Pass the aspirin.

The headache: strategic planning--part 2

As explained last month, we had an overwhelming response to our questions about strategic planning, and had to split up the answers over two issues. This is the second and final instalment.

Some excellent answers could not be included

Here again are the questions we asked:

1. What is the general structure of your planning effort?

2. Who in the bank participates in your planning effort? Is there any input from the rank-and-file?

3. What do you think of using outsiders in your strategic planning (facilitators, speakers, etc.)?

4. What time horizon do you use in your strategic planning?

5. Do you find that examiners show interest in your strategic planning process?

6. Do you feel strategic planning works? In the responses below, the numbering

continues from September's Part 1.

Remedy 5

Dorothy J. Bridges, president and CEO, Franklin National Bank, $127.1 million-assets, Minneapolis, Minn.

Our examiners do ask for and review our strategic plan. They check for realistic attainability of goals and objectives and any plan to significantly alter our core business activity. They even mention in their exit interview with management their assessment of the plan.

I am a strong believer in strategic planning and the process it requires to get it done. It really does pay off.

Our strategic planning process calls for a rolling three-year strategic plan. We update the plan every year for the following three years and, every other year, hire a facilitator to motivate us to think proactively.

This is a manual process at our bank. We have only 37 employees and two branches. Our senior management team meets every week for one-and-a-half to two hours to work on various section elements of the plan. These include vision statement, mission statement, core values, SWOT analysis [strengths, weaknesses, opportunities, threats], market characteristics, and strategic goals and objectives. These weekly meetings run from September to December. A final draft is approved by the board at our January meeting. All meetings are in-bank. The SWOT analysis is done bi-annually with the help of our outside facilitator.

The core participants include the president, our CFO, the senior credit officer, the senior Lender, and our business development officer. Other invitees include the retail manager, operations manager, the head of marketing, and our administrative assistant. The bank's rank and file participates by providing input to their managers, who submit feedback at the planning meeting.

The right facilitator can be an invaluable resource to help keep the process moving and everyone focused on the appropriate issues. They can also be objective enough to challenge management about setting realistic, attainable objectives for the bank.

We build the growth expectations established by the strategic plan into annual performance evaluations and incentive work plans. For example, over the next three years, our strategic plan has a net asset growth goal set in terms of percent and minimum dollar amount. All senior managers have a portion of their incentive pay tied to that for each of the three years.

Remedy 6

Robert T. Braswell, president and CEO, Carolina Bank, $377.2 million-assets, Greensboro, N.C.

We feel strategic planning works. It brings the board and the management team closer together and helps set the stage for discussions on the issues each group has in a Less-threatening way than in a time-constrained board meeting.

We hold an offsite meeting over a day and half. Both directors and executive management attend. We have a computer mode[ which we employ when we get to the part of discussion that involves financial modeling. We use the outcome of this exercise to set the budget and plan for the next few years.

We've used facilitators, but not every year. It is up to the board as to what issues they want to cover. We in executive management can put anything on the agenda that we want to.

Remedy 7

Thomas W. Kelly, president and CEO, BankNewport, $1 billion-assets, Newport, R.I.

We have a retreat in [ate August that includes the directors of both our bank and our mutual holding company and five company executive officers. The retreat Lasts for one-half to a full day, depending on anticipated changes to our existing comprehensive three-year strategic plan.

This group creates the plan's basic outline. In early September, management of the bank and other subsidiaries meet for two days at another retreat to expand the plan outline with more detail and substance that can be used to create action plans for each strategic objective. Attendees include all executive and senior vice-presidents, some selected department managers, and, at times, some selected middle managers. The latter are included to expose them to the planning process. Often we distribute questionnaires to attendees at both meetings to obtain input on certain issues prior to the meeting. Sometimes these are used to obtain input from other company staff as well.

For the past three years we've been utilizing an outside facilitator for these meetings, and both board members and management agree that it has helped significantly in creating focus and organization with respect to the plan. We do at times have outside speakers, depending on the anticipated issues that will be discussed at the meetings.

The time horizon is three years, but the plan itself is updated annually. The plan includes a comprehensive List of objectives, assignment of responsibilities, and a time frame, generally quarterly, for completion. Progress is reviewed, formally, semi-annually with executive management and the facilitator, as well as internally with all management on a continuing basis. A bound copy of progress of the semiannual review of the plan is then submitted to the board for their review at the next board meeting.

Bank examiners have been very interested in our planning process and have been very complimentary of it since it was introduced three years ago.

We strongly believe that the strategic plan and planning process are valuable in several respects. While it is usually very difficult to predict the banking and financial services environment three years in the future, the planning process forces you to do the best you can in focusing on the issues that will probably confront the organization. It also helps you to create more comprehensive shorter-term business plans, as well as to foster the discipline and monitoring to ensure completion of objectives.

One of the major advantages of having the plan is that it has nearly stopped a frustrating practice of the past: Directors would bring up strategic issues at regular board meetings that had never been discussed previously and for which there was usually neither enough time nor enough information available to discuss or assign priority for action.

Now, nearly all strategic issues have been addressed at the planning meeting, or in the plan, and have either been dismissed or placed in the plan. If an issue is mentioned at a meeting we can simply reply that it is in the plan for completion on a certain date.

Remedy 8

Don Patillo, president and CEO, Farmers & Merchants Bank, $311.7 million-assets, Stuttgart, Ark.

I know the planning process works. It's been very helpful to our bank, officers, and directors. Our timeline focuses on three to five years.

We have been using an annual retreat for strategic planning for several years. We have had them in the bank, out of town and, most recently, 20 miles out of town at a hunting Lodge. I would recommend getting away from the bank, preferably totally away from town. This forces the directors to focus on the meeting the entire time and negates leaving early for other social or business meetings.

Our retreat includes the directors, of course, and our senior officers for a portion of the meeting. We want their input but also need time for the board alone to discuss some of the issues. There are no nonofficer employees present.

I would definitely recommend using a facilitator. A facilitator pushes you to make decisions you know you need to make, but for some reason have chosen to delay. This year we used Scott McDonald as a facilitator. Scott works for the Southwestern Graduate School of Banking at Southern Methodist University and heads up their Assemblies for Bank Directors.

Remedy 9

B. Keith Johnson, president and CEO, First Federal Savings Bank, $786.6 million-assets, Elizabethtown, Ky.

We use a two-prong approach at our institution. The strategic planning process is the responsibility of our top leadership. We meet off-site semi-annually to assess and revise our formal written strategic plan. Annually, the board meets off-site to review and update the plan and to discuss long-term strategic issues. The latter meeting includes the top leadership of the bank also. Annually, the CEO meets with each of the 30 bank teams to share the strategic plan and vision for the bank's future.

We do not incent anyone directly for their performance in connection with the strategic plan. We work as a team to reach the strategic objectives. Since we are a publicly traded company, we all benefit by stock appreciation, which is a direct result of accomplishing the strategic plan. We offer ownership through a KSOP and an Employee Stock Purchase Plan for motivation in connection with the company-wide strategic accomplishments.

Although we have discussed the use of an outside consultant, we have not felt the need to bring one in. We seem to make good progress without one. I believe our strategic planning process is very successful.