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10 commandments + 1 for community bank planning

This effort can produce—when done properly

OK, so you've convened, conferred, and concluded. What happens next with the strategic plan you put together? The answer hinges on how you went along all the way through the process, advises Jeff Gerrish. OK, so you've convened, conferred, and concluded. What happens next with the strategic plan you put together? The answer hinges on how you went along all the way through the process, advises Jeff Gerrish.

Strategic planning is the term that many community bank directors love to hate.

The visceral reaction to the mention of strategic planning for many directors reflects the fact that their past experiences in their community bank’s planning efforts have been, to put it mildly, a total waste of time.

I facilitate 40 to 50 strategic planning retreats every year for community banks of all shapes, sizes, and locations. Rural, urban, family-owned, publicly-traded—if it’s out there I’ve seen it.

Regardless of the bank’s profile, the common theme is that prior strategic planning has been ineffective, lacked direction, lacked accountability, spent more time on process than substance, and, as a practical matter, was simply no “fun.”

In view of this unfortunately reality, I have created the 10 Commandments for Community Bank Strategic Planning. These are designed to ensure that your bank’s strategic planning is simply not a waste of time.

Keep in mind, there is a significant difference between strategic planning at a 30,000 foot level and operational and tactical planning, which is management’s job. The board’s job, generally in conjunction with the senior officers, is to set the strategic direction for the bank and its holding company.

Once the board does that, it is management’s job to create the operational and tactical plans that execute on that strategic direction. Your board should not be involved in the operational and tactical piece. The board’s job is to set high-level, strategic direction.

(There is an idea floating around out there that banking’s pace is so frenetic now that strategic planning should be revisited quarterly. I’ll have something to say on frequency at the conclusion.)

All that said, the 10 Commandments for ensuring that your strategic planning is not a waste of time are:

1. Make sure the directors and officers “buy-in.”

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Why in the world would you engage in a planning session for a day or a day and a half, or even a minute for that matter, if, at the end of that planning session, no one has bought into the result? Don’t waste your time.

Make sure the directors and senior officers are on board with the process, and then engage. On that note, make sure your officers are involved. Possibly the oddest question we get when we plan to facilitate a planning session is, “We know the directors should attend, but should we invite the senior officers as well?”

Our response is generally, and in not such a nice fashion, “Duh!”

2. Make it enjoyable for the participants.

A good sign that past planning sessions have not been enjoyable is when board members look for excuses not to attend the next one.

For example, if you hear “I think I would rather have my annual physical that day,” then that is a good sign you should look at the process, content, facilitator, and/or location of past planning sessions, and do something different.

Make the process enjoyable and worthwhile. Often, this involves getting offsite, or at least having some good food.

3. Do not focus too much on the process itself.

In our firm, we prefer to refer to the planning process as “Action Planning” as much as possible. If your group is going to insist on establishing a certain number of objectives; followed by goals; followed by strategies (each having three bullet points under it, of course), then you are focusing way too much on the process.

4. Focus on substantive issues.

Related to #3, the real goal of planning is to focus on the substantive issues. It is not a formulaic process, but it is also not a touchy-feely exercise. If you want to stand in a circle and sing “Kumbaya” or take teambuilding “trust falls,” then be my guest—but do it someplace other than the planning session.

A more practical example of “touchy-feely” planning is spending the whole time on the mission or vision statements.

Let’s be honest. Most banks have a mission statement just so they can feel good about their purpose in life. They never actually do anything with it.

If your bank is one of the few that tailors strategy and operations to their mission statement, then certainly discuss it. For the rest of you, however, the planning session should deal with substantive issues that face the bank and address the strategy for each.

5. Spend very little time on the SWOT analysis, then move on.

Virtually every planning session, for many reasons, contains an analysis of the bank’s strengths, weaknesses, opportunities, and threats (“SWOT”). This is a good exercise to figure out where the bank is at a certain point in time.

• What is the bank doing well?

• What are areas that need improvement?

• What are its opportunities in the external environment?

• What external factors pose a risk?

Our general method is to use an internet survey of the people who will attend the session to confidentially provide us with their written assessment of the SWOT analysis.

At the meeting itself, the live SWOT analysis should take 20 minutes—tops.

6. Do not make it a budgeting session.

As noted, there is a significant difference between long-term strategic planning and operational and tactical planning.

• Strategic planning is at a 30,000-foot level.

• Operational and tactical planning is on the ground.

• Creating a budget is part of operational and tactical planning.

• Establishing the long-term strategies that will dramatically impact the budget is part of strategic planning.

7. Encourage the participants to be honest with themselves and each other.

Many of you who are officers that grew up on the credit side of the bank know there are four “C’s” of credit.

There are also four “C’s” of planning: Communication, Candor, Consensus, and Confidentiality.

What this all boils down to is that what occurs in the planning session stays in the planning session. The planning session will be a waste of time if the participants are not honest with themselves and each other.

8. Do not let one person dominate the meeting.

Many of you have likely been in a planning session where one person seemed to do all the talking. As a result, there was little to no exchanging of ideas, and the meeting was a complete waste of time.

This dominating personality may be the principal shareholder; the bank’s patriarch or matriarch of the bank; or a facilitator who likes to talk too much.

It doesn’t matter who it is. Don’t let any person dominate the meeting. Every person present deserves an equal voice. Otherwise, the effectiveness of the process breaks down.

9. Hold everyone accountable and follow up on the actions taken and strategies established.

Every planning process and every subsequent strategic plan should result in some action plans as a means to implement the strategies established.

If the board spends a day or a day and a half together to determine the strategies for the institution going forward, yet there is no accountability for implementation of those strategies, then that time has been wasted.

A road paved with good intentions leads nowhere good, so I’m told.

10. Use an outside facilitator.

Whether the bank uses an outside facilitator is the choice of the board and senior management. The comments we normally receive are that it is very difficult for management, or even a board member, to facilitate his or her own retreat simply because there is too much history, emotion, politics, and the like involved.

An outside facilitator can at least ask the hard questions. If you are going to use an outside facilitator, find one that is knowledgeable about the industry. There are many “experts,” but few who actually know what they are talking about.

Adhere to these 10 Commandments, and your strategic planning process will be much more effective. (Don’t tell anyone, but you might actually enjoy the experience.)

The final commandment: Thou shalt do something

What, then, happens once you get the plan together?

As I mentioned earlier, if there is no follow-up or accountability, then the plan is useless. It will primarily sit on the shelf and gather dust until the giant beast rises again for the next planning session.

So what do you do about revisiting the strategic plan?

My recommendation is that the board free up time in every single board meeting (or at minimum once a quarter) to deal with strategic issues, risk issues, and action plans. This will provide the necessary accountability for management to make sure that they look at what they are supposed to be doing at least quarterly.

No, you may be thinking, “Jeff, the board meetings run too long as it is.”

The general way to accomplish the strategic review without expanding the length of time of the board meeting is to use a consent agenda. (If any readers want a sample consent agenda or a memo explaining what a consent agenda is, please contact me.)

The purpose of this tool is for the board to begin looking strategically at the future and its risks instead of simply looking in the rearview mirror reviewing what happened last quarter or last month or last year.

At the end of the day, the important thing is that the board, ideally along with management, engages in strategic planning in order to establish strategies. The board’s job is not to execute on the operational and tactical piece.

Micromanagement is not part of the strategic plan.

Jeff Gerrish

Jeff Gerrish is chairman of the board of Gerrish Smith Tuck Consultants, LLC, and a member of the Memphis-based law firm of Gerrish Smith Tuck, PC, Attorneys. He frequently contributes to Banking Exchange and frequently speaks at industry events.

In mid-2016 Gerrish's blog received a national bronze excellence award from the American Society of Business Publication Editors. This followed his receipt of the regional silver excellence award for the Northeastern Region from the same group.

Gerrish formerly served as regional counsel for the FDIC’s Memphis regional office and with the FDIC in Washington, D.C., where he had nationwide responsibility for litigation against directors of failed banks. Since the firm’s formation in 1988, Gerrish Smith Tuck has assisted over 2,000 community banks in all 50 states across the nation with matters such as strategic planning, mergers and acquisitions, common stock private placements, holding company formation and reorganization, and a wide variety of regulatory matters. Jeff Gerrish can be contacted at jgerrish@gerrish.com.

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