by Philip K. Smith, Principal, Gerrish McCreary Smith Consultants, LLC

For as many different people as there are to assist community financial institutions with “strategic” planning, there are as many different ways of handling this unique task. I do not claim that my method is the best or that other techniques are not effective, but in my 17 years of exclusively representing financial institutions and facilitating scores of strategic planning retreats, I have seen some common themes that I think should be noted. This article describes 10 common problems I see in many planning retreats and my recommendations on how to correct them. Some are born out of my own experiences early in my career and some are born out of the experiences that others have had with other facilitators. The bottom line is that if you are going to require your board’s time to attend a retreat, you want the time to be well spent and valuable, both to the directors and the institution. I hope the following will help.

1. Don’t Focus Too Much on SWOT
   Just about every person who facilitates retreats has some aspect of requiring an organization to analyze its strengths, weaknesses, opportunities, and threats (SWOT). While that is a valid discussion, it does not need to take up half of the day. For institutions that have conducted planning retreats for several years, an analysis of SWOT should merely be a revisitation of the current market and environment in which the institution is operating and a confirmation by board members that the environment is still the same or that new strengths have presented themselves, there are new threats for the institution to consider, a previous opportunity no longer exists, etc. Rather than taking several hours in a meeting to discuss those issues, I recommend that directors simply provide their responses to those types of questions ahead of time in response to a questionnaire or something similar and that the facilitator should simply provide consensus answers to the board and ask the board to confirm or deny those elements.
2. Once Your Mission Statement is Set, Leave It Alone
   I see far too many institutions spend an inordinate amount of time “wordsmithing” the mission statement to death. For a new institution, it might be appropriate to spend an hour talking about what the mission really is, what language should be incorporated into that statement, how it relates to the overall goals of the institution, and similar discussion. For an institution that has established a mission statement, I think the focus of the board should be to reaffirm the statement or, if it seems totally out of line with the current direction of the organization, ask the consultant, the chairman, the president, or some other individual to craft what they think would be the updated version of the mission statement and present that for further review and approval by the board. I don’t think it is an efficient use of time to spend more than 10 minutes on the mission statement once it has been established, unless there have been major changes in the organization.
3. A Planning Session is Not a Budgeting Session
   If a large portion of your planning session is devoted to the directors reviewing detailed financial statements, analyzing growth rates, projecting trends for the future, setting targeted goals for future earnings, capital, loan growth, etc., it has likely devolved into a budgeting process. In my opinion, those items should be left to senior management, who develop the budget and then present it to the board for approval. The brief review and approval of the budget can certainly be made a part of the planning process, but it is not the board’s duty to be heavily involved in the tactical or operational planning that budgeting requires. Keep your board at the 30,000-foot “flyover” level. In fact, think of it this way. Management sets the budget, the board sets the goals—and those two elements do not have to be identical. The budget should be what you expect to attain, and the goals should be what you hope to attain.
4. Not Addressing “Real” Issues
   At planning retreats I facilitate, I spend some amount of time on “soft” issues. Those items might include the impact of competition in our markets, employee retention and motivation, our overall business strategy, the perception of the institution in the community, and other similar issues. However, I like to spend the overwhelming majority of the time focused on real (and often very tough) issues. Examples might include the following. What do we do if the president doesn’t show up for work on Monday? How do we plan to raise new capital to support the asset growth we are expecting? Why do we keep “grandfathering” directors who are otherwise subject to mandatory retirement? If the largest stockholder dies, who inherits his shares? Do we want that person on the board? Would they want to sell the shares? If the bank down the street makes us an offer, what do we do? I think those types of discussions produce the most candid and open responses among directors and produce the best action plans and direction for institutions.
5. Focusing Too Much on Process
   I tell boards when I facilitate their retreat that I am not concerned about the process we take to reach decisions in the meeting, as long as we ultimately reach decisions. If a facilitator is too focused on following his or her agenda rather than being responsive to the needs of the board, the result may be a meeting that winds up with no real substance. The facilitator’s job should be to discuss the issues the board wants to discuss, facilitate that discussion, provide expertise, encourage the board to reach consensus, and then move on to the next areas.
6. Not Being Honest (with Yourself and Others)
   Typically, I will outline for a board of directors what I see as the “four Cs” of planning: Communication among the directors, Candidness in the discussions, building Consensus, and maintaining Confidentiality. The one of those that would likely seem to be the easiest (candid conversation) often may be the most difficult. If boards are new to the planning process, individuals may be hesitant to speak about their long-term desires for the organization, their retirement plans, or their true thoughts about selling their shares and the like. One of the critical components of successful planning is for all the attendees to be open in their conversations with the other directors including the ability to air grievances and talk about difficult issues, such as mandatory retirement, succession planning, their need to liquidate their shares to generate cash, and other sensitive matters. Boards that are honest with themselves and honest with each other by far produce the best results.
7. Not Making Efficient Use of Time
   Boards should also focus on how much time they are allocating to the planning process as a whole. If a $500-million institution is trying to conduct its strategic planning in a two-hour afternoon session, it is probably not allowing enough time. On the other hand, if a $100-million institution wants to spend three full days at a retreat, that may be too much. The idea is to be efficient with the use of time. For most organizations, a total time allotment of eight hours (give or take a few hours) is about right. Some of my clients choose to meet one afternoon, take a break for dinner, and then meet for half a day the next day. Other clients choose to spend an entire day as a working session from about 8:00 or 9:00 a.m. to 4:00 p.m., and then, if there is anything left to cover, they may spend a few hours the next morning. Make sure you have allocated enough time and make proper use of your time for your planning retreats.
8. Not Making the Event Enjoyable
   If you are going to ask your directors to take time out of their personal and professional schedules to attend the planning retreat, it should at least be an enjoyable event. Perhaps not surprisingly, directors seem to embrace the process a little more if there is some element of entertainment—socializing, golf, or some other activity—tied to the retreat. Some of my clients allow their board members to bring their spouses. The retreat becomes a yearly destination event that everyone looks forward to, and the planning session is carved out as a focused working session in the midst of a fun event. Other clients prefer to keep it all business all the time. You need to find what works best for your board, but make sure it is enjoyable and an efficient use of their time.
9. One Person Dominating the Meeting
   Whether it is the chairman of the board, the president, or even the facilitator, no one person should dominate a well-run strategic planning session. If the facilitator spends the entire day lecturing on particular topics or the chairman simply lays out what he wants to talk about, the session will not be as effective as it otherwise could be. Every person who attends a planning session should be advised on the front-end that they will be expected to personally be involved, provide commentary and opinions, etc. The nature of the process should demand that everyone is an active participant. To do otherwise is a waste of everyone’s time.
10. Assign Responsibility and Follow-Up
    I have seen many well-written strategic plans with no individuals assigned responsibility for implementing the plans and no provisions for follow-up. If a decision is made on a particular topic, even if it is a decision to conduct further analysis, a specific person should be named and assigned responsibility for completing that task, a specific timeframe should be provided for completion of the task, and some aspect of follow-up should be mandated by the board or the facilitator. Typically, I develop specific action plans for financial institutions that are simple checklists that can be inserted in the board packets. I encourage boards to review the checklists monthly to see what has been accomplished, who is assigned responsibility, and how the institution is progressing and meeting all of its deadlines.

I trust that these points will be useful to you as you consider your planning needs for 2008 and beyond. I hope you will avoid some of these common mistakes and work to make your strategic and action planning sessions a success.

Philip K. Smith is a principal in Gerrish McCreary Smith Consultants, LLC and a member of the Board of Directors of the Memphis-based law firm of Gerrish McCreary Smith, PC, Attorneys.

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