Plansmith Blog

Change Isn't What It Used To Be

Posted by Craig Hartman on 3/7/18 2:15 PM

Since the mid-1960s change has been a constant. The only real change is the rate of change. For years there have been predictions of shrinkage in the number of banks – the prediction is finally coming true. There has been a big change in the number of institutions (over 16,000 in 1972 to about 5,000 today). The environments they serve and the ways in which they serve has changed. Competition, consumer attitudes, market demographics, regulations, products, and technology have all had their impact.

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The option for managing in the midst of this disruption is to adapt to the new realities. Those who embrace change, adapt and use it to their advantage will win. So how do we adapt? Better planning. This is like telling someone who wants to lose weight to diet and exercise. Everyone will roll their eyes at this and yet we all do this in our personal lives every day in a million ways. We are constantly anticipating and adapting to what’s in front of us. Walking across the living room, driving to the store, taking a trip are just some simple examples. Why shouldn’t our business life be the same? As the saying goes, “luck is the intersection of preparation and opportunity.” Change presents the opportunity. Planning is the playbook for preparation.

There are two levels of planning, strategic and tactical. Strategic planning is not just the long view but includes a statement of our business purpose, vision of the future and an understanding of the market for our products and services. Our business purpose articulates our reason for being and how we expect to be different. Our vision specifies our long-range goal, not just financial but how we relate to our audience. While this audience might change our relevance to it should not. We must adapt within the context of who we want to be. A periodic assessment of the demographics and the competition is essential. For example, a car company with a vision to be the best personal transportation company will adapt by moving to electric from gas or from sedans to SUV without changing their purpose or vision. So new markets for our products and the opportunity for new products in our markets is another way to adapt. Within this context, a review of the internal factors (strengths and weaknesses) as well as the external factors (opportunities and threats) that will shape our actions. Again, this is just a formal way of explaining what we do every day. For example, we are driving somewhere and we are aware of the internal weakness (our gas level and the range we have to go) and the external (weather and traffic conditions). In this case, we might plan to stop for gas or plan to take a different route. This is all subliminal but real.

Tactically, the playbook contains the action plans or tactics we employ to reach milestones and objectives. It is the way we communicate with each other. This contains the assigned responsibilities, timetables and expected results. Currently, budgeting is and rudimentary example of this lack of specificity. Most budgets we see are purely financial forecasts and expense targets that often lack the specific tactical support components.

Current budgeting practices have many flaws. It is too often presented in the form of future financial statements with unsupported by a playbook. It is also often momentum-based; the past trend predicts the future so if nothing is changing then this is what to expect. Also, the budget is exactly that, a means to control expenses. The income forecast is more or less a guess and really is a framework for expense limits. We can control expenses more than we can control income and that is comfortable.

A complete and more effective planning process connects the strategies with tactics. Supporting both is a market analysis and assessment of available resources both intended to achieve short- and long-term successes. There are three key areas that need to be considered to yield these results. These are the customer-facing requirements, internal capabilities and personnel.


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Customer-facing requirements are derived from our understanding of the Opportunities and Threats in the markets we serve. Understanding our customers’ needs and the competition so we know where to play and how to win. Internal capabilities come from the Strengths and Weakness analysis of our own core competencies, systems, facilities and locations. What organizational capabilities do we need to build to best serve our customers in a differentiated and valuable way? The right personnel and culture must be organized to deliver that customer value and execute the plan effectively. When we align these elements we are in the best position to meet the challenge of a changing environment.

In conclusion, a more complete planning process that links strategies and tactics supported by good analysis and a constant review of the future is the only way to manage in a changing environment. Otherwise, your company will just bump along and ultimately just fail due to lack of relevance.

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Tags: community bank planning, strategic planning for banks, bank mission vision core values, credit union planning

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