two lists should be limited to a combined total of 12 to 15 projects. And, the senior management team should consider that projects must be worked on primarily during the first nine months of the year. Why? The fourth quarter is typically the start to the planning and budgeting cycle for the next year. It is important to conduct that planning and budgeting cycle knowing what has been accomplished and having a clear perspective of the starting point for the next plan year. This step is missed sometimes when the board annual strategic planning session is conducted by an outside facilitator. The continuation of, and/or refinement of, long-range goals should be done in the context of progress made since the last planning session.

Getting the combined lists of meaningful strategic and operational projects to 12 to 15 should now make sense if the number of projects is limited to two per manager and projects are to be worked on primarily during the first nine months of the year. That brings the thought process back to the internal negotiations that should take place to get the number of projects down. In our previous examples, the vice president of lending and the vice president of operations both have ideas of how their respective functional areas can benefit through various improvements. But if one project from either lending or operations has to be cut then there has to be a way to decide which project survives based on overall benefit to the organization. This requires the process of open discussion and negotiation. The electronic item capture project might reduce float whereas the automated loan decision system is expected to improve loan production. The senior management team ultimately has to decide which is more important to the organization now, and which project can be postponed a year, if only one can be tackled.

6. Taking Ownership.

The sixth step in this business planning model follows assigning one project manager, or owner, for each project. Next each project manager has to accept responsibility for the expected outcome. He or she has to make sure the project scope is defined and agreed upon, milestones are set, tasks are outlined, and team members are assigned. This includes limiting the number of project teams each employee can be assigned to. The project manager must coordinate the traditional project constraints of scope, time and cost. The project manager must organize his/her work to monitor and oversee these constraints. Available human resources will be a primary project success factor. If team members are pulled away from a project by their daily duties or to work on other projects, a project will fall behind schedule. Therefore it is necessary to limit the number of project teams any one employee can be selected to join. To properly control the variables, a project manager must able to monitor progress; escalate issues to senior management as or if risks and delays arise; and take corrective actions. The project manager must have authority to act as needed.

7. Review and Revise.

What else should be done? The seventh step in this business planning approach is establishing a formal project status review meeting schedule. The senior management team should hold a specific project oversight meeting monthly to discuss the status of each project. If each project was important enough to make it on the strategic or operational improvement list for the year then each is important enough to track at the highest organizational level. This step allows for mid-course corrections and for an interim assessment of the final outcome. This step may prevent misunderstandings if there are variations between the initial plan conception and the project deliverables. This step also provides a forum for the formal conclusion and acceptance of projects.

8. Celebrate!

The last step is to celebrate success as projects are completed. The senior management team should track completion of each project, and chart overall progress toward accomplishing the tactical plans that were established for the year. All too soon it will be time to start planning for next year. Keep in mind that effective business planning is a process, not an event.

Richard L. Sandenaw is managing partner for Strategic Mark LLC, a credit union consulting firm. Contact him at rsandenaw@strategicmark.org.