Bank Strategic Planning Needs More Strategic Thinking

Leda Glyptis' "Planning Like a Banker" post takes banks to task for three strategy-related "mistakes":

  1. Making irrevocable decisions when they know the least they will ever know about everything;
  2. Discussing the what before the why, the how before the what, and the how much before everything;
  3. Not changing anything in the face of evidence and experience.

All great points. But if I can quibble a bit with Leda here, those aren't necessarily issues with "planning"--they're issues with how banks (and, to be fair, plenty of other industries) "manage." And I would submit that the underlying cause for the issues that Leda raises isn't poor planning, but the lack of strategic thinking.

Two Truths About Strategic Thinking

The core of the bad rap on strategic planning starts with confusing the process with strategic thinking. There are two truths about strategic thinking that bankers should never forget:

  1. The strategic planning process will not necessarily produce strategic thinking.
  2. Strategic thinking is needed all the time--not just during the strategic planning process.

Without an understanding of these truths, the strategic planning process is set up for failure. Don't throw out the baby with the bath water, though: Strategic planning can be effective if you understand and define the specific roles it can play.  Because sometimes, strategic planning isn't about strategic planning.

Three Roles of Strategic Planning

Consciously--or purposely--or not, sometimes strategic planning isn't about strategic planning. Sometimes it's about:

  • Alignment. Get the team together, stick them in a conference room offsite for the better part of two days, and discuss what you think you're going to do over the next 12 to 24 months (with lesser concern about that 13 to 24 month part). Hash it out for a bit. Come to some agreements (some real, some veiled), and voila! You have alignment around your "strategic" plan. Often, the plans are nothing more than a continuation of what's already going on in the organization. But here's the thing that might surprise you; That's not necessarily a bad thing. An organization doesn't have to re-think it's strategy every 12 months (if things are working).
  • Education. In other instances, strategic planning is used as a way to educate the management team (and board) about what's going on out in the real world. Typically, a couple of outside speakers are brought in to inform the team on some aspect of the industry.
  • Resource allocation. In far too many banks, strategic planning is really just the annual budgeting process, and strategic planning is little more than a process for resource allocation.

What may or may not be present in any of these scenarios is strategic thinking. I could even make a case that strategic thinking is detrimental to the alignment scenario--the last thing that process needs is someone questioning commonly-held beliefs and assumptions about the business, otherwise the team might never come to alignment.

Understanding Strategic Thinking

Leda hits the nail on its head with her identification of the lack of strategic thinking in too many banks today. Part of the problem is that many execs have misconceptions about what constitutes strategic thinking. I don't think you'll find a generally accepted textbook definition of the term, so I'll put my stake in the ground and make this assertion:

Strategic thinking is more about looking at the past and present than it is the future.

Strategic thinking is introspection, not necessarily forecasting. Strategic thinking is asking:

  • What's working and not working--and why or why not?
  • Why do consumers do what they do, or not do what they don't do?
  • Why does that one pesky competitor of ours always eat our lunch?
  • What assumptions about the business do we hold dear, but not might be true? (think bank branches)

While I'm sure there are others, there are two common barriers to strategic thinking:

  • Some execs aren't equipped to address those questions. Reality is, many senior execs got to where they are because they're really good at managing people and/or operations. When they get to the senior ranks, there's this unwritten rule that somehow--magically--they're going to turn into strategic thinkers. Doesn't work that way. Sorry.
  • The truth hurts. Here's an uncomfortable thought: Maybe the reason things aren't working out like planned, or why that competitor beats you every time is the result of decisions YOU made or actions YOU took. Sure don't want that coming to light in the strategic planning process, do you?

Many bankers feel the pain of not having strategic thinking permeate the strategic planning process. The answer isn't to throw away the process. The answer is to make a big--and potentially painful and expensive--change to the process: Strategic "planning" needs to become an on-going process, not an "episodic" time-bounded process. 

The accounting process doesn't just once a year for six weeks, why should strategic planning?

How many monthly executive team meetings are nothing but a "go around the table and give an update of what's going on in your department" meeting? Answer: Too many. These meetings are missed opportunities to make strategic planning--and strategic thinking--an ongoing process.

And part of the job of the CEO and Chief Strategy Officer (if there is one) is to help other senior execs become better strategic thinkers.

It won't happen on an ad-hoc basis. Strategic planning must be designed to produce strategic thinking. Assuming strategic thinking is already there and will be magically infused into the process is a bad assumption.

Ron Shevlin
Director of Research
Cornerstone Advisors