The Cost of Planning: Investment or Expense?

Dean Borland
August 2, 2010 | COMMENTS

Every business endeavor has a cost; raw materials, labor, equipment, facilities, cost of funds… you get the picture. As a result, business decisions are commonly made based on projections of cost versus the opportunity for benefit. Like other business decisions, strategic planning should be considered in the context of cost versus benefit.

There are real costs associated with developing a strategic plan. Planning is undeniably a time consuming process. Planners can spend untold hours before, during, and after a planning event, expending capacity that is undoubtedly transferred from other duties, which translates into a drain on capacity or, at the very least, efficiency.

There are also hard dollar costs to consider. Event logistics associated with meeting location, travel expense, and the cost of producing a plan document are not uncommon. Professional planning facilitation can also be costly although some of the hard dollar costs are offset by reduced planning-associated workload by organizational leaders.

In addition to cost, potential benefit must also be considered in the decision process. Credit union examiners will be interested in whether the organization has (and is adhering to) a strategic and/or business plan. But, perhaps the most compelling question for credit union leaders is whether the planning process will yield improved performance and results. The answer can be found in the credit union's own commitment to its Mission, Vision, business strategy, and plan deployment.

The mission is the organization's reason for being. Articulated in a mission statement, the mission defines the organization's purpose and primary objectives. The vision defines what the organization wants to become, often in terms of its values rather than bottom line measures.

Business strategy defines the activities a credit union embraces to differentiate itself in the marketplace. Businesses can choose to differentiate based on price, product, or service. However, because basic tenants of cost and benefit can be different based on different strategies, it is difficult, if not impossible, to create differentiation in two or three categories simultaneously. A well devised strategic plan leverages an organization's mission, vision, and business strategy to create well defined, measurable objectives that become the litmus test for future decision making. “Does this activity help or hurt our progress toward achieving our strategic objective?” If the answer is “yes,” the decision may be to move forward. If the decision is “no,” perhaps the endeavor is not worth the effort or cost. The creation of a few guiding tenants (objectives) is therefore the desired outcome and ultimate benefit of strategic planning.

In the end result, the greatest benefit of a viable strategic plan may be cost avoidance. Costs associated with inconsistent decision making, budget dollars and capacity expended on activities that do not support the organization's primary objectives. Not seeing the forest for the trees.

Dean Borland is assistant vice president of OnBalance, a service of Credit Union Resources. Reprinted with permission from the Texas Credit Union League.