(First in a two-part series.)
If nothing is certain except death and taxes, how can credit unions be expected to plan for the future?
To start with, they have to accept that instead of subscribing to some rigid, Soviet-esque five-year plan, they should find ways to be flexible to succeed in any scenario the future may throw at them.
"I always like to say that the one forecast I can make with absolute confidence of not being contradicted is that one year from now, the prime rate will be between 1% and 25%," laughed CUNA Economist Bill Hampel-an old pro of the non-prediction prediction. "I've been using that line for years, and it's never been wrong. But I should point out that I used to say between 5% and 25%-fortunately, I lowered that bottom end in time."
Which just goes to show that even some certainties aren't as certain as we may think.
For most economists, the key to forecasting the future is often looking for similar patterns from the past-researching the history to understand what's coming.
"When credit unions look to prepare for the future, obviously, they have to start with the economy and look at growth, inflation, interest rates and the like, all of which can affect every major decision, like when and where to open a new branch or deciding to go into member business lending," said Jeff Taylor, senior staff economist at NAFCU. "One of the things that has made this economic cycle so difficult to predict is that we have no norms to look back at; we just don't have a similar historical pattern to refer to."
That's why flexibility is so important, he advised. "Most credit unions have a five-year plan, but then as you move through those five years you have to be ready to fine-tune. Most credit unions still have a strategic planning session once or twice a year so they can revisit the original plan. Instead of looking at the GDP, for example, and saying 'it's going to be five,' look for the magnitude and direction, not focusing in on an actual number."
Emphasis On Scenarios
To that end, CUES emphasizes scenario planning rather than the traditional five-year plan, according to George Hofheimer, VP-professional development at the executive trade association.
"When people talk about doing a five-year plan, that's planning in a vacuum, not taking into account what is actually happening around you," he offered. "Scenario planning goes way beyond that. We start out by identifying trends in the external environment that may have an impact on us. Then the next step is looking at the key uncertainties that are facing us."
For example, there are some clear trends in demographics, such as the aging population, and then there are uncertainties, such as the rate of consumer adoption of technology. In scenario planning, Hofheimer explained, credit unions look at those trends and those uncertainties to create several different possible scenarios for the future.
"We usually come up with four scenarios, and then we can look at those scenarios and determine what skills will make us successful in all four scenarios," Hofheimer commented. "You still may be blindsided by a wild-card event like 9-11, but scenario planning establishes a flexible mindset to be able to deal with uncertainties like this. Credit unions weren't planning for Sept. 11, but they were looking at questions like, 'What happens if all our communications are down or people are afraid to come out of their houses and go to the branch?'"
Hampel agreed. "If you think through several possible scenarios, when the world unfolds, the mind is more nimble and you're prepared to adjust to it," he offered.
So important is planning for the future that an entire industry has sprung up around it-and we're not talking about psychic hotlines- futurists.
Glen Hiemstra, founder of Futurist.com, has worked with Boeing Credit Union and Western State Employees Credit Union, as well as a host of other industries to help them look beyond the crystal ball.
"I don't just try to help organizations to look into the future. I try to help them determine what sort of future they'd like to have and then help them become a self-fulfilling prophecy," Hiemstra advised.
But how, exactly, does one become a futurist?
"There are three avenues. The first is the academic route. There are schools with future studies programs, like University of Houston Clear Lake and University of Hawaii. I taught future studies in my last post as a professor," he noted. "The second avenue is to be self-taught, and this is the most common avenue. You join groups like the World Futurist Society, attend seminars and read the literature. You're learning how to look at the future. For most futurists, it's the result of having learned and applied these skills at the industry they came from and then going out from there."
The Future Is All About Now
The third avenue is the route Hiemstra took himself. He was mentored into the world of futurists by one of the founding members of the World Futurist Society, who was the college president where Hiemstra was a professor.
There are three fundamental steps toward planning for the future that Hiemstra takes his clients through. The first is determining how much of a long-range view the organization already has-and committing to develop that view.
"Next, you have to develop a capacity to ask questions about the next five to 10 years and then researching the events, trends and developments," he suggested. "The third step is to engage the organization in asking what sort of future do we want for our organization. What would our preferred future be."
Once there's a clear vision of what the preferred future is, it's figuring out how to become that self-fulfilling prophecy.
"Planning isn't about what the credit union should be doing in the future, it's all about what the credit union should be doing right now," he said.
