Economic uncertainty and continued earnings pressure are causing many top level executives to reassess their institution’s current business model. The development of three- and five-year strategic plans have gone by the wayside. A shorter time horizon is more realistic in this environment, emphasizing what can be done NOW to impact the bottom line and building consensus and commitment to move quickly on decisions.
 
Coinciding with the planning cycle beginning in Q2 2008, RFG has been actively engaged with several financial institutions employing our market-driven building block approach to the planning process which incorporates relevant industry research, local and regional market data and historical, comparative financial information and metrics. The key questions underscoring the planning process are: Where are we now? Where are we going? How do we get there? Are we on track?

Recognizing that each financial institution is unique based on their current strategy, business model, corporate culture and customer base, we have been successful in promoting candid dialogue, challenging the current status and business model and arriving at consensus on specific, factually based initiatives. Even with wide geographic dispersion among our strategic planning clients, many similar issues are confronting chief executives, including: 

• Restructuring the balance sheet to minimize risk and maximize yield
• Optimizing revenue and expense levels
• Developing a formal M&A strategy
• Leveraging the retail banking network to drive core account acquisition
• Revamping product offerings for market differentiation.

The following are an aggregate list of client action items and tactical initiatives that align back to strategies and may be topical for your institution:

• Create a new Money Market product that will lower cost of funds (COF) and provide an alternative to CD funding and generate $120 million in retail and commercial MMDA balances over three years.
• Elevate the current sales and service culture from transaction orientation to relationship building and increase services per household from 1.50 to 1.55 in Q4 2010; 1.60 in Q4 2011 and 1.65 in Q4 2012.
• Formalize an on-going process to address acquisition and investment opportunities. Purchase assets, loans and investments from distressed sellers; acquire/invest in other financial services companies.
• Enhance opportunities to grow loan balances and commercial relationships. Increase construction and industrial (C&I) portfolio from $32 million to $45 million in Q4 2010; $60 million in Q4 2011 and $80 million in Q4 2012.
• Further leverage retail branches/managers to engage in small business banking and identify and cultivate small business banking relationships within the branch customer base; generate $15 million in new business within three years.
• Conduct ongoing review and analyses of select NIE categories: compensation and benefits, IT, occupancy, misc. expense and advertising. Hold expenses to a 2.0% increase per year over three years.
• Develop individual retail branch marketing strategies for loans and deposits to increase branch market share, profitability and customer/non-customer penetration and establish specific growth goal for each office.

With disappointing earnings reports the last two quarters, the industry will be challenged as never before. For this reason alone, it is imperative that management construct a factually based plan built on realistic and achievable goals.

If you want more information about RFG’s approach to strategic planning, I will be presenting a complimentary Web conference on this topic on Tuesday, May 19 at 2:00 PM CST.  Visit http://registration.raddon.com/step4.asp?2595 to register for this event. You can also read my Raddon Report article “The Building Blocks for Successful Strategic Planning” for more ideas.

Need ideas, recommendations or solutions for sustainable business improvements?

Contact RFG for our unique blend of strategic foresight, objective intelligence and industry expertise that enables our clients to gain a competitive advantage.  Call 800.827.3500 or email.

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