After the financial industry came close to meltdown within the last four years, strategic planning is more important than ever before if an appropriate response is to be made to an economy in recovery and a drastically-altered banking landscape. One successful strategy was evident when the 200 year-old private Swiss bank, Lombard Odier, was named the best foreign bank at the 13th Banker Middle East Industry Awards in Dubai.
Strategic planning does not itself catch fish, but it teaches how to fish. It does not make decisions, but enables better decision making. Banking today is extremely dynamic, and strategic planning establishes the most important goals, issues, opportunities and gaps for a bank. To community banks that find themselves amidst the tightest of competition, it can provide a lifesaver that leads to years of sustained growth. Dwight D. Eisenhower, who was then a general but later became President of the United States, said, "A plan is worthless, but planning is indispensable."
A plan should identify target customers and the reason for selecting them. An example was given by Stephane Monier, the global head of fixed income and currencies at Lombard Odier. He said that efforts were concentrated on the most volatile asset of equities. If market segments are not pursued, the reasons for so doing should be elucidated. The unique value of the bank should be expounded, in addition to how the bank is better than competitors and why customers should prefer it. The manner in which profit will be generated should be asseverated and why this is better than any alternatives. A rundown should be given of how the bank's position will be defended from competitors, as well as the risks of such a strategy.
Planning will form a strategy, show how to effect that strategy, and make it matter. Traditionally, banks have concentrated on only the first one of these objectives and do not realize that all are critical. Because the requirements and possible outcomes of strategic planning have been fundamentally misunderstood, it has been undertaken in a haphazard and superficial fashion. Usually, planning is just an annual ritual which is sometimes devolved to a staff unit. The employees of the bank have little knowledge of it and so do not work to it and make decisions independently of the plan. One year after, the leaders of the bank wonder how their plan did not work.
Strategic planning consists of planning, communication and execution. Strategies often fail due to communication rather than execution. The whole executive team and relevant managers should be brought into the process at an early stage. If the plan is not communicated adequately to employees they might not follow it or feel engaged to it.
If strategic planning is to be effective, it should be a daily habit and not a yearly event. It should be part of the awareness of every employee. In smaller banks, engaging people is less difficult. Incentive programs and goal-setting can give accountability. Communication and formal mapping can link strategic objectives to the job functions of employees, and show employees their part in a plan.
Many banks might find a skilled facilitator to be useful at first. If employees of a bank understand that they must follow a plan, the initial milestone will have been passed in making the difference between disappearing, surviving and thriving.