Planning for your credit union’s future can be challenging, even during the best of times. Throw in a recession, new compliance requirements, and liquidity challenges, and strategic planning can be even more challenging, CEOs agree.
Plan drives bonuses
NuMark Credit Union, Joliet, Ill., develops an annual strategic plan and then reviews it periodically to ensure the credit union is on track. “We place a copy of the plan right behind the agenda in the board packet every month,” says Ann Dubie, president/CEO of the $160 million asset credit union. “The board and management go over it quarterly to review progress, and update it as needed.”
To begin annual planning, NuMark’s management team reviews CUNA’s Credit Union Environmental Scan (E-Scan) as a thought-starter. Dubie assigns different sections to each manager and then the team meets to discuss their findings and the state of the economy. “We talk about how the national data compare to our region and our credit union,” she says.
Board members and management hold a facilitator-led strategic planning meeting, starting with an E-Scan review. The facilitator distributes a questionnaire asking open-ended questions about the competitive environment, product growth, and other areas. The group also participates in SWOT (strengths, weaknesses, opportunities, and threats) analysis.
The facilitator compiles the information, and the next day the management team meets to establish an action plan, timelines, and accountability. It presents the plan to the board for approval at its December meeting, Dubie explains. “It clearly has to tie into the budget forecast, as well. Then we know our tasks for the following year.”
All staff participate in the process at some point. “We talk to staff about strategic planning beforehand,” says Dubie. “And after we roll out the plan, we show them exactly what we foresee for next year and how it rolls up to our key ratios.
“That’s what drives our organizational performance bonus program. It all ties together,” she continues. “Ultimately, the action plan is successful only if every employee works toward it, and the bonus is their reward. Members benefit from the new products and services the plan describes, but we don’t share the document with them.”
Dubie finds strategic planning extremely difficult in today’s environment. “It’s hard to forecast interest-rate trends, so it’s difficult to look out more than three years. This year, we toyed with what we might look like in five years, but we generally keep it to three years.”
Consumer confidence is still fragile and people are saving more. The outlook changes daily, she adds, “and members have become just as sensitive to it as we are. They’re becoming much more educated.”
NuMark has a strong capital position, she notes. “We’re focusing on controlled growth, and if lending continues to be weak, we’ll manage our cost of funds while conservatively investing excess cash. Break-even is the new black; there’s no more 1% return on assets anymore.”
A balanced scorecard
CommonWealth One Federal Credit Union, Alexandria, Va., also annually develops a three-year plan. “We use a balanced scorecard featuring not only financial targets, but service-level targets,” says John Blair, president/CEO of the $294 million asset credit union.
“We use member satisfaction scores and Net Promoter Scores, which say how likely you’d be to recommend a service,” he continues. “Our board puts equal emphasis on the nonfinancial scores.”
CommonWealth One Federal has used the balanced scorecard approach for roughly nine years. Its strategic planning committee—Blair, executive staff, and three board members—starts the annual planning process by reviewing questionnaires completed by board members, executives, and middle managers.
They develop a list of critical issues and identify the top three. “Then we prepare a booklet for our strategic planning team of easy reads on critical issues,” says Blair. “We distribute it to the board, two supervisory committee members, our executive team, and a couple of mid-
level managers—who participate on a rotating basis—about two weeks before our planning meeting.”
An outside facilitator leads the off-site strategic planning meeting. “That enables us to get fresh insight into the financial industry, says Blair.
The group watches CUNA’s E-Scan DVD; reviews the credit union’s vision, mission, and core values; and identifies supporting strategies. “We use a traditional planning approach, although several executives and I have studied the scenario planning approach,” notes Blair. “We don’t think the board would prefer that; we feel we can cut to the chase.
“After we formalize the plan, we use key elements to develop an annual board meeting calendar. The board knows in advance about planned discussion items and capital expenditures.” For anything outside of those items, Blair and the credit union’s board chair discuss the need to modify the calendar.
Blair does a midcycle review of the plan at the July board meeting. “We go over all areas in the plan, and add any unforeseen things we need to deal with in the near future.”
The economy and the increased compliance burden are affecting many planning initiatives, he adds. “We have to carefully balance deposit and loan growth to preserve our desired capital ratio.”
A living document
Barry Heape, president/CEO of $174 million asset Doco Regional Federal Credit Union, Albany, Ga., includes all stakeholders in strategic planning. “I meet with the management team about three times in the months leading up to the annual planning meeting.
“I also solicit input from the board in advance and meet quarterly with all staff,” he continues. “Staff provide input on what members are saying and I update them on credit union strategy. They don’t necessarily realize they’re involved in planning, but their input is very valuable.”
The credit union has a member survey on its website and gets results daily for use in planning. “We also read reports from CUNA and the league, but our membership demographic tends to act differently from national trends,” says Heape. “They’re largely low-income consumers, so we were already in the circumstances many credit unions are now facing.”
The management team develops the credit union’s strategic plan and presents it in detail to the board at a one-day meeting, which Heape facilitates. “We’ve had outside facilitators and it worked well, but we think it works as well without, and it saves money.”
The team updates the plan annually. “We review it with the board quarterly and talk strategy,” he says. “If our goals change, we note it in the board’s minutes, but we don’t change the formal, bound plan.”
Other than economic uncertainty and regulatory changes, he hasn’t found strategic planning much more challenging in recent years. “Things aren’t quite as predictable as in the past, but it hasn’t affected us as much as others because of our demographic.”
His advice: “Gather feedback through every avenue you have, involve front-line staff, and share as much information with staff as you can. Remember, the plan is a living document; don’t expect to stick to it exactly as written.”