Plot a Course to Success

Strategic planning requires keen insight and a focus on members’ needs.

June 8, 2013

Strategic planning has served as the inspiration for a wealth of insightful quotes, often traced to distinguished statesmen and captains of industry. But the inimitable Yogi Berra probably said it best: “If you don’t know where you’re going, you’ll wind up somewhere else.”

Three credit union executives share their formulas for effective strategic planning in concert with their boards of directors. Their methods might differ, but they share a similar goal, as consultant Clark Crouch so aptly put it: “Do the right thing for the right reason in the right way at the right time with the right resources.”

Consistent purpose

The foundation of a productive strategic planning meeting is simple: “There’s no ‘I’ in strategy; it’s a team effort,” says Jim Updike, CEO of Honda Federal Credit Union in Torrance, Calif., which has nearly 60,000 members and $635 million in assets. “It’s not the board’s strategic plan. It’s not the management team’s strategic plan. It’s our strategic plan.”

The CEO plays a vital role in the process, Updike says, by structuring the agenda and providing information the team can use to make educated choices about the direction of the credit union. But Updike also uses a facilitator—John Gregoire of The ProCon Group—to guide the team to consensus and avoid the perception that the CEO might control any outcome.

Honda Federal has a multistate field of membership (FOM), so its directors come from multiple states as well. As such, monthly financial updates and other board meetings oft en are held via videoconference.

Updike’s senior management team usually meets for a two-day session each fall to develop the credit union’s operational goals. The full board and key management staff then convene each February or March to discuss the credit union’s overall vision and strategy.

Typically, some Honda Federal directors can’t attend the annual planning meeting because of commitments in their credit union branches across the country. But this year, the lead item on the agenda was so important, Updike wanted his entire board physically present at the two-day planning meeting in California.

The task: Develop a succession plan whereby Honda Federal would ultimately appoint Updike’s successor.

Updike thought about stepping down this May but decided to give his board time to develop the credit union’s long-term vision, which will define the future CEO’s ideal qualities and qualifications.

Concentrating on a goal for multiple years is the norm at Honda Federal. The past two strategic planning sessions focused on the credit union’s branding efforts and how to become its members’ trusted adviser. The planning team read the book “The Trusted Advisor” by David H. Meister to focus those discussions.

“It’s tempting to sit down at a strategic planning meeting and say, ‘What’s our next great strategy?’ ” Updike says. “But you need to maintain a consistent purpose. You can’t be jumping around from pillar to pillar, because all the stakeholders will get confused about who you are and what you’re all about.”

Updike took over as CEO in 1986 when Honda Federal had only $16 million in assets and 7,000 members. Since then, he has maintained a strong relationship with the credit union’s sole sponsor—the American Honda Motor Company.

The credit union’s FOM includes employees of the auto manufacturer and its affiliated companies, but not Honda dealerships. The credit union hasn’t seen a need to seek a community charter or add other select employee groups (SEG) due to Honda’s consistently strong performance.

Updike periodically invites Honda senior executives to the credit union’s annual strategic planning meeting. Updike feels so strongly about the bond between the credit union and Honda that in 2009 he and his executive team voluntarily took an 18% pay cut because that’s what Honda required of its senior management team.

With a fiscal year that concludes in June, Honda Federal reduces its strategic planning expenses. Facilitators oft en charge less to conduct planning sessions held in February or March when they’re not as busy. Honda Federal also saves money by holding its planning sessions in Orange County near the credit union.

“As much as I’d love to take the board out and treat them to something extravagant, directors are pretty adamant that anything we do passes the ‘stand-up-in-front-of- the-members-at-the-annual-meeting’ test,” Updike says.

NEXT: Data defines decisions

Data defines decisions

Jon Hernandez, CEO of $56 million asset CalCom Federal Credit Union in Torrance, Calif., prepares for his annual strategic planning meeting by scrutinizing member data with his senior management. From this data, he and his team extract a profile of the “typical” member.

The board of directors then uses that member profile to decide how to best serve members within the framework of CalCom Federal’s limited resources.

Hernandez then repeats the process at $28 million asset Mattel Federal Credit Union in El Segundo, Calif., where he also serves as CEO. And again at $7 million asset City of Downey (Calif.) Federal Credit Union, where he is CEO, too.

Hernandez uses the same general planning agenda for each of his three credit unions. The seven-hour, single-day format begins with a look at the national economy, followed by an analysis of the credit union industry, a look at each credit union’s SEGs, and then the final agenda item—the focus on members.

“When we’re finished, we’re very focused on what we need to be thinking about in terms of the credit union’s role in the lives of its members and future members,” says Hernandez.

Hernandez usually facilitates these strategic planning sessions. He will, however, hire a facilitator when a complex issue requires specific expertise. He did that recently when the board discussed solutions for the growing regulatory burden.

Hernandez says he’s oft en asked: Who should attend strategic planning meetings?

“If you’re a really small credit union, everyone should be there,” he says.

All five employees of City of Downey Federal attend, along with the board. At Cal- Com Federal, only five of its 20 employees attend, but managers seek input from staff in advance. Notably, these two credit unions will merge on July 1.

Whenever possible, Hernandez breaks up the board into small groups to generate more discussion and generate better ideas.

“People talk more when they’re in a group of four rather than a group of 16,” he says. “It also creates somewhat of a competition to see who comes up with the best ideas.”

His basic philosophy remains the same: Use reliable data to know your members’ needs and to come up with the most efficient, effective ways to serve them.

Hernandez also likes to facilitate other credit unions’ planning meetings because “I get ideas from them for free!” he says. “The good thing about smaller credit unions is that most of them serve a specific niche, so we’re not competing with each other. It’s OK for me to ‘borrow’ their ideas.”

He believes it’s good to have fun at strategic planning meetings. In fact, a former board chairman of CalCom Federal established “not fulfillment, but fun” as one of the credit union’s core values.

Hernandez keeps the meetings light and fastpaced, shows movie clips, and plays games. The location can lead to more fun: CalCom Federal conducted one session in a meeting room at a local casino, which many explored afterward.

“Life’s too short to not have fun,” he says.

A long-range lens

Focusing on future opportunities without getting bogged down in the minutiae of the present is a strategic planning goal for Allegius Federal Credit Union, Burns Harbor, Ind.

“What’s the credit union going to look like five to 10 years from now? I ask that question at every planning meeting,” says Russell Dahl, CEO of the $159 million asset credit union.

“The ideas that follow might not fit into our immediate plans, but at least it gets us thinking long-term. Our industry is ever-changing, and we need to position ourselves for those changes.”

Years ago, Dahl scheduled strategic planning sessions at three-year intervals with check-in meetings every 18 months.

But since the start of the economic recovery in 2010, Dahl switched to an annual planning cycle with check-ins as needed to keep Allegius nimble and more responsive to change. Dahl’s considering going back to the three-year cycle.

The credit union, which has five branches in northwest Indiana, tackled some pressing issues at its 2012 planning meeting, most notably the need to upgrade its product offerings and re-evaluate its charter.

When confronted with issues of that magnitude, Dahl typically hires a consultant to conduct research and present the best options. In this case, he called on Dennis Dollar of the Birmingham, Ala.-based Dollar Associates.

“I think it’s important to occasionally get an outsider’s viewpoint,” Dahl says. “Most of the time we’re not that far off because we’re all studying the same trends and data.”

Last year, Allegius decided to develop its bill-pay product and bring its Visa credit card portfolio in-house. And after some spirited debate, the credit union moved away from its community charter to a multiple-SEG charter so it could serve a promising area outside its previous boundaries.

“It felt like a step backward, but it’s actually a step forward,” Dahl says.

Dahl isn’t opposed to mixing business with pleasure, but he prefers to keep the tone of the planning meetings “pretty much all-business.”

He starts the meeting by presenting bigpicture topics that he prepares from NCUA materials, the “Top 10 Trends” from the CUNA Environmental Scan Report, and data from the Filene Research Institute.

Then he works through the credit union’s balance sheet and income statement.

Dahl will occasionally mix things up by introducing data from other industries and applying that information to the credit union movement. “This year, I went off the credit union map and introduced some quotes from Warren Buffett on interest rates,” he says.

Read how these CUs craft ed strategies to best meet their members’ needs at