Banking consultants say their clients request an inordinate amount of help on strategic planning.

This term is often bandied about, but many executives admit they really do not know what it involves or how a strategic plan can be most useful.

Despite all the consultants' complex descriptions of how they can help on planning, they readily admit that it is really simple. All it involves is determining very clearly what the bank wants to accomplish.

There's an adage: "If you don't know where you are going, then any road will get you there."

Deciding on the best road is not as easy as in the past, however. At the recent convention of the Pennsylvania Association of Community Banks, Robert E. Kafafian, president and managing director of Tucker Anthony Cleary Gull, defined movements in seven fundamental areas that have changed how banks must be managed:

  • Deregulation and reregulation.
  • Asset-liability management.
  • Profitability analysis.
  • Product diversification.
  • Industry convergence.
  • Risk management.
  • Technology and information management.

Certainly all bankers are aware of these movements and watch them carefully, but Mr. Kafafian warned the bankers not to "chase a fad" when trying to address them.All too often, he said, bankers hear a buzzword and try to fit it into their way of doing business, even if the buzzword is inconsistent with the bank's goals.
Take customer relationship management. This should not be stressed by itself but put in its proper relationship to the bank's goals, Mr. Kafafian said. Otherwise we work on building relationships without knowing why we want to build them.

What basic goals should strategic planning address?

They boil down to the fundamental three: improving shareholder value, making the bank a better place to work, and helping communities prosper.

Planning specialists begin by searching for the bank's motives and asking whether all three basic goals really apply. Sometimes we act as if we are afraid to discuss, even internally, things that we definitely would not admit to the public.

Specifically, some banks put very little emphasis on community service because they feel there is no payoff in terms of business development, customer loyalty, or bottom-line growth. Then there are banks that put as much focus on employees and/or the community as they do on profitability. When this is true, the bank's policies should reflect it.

Eugene Mann, a bank consultant in South Orange, N.J., put it this way: "If your goal is community service, make sure you have enough resources committed to meet this goal, even if it comes from your bottom line. And if you want staff satisfaction as a goal, make sure you devote resources and effort to insuring that your people have challenging and rewarding jobs with empowerment, even if it violates your other goals.

"But if you can't fulfill the goals you have established, and you are unwilling to divert resources from another of the three goals to meet this one, then change your orientation and goals." Simple, isn't it?

Mr. Nadler, an American Banker contributing editor, is professor of finance at Rutgers University Graduate School of Management.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.