By John Redding and Richard Kamm
Earlier this year, we wondered how many credit unions would put their strategic plans on shelves, postpone planning sessions, and focus exclusively on surviving the crisis. The answer is in: "Not many."
In fact, many CUs have come to recognize that strategic planning is more important than ever. While many teams admit in advance to dreading their upcoming planning sessions, fearing they will be "real downers," most leave the sessions highly optimistic about their CUs' futures.
The current crisis is also necessitating that CUs become even better in four key areas:
Managing Risks Better
Not being sure about the future is requiring CUs to identify risks earlier, consider a broader range of risks (not just credit risks), and prepare for future scenarios no one can predict. Many CUs have also become more skilled at contingency planning: not waiting for a crisis to arise to consider events and conditions that could threaten their future viability and the actions they might take to limit the effects of the crisis.
Becoming More Focused and Efficient
With dramatically lower CU earnings, controlling costs is essential. Quick fix solutions--such as reducing travel, suspending pay raises, and curtailing vendor expenses--while sometimes needed, often provide only limited, short-term relief and are not a sufficient foundation for long-term competitiveness. The crisis is causing CUs to become more focused in allocating resources. This requires CUs to understand better what expenditures are truly value-added and which are not. It is also leading many CUs to adopt an ongoing, systematic approach to cost control and efficiency improvement, rather than waiting to cut costs until absolutely necessary.
In fact, many CUs are coming to recognize that cost control and efficiency improvement, if done right, can actually help CUs achieve their member service and growth goals. For example, inefficiencies can make it difficult for members to do business with CUs, and spending money on non-value-added items depletes resources that could be invested in growing the CU.
Making More Disciplined Business Decisions
Over the years, we have observed CUs occasionally make business decisions they later came to regret. Sometimes, these missteps resulted from quickly adopting the latest CU trends or trying to find quick-fix solutions to immediate business problems without proper due diligence.
In today's business environment, CUs must be disciplined and rigorous in how they make key business decisions. CUs must:
- Make sure decisions align with the CU's strategic goals and business model and are sustainable over time.
- Determine whether the CU possesses the capabilities and resources needed to be successful in implementing the decision.
- Understand that major changes rarely go as smoothly as first thought and be prepared for a potentially lengthy and painful learning curve.
Strengthening Leadership Practices
Board and senior staff are also being challenged to step up to the plate to provide needed direction during the crisis.
Enhanced board role in strategic planning. The crisis has caused many boards to take on an increasingly important role and make an even greater contribution to strategic planning.
Evidence includes broader board participation at planning sessions, more preparation before planning sessions, and full engagement throughout the process. Interestingly, it is more often than not directors who propose more thorough risks assessments, advocate the development of proactive contingency plans, encourage systematic cost control and efficiency improvements, and insist on thorough due diligence before major decisions.
Enhanced communications and understanding of changing business conditions. During this crisis, volunteers and staff are being challenged to communicate with each other more frequently and effectively than ever before to stay abreast of shifting situations.
Operating as a unified leadership team. We have also seen that the crisis has strengthened the capability of many boards and management teams to work together cohesively to provide the leadership needed. Many have reported that they are proud of the fact that, as a unified leadership team, they have been able to openly confront the uncertainties ahead and have reaffirmed their commitment to the long-term success and viability of the credit union.
Over the years, as strategic planning facilitators leading hundreds of planning sessions across the country, we have been generally impressed by the sound leadership and sound judgment exhibited by most CU planning teams. But let's not let this crisis go to waste! While painful, this crisis also has the potential to stimulate CUs to refine their business models and practices, improve their organizational capabilities, and become better strategic planners.
John Redding is president of and Richard Kamm is a principal with Institute for Strategic Learning, planning facilitators based in Naperville, Ill.
Read another post by these authors: "Competitive Differentiation: From ‘As Is’ to ‘Will Be’
