Strategic Planning Advice for 2009

Published August 25, 2008, 10:15 a.m. EDT

Updated August 27, 2020, 1:05 a.m. EDT

13 Min Read

BOOST YOUR NET INCOME

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Name: Steve Coale

Title: Managing director

Company: Amherst Securities Group, LP

Info: www.amherstsecurities.com

Advice: A slumping economy will lead to more deposits, and CUs will have to look more toward investments to maintain spreads, and strategy sessions should address how the investment portfolio can become a more important earning asset for the balance sheet.

HOUSTON–“The bottom line is that loan demand is not ticking up anytime soon,” observes Steve Coale. “Deposits are going to continue to come in, and investment portfolios are going to get bigger and bigger. That trend is going to carry into and through 2009.”

Coale contends that when deposits increase, CUs try to “loan themselves out of the situation.” But with lending expected to remain flat, CUs are going to have to address investment strategies during 2009 planning sessions.

“Credit unions...don’t take the time to learn how the investment portfolio is a very important earning asset for the balance sheet,” Coale said, adding Amherst is positioning clients for what it expects will be rising rates at some point in 2009. “Credit unions should have a fairly high concentration of agency annual adjusting ARMs. We would also include the AAA, private label, annual adjusting ARMS with probably a 30% mix of one-and-a-half to two-year, fixed-rate, high cash-flow CMOs.”

Even though Coale predicts there is a 60% chance the Fed will cut rates another quarter point before year’s end, rates will rise next year, he said, and recommends avoiding longer-term fixed-rate investments.

Coale also warns against callable agency bonds.

TIME TO TARGET THE BANKS

Name: Jim Schneider

Title: CEO

Company: Schneider Sales Management

Info: www.schneidersales.com

Advice: While long-range goals are essential, make sure 2009 planning discussions address current opportunities to take business from banks. It’s time to focus and pick targets, and that goes for branch expansion, too.

GREENWOOD VILLAGE, Colo.–“A lot of our credit union clients are targeting banks that are having trouble,” says Jim Schneider. “I am seeing this more and more and hearing that now is an opportunity to take customers and staff from banks that are struggling in the lending area. Credit unions are picking banks and going after them.”

Schneider believes the time is right to target banks because they are “distracted. Especially the regional banks.”

Many of Schneider’s clients are emphasizing service quality with their marketing approaches, which do not directly claim credit unions are better than banks. Some of the banks’ service levels are going down due to cutbacks and lean staffing,” Schneider said. “We’re seeing credit unions employing service guarantees.”

Schneider suggested bank cutbacks also affect staff satisfaction, making it time to persuade talented employees to come to the CU in 2009.

“Where they know there are good people, credit unions are targeting bank employees on a one-to-one basis, talking to them when they see them in the community.”

But zeroing in on the banks is just one strategy, according to Schneider.

“Rather than considering several branch expansions over the next couple of years, credit unions are looking more toward one, good branch expansion that can serve as a model for future growth, taking into considering optimal location as well as design,” he said.

LEVERAGE TRUST IN CUS

Name: Nicolette Lemmon

Title: President

Company: LemmonTree Marketing Group

Info: www.lemmontree.com

Advice: Strategic plans should address the opportunity a difficult economy presents to stay in front of members with a message of trustworthiness, and should not include marketing cutbacks to meet bottom-line concerns.

TEMPE, Ariz.–“In a potentially recessionary time, you need to revisit where members are coming from in terms of their community, monetary, and social issues,” suggests Nicolette Lemmon. “What are the threats facing them–joblessness, cutbacks, gas prices? They also have obligations, such as loans, to take care of.”

Lemmon believes it’s time to “get into the minds of members”–stepping away from just looking at products and services–and determine what’s going to help members trust the CU to assist them with those threats and obligations and survive a difficult economy.

Some of that knowledge comes through market research, MCIF database analysis, and focus groups, she said. “I think you’ll find there is a huge amount of trust built up in credit unions now,” Lemmon suggested. “There is a large core of members and people who assume credit unions are trustworthy, and that needs to be part of credit union messaging.”

That means marketing budgets should not be slashed to accommodate shrinking margins. “Those businesses that continue to market during a downturn and stay in front of customers are the ones that thrive and take off once the marketplace turns around,” Lemmon said. “So the strategy for 2009 could be to grow at the same pace as 2008. It might mean holding your own for the time being...In terms of costs, it’s not about slashing but making sure you maximize every dollar you have in the best way.”

PLAN NOW FOR SUCCESSION

Name: Todd Lane

Title: CEO

Company: Executive Compensation Solutions

Info: www.ecs-m.com

Advice: With a large number of CEOs approaching retirement age, CEO succession planning and retention should be seriously discussed during 2009 strategic planning sessions.

LOS ANGELES–“We are estimating about 3,000 credit union CEOs will be reaching retirement age in the next five years,” explains Todd Lane. “We think it’s important that credit union boards begin planning for that change.”

That’s why succession planning needs to be part of 2009 strategic planning discussions, Lane insisted. “Boards need to create plans for ways the credit union will quickly and effectively address this upcoming shift,” Lane said. “I think too many credit unions wait until the CEO announces he is retiring, or he retires, before taking action. That’s not strategic.”

A credit union needs to determine where the replacement will come from and then build plans around the decision. “Will the talent come from inside the credit union?” Lane asked. “If so, does the credit union have the leadership programs in place to bring up that candidate? Or will the talent come from outside?”

If the credit union is to attract and retain top talent, Lane suggested structuring an attractive benefits and retirement package, including supplemental retirement benefits. A supplement to the 401K and pension, if the CU has a pension program.”

“Strategically this is the right thing,” he said. “Not doing so creates risk. There will be no consistency in leadership if the CEO is jumping every three to five years.”

GET TO KNOW BEST MEMBERS

Name: Arp Trivedi

Title: VP of strategic planning

Company: DEI

Info: www.dei-corp.com

Advice: Strategic plans should be centered on the credit union knowing its members and its market well to make the most of promotional dollars in a tight economy. Strategies should also reduce organizational complexity to allow for the highest operational efficiency.

CINCINNATI–With the economic challenges facing credit unions, understanding the types of members that are bringing in the most profitable business is necessary to help any credit union spend marketing dollars wisely and grow, offers Arp Trivedi.

“I want to know who my best members are, and I think credit unions are understanding this through MCIF data,” Trivedi said. “But what they may not be doing a good enough job of is asking, ‘What do these members look like from a general market perspective? What type of lifestyle or psychographic category do they fall into? Now let me go find these same consumers in the marketplace.’”

Trivedi feels the strategy should be discussed most critically during community credit union planning sessions, “But everyone can utilize this logic to understand who are their best performing members and how to find more of them.”

A streamlined organization also drives growth, according to Trivedi, who recommends discussing aligning the credit union under three “simple” buckets: sales and service, enterprise-wide support, and accounting and finance.

“You have to be designed to compete, and now is the time to do it,” advised Trivedi, pointing to economic pressures facing the financial industry. “Sales and service is anything that touches a member or fulfills a member request. Enterprise-wide support are those functions that run the gamut of the business, such as IT and HR. And then, of course, by the nature of our business, we have to have accounting and finance functions.”

FOCUS ON NET INCOME

Name: Dennis Dollar

Title: Principal partner

Company: Dollar Associates, Birmingham, Ala.

Info: www.dollarassociates.com

Advice: Strategies to increase net income should be a high priority with credit unions and CUSOs may be the way to improve the bottom line, advises Dennis Dollar, who also sees merger preparedness, business lending, and membership growth as important discussion topics within 2009 strategic planning sessions.

BIRMINGHAM. Ala.–“The economy is certainly the backdrop upon which any strategic plan will be painted,” says Dennis Dollar. “With the tough market on loans and investments right now, credit unions are looking at any way to increase income, and is there perhaps some opportunity in the CUSO area. If you look at the highest-producing credit unions in the country from an ROA perspective, they are usually quite active in the CUSO market.”

Dollar acknowledged that many CUs seek CUSO arrangements to drive economies of scale, which is beneficial in today’s tight economy. But many credit unions are solely owning CUSOs and not looking necessarily at managing expenses, he said. “It’s about return on investment...CUSOs allow credit unions to extend some of their services beyond their field of membership.”

Dollar said he has not been in a planning session this year that did not include talk of CUSOs. “Credit unions are making lists of the types of products being offered through CUSOs and then doing some strategic thinking as to whether there is a market for that product in their communities,” Dollar said.

THE PLANNING BASICS

Name: Barb Kachelski

Title: SRVP and COO

Company: Credit Union Executives Society

Info: www.cues.org

Advice: Strategic plans can only be effective when the credit union clearly understands who it serves–and does not serve. Once those hard decisions are made, the organization’s entire efforts, from marketing to community involvement, must reflect those choices.

MADISON, Wis.–“It’s back to basics,” insists Barb Kachelski, “which is always a good idea for strategic planning. The credit unions that are enjoying strong performance are the ones that have clearly identified who they are working to serve and work to differentiate themselves to that market.”

Conversely, credit unions having the “hardest times” are those attempting to be “everything to everyone,” she suggested. “Once you know the customer or member you are trying to appeal to, it becomes pretty obvious what you need to do from a strategic standpoint.”

Kachelski recommends that in 2009 CUs identify who they do not serve, as well.

“If you cannot say who you do not serve, then you really don’t have a strategy,” Kachelski contended. “That sounds harsh, but if you are looking at any successful company, large or small, they know who they were formed to serve. Putting who they serve into a negative makes credit union leaders think harder about their objectives. Because it’s pretty easy to say who you serve, but that’s not clearly making the difficult choice of who you do not serve.”

OWNERSHIP & METRICS

Name: Gee Gee Kaufman

Title: Director, strategic planning

Company: Raddon Financial Group

Info: www.raddon.com

Advice: The steps involved in strategic planning are as important–if not more so–than finished plans. Make sure the planning process is owned by the entire management team and board, and establish metrics to track success.

ATLANTA–“In my view there are a few steps that are integral to any successful plan,” said Gee Gee Kaufman, who outlined four points credit unions should keep in mind when setting strategy for 2009:

* Challenge the current status and business model.

* Reach consensus on initiatives–everyone has to buy into the plan.

* Establish clearly defined tactical initiatives and action plans, assigning accountability, responsibility, and target implementation dates.

* Obtain consensus, commitment, and ownership across the entire organization on action items.

* Establish measurement and tracking programs with key dates and milestones to determine if the CU is on track or if modifications are needed.

Kaufman contends that CEOs sometimes use planning sessions to facilitate their own agendas, leading to creation of a strategy without a great deal of input from the management team.

“One of our basic strategic planning tenants is that there has to be consensus, commitment, and ownership. You have to build it from the ground up,” Kaufman suggested. “Everyone leaves their stripes at the door, and the input from the SVP of marketing is just as important as the CEO’s.”

The Lombard, Ill.-based Raddon recommends including the board, either directly or through interviews, to produce a plan everyone buys into. If it’s the CEO’s plan simply rubber-stamped by the board, staff and the board are less likely to own it, which could affect implementation, Kaufman said.

–Planning Profiles by Ray Birch