How strategic your 2013 investment plan?

Is your institution investing in “true strategic change”?  Does budgeting drive planning in your organization, or does planning drive budgeting?
Many financial institutions are in the midst of strategic planning and budgeting for 2013.  As your organization contemplates key strategic initiatives for the coming year--including major problems to address, new compliance regulations, and incomplete projects that will roll into 2013-- annual planning can seem like a bit of a “fire drill.”  Condensing the time available around year-end activities  often results in tactical rather than true strategic planning–and in sub-optimal and tactical approaches that limit the economies of scale and returns on investment. 

How can your institution move from “tactical strategic planning” to “true strategic planning”?
Following are four keys to true strategic planning.

Understanding current capabilities.
Strategy often focuses on where your institution wants to be.  Accordingly, organizations spend significant time, effort, and funds on defining a destination but less on understanding current capabilities.  Many efforts to implement change begin with an assessment of current capabilities.   Unfortunately, these “snapshots” are rarely kept up to date, shared, or combined to provide a broader view of organizational capabilities. As a result, a portion of the annual budget must go toward “re-understanding” current capabilities.  

Typically the current state for a financial institution does not change dramatically in a given year, so the key is to establish a framework to represent the current state.  By providing a common format to capture the current state, you can combine these periodic snapshots into a reusable enterprise view that can be a foundation for true strategic planning.

Articulating an executable strategy.
To define what is “strategic” to your institution, you first must articulate an executable strategy.  Many organizations stop at defining organizational strategic goals, to which they tie individual project activities broadly.  This approach makes it difficult to compare and prioritize initiatives and their relative impacts on high-level strategic goals.  Prioritization often becomes a matter of compulsory regulatory requirements–or which sponsor shouts the loudest.

An executable strategy breaks down your institution’s strategic goals into achievable and outcome-driven actions, within and across business lines. This enables you to identify and exploit synergies and/or resolve conflicts earlier–naturally prioritizing projects that are truly strategic. 

Another advantage of an articulated and executable strategy is responsiveness to change.  An articulated strategy provides a framework for communicating strategy changes; moreover, it provides a mechanism for identifying investments that are no longer strategic as a result of the strategy change.

Acting quickly to limit sunk costs of non-strategic projects helps to preserve funds for true strategic change.

Collaborating across business lines and with key vendors.
How frequently does your planning/budgeting process allow a step back to construct the best plan across business lines for the next year and for years to come?  How frequently do you feel like your ability to execute on a strategy is limited by internal shared services groups?  Collaboration among organizational functions and with strategic partners and vendors is critical to both true strategic planning and successful execution. Internal change management, technology, and operations resources and capacity can be strained, particularly towards year-end, limiting the ability to deliver strategic service.  Lack of collaboration, in time, causes project delays, unexpected changes in direction, or even project cancellations–all of which carry both financial and opportunity costs. 

Time and Resources.
Separating the strategic planning and budgeting processes can be key to collaborative strategic planning.  Organizations that spread strategic planning across the year often are able to then focus budgeting on the appropriate amount of the true strategic change to fund during the next year. By spreading strategic planning across the year, you can dedicate more time and resources to vision and strategy–than is often possible during a condensed combined planning and budgeting cycle. 

Ultimately, the key to true strategic planning—for next year and years to come–is recognizing that strategic planning and budgeting are two separate activities to be completed in two separate timeframes.  Strategic planning is an ongoing activity that requires strong collaboration and processes to enable many small steering corrections and fewer large changes of directions.  Budgeting is more about the speed at which you get to your destination.  Defining a mature approach to strategic planning and budgeting maximizes the chances that your institution can focus its investment on true strategic change.

West Monroe Partners helps financial institutions define and achieve executable strategies. For more information, please contact us.

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