Strategic Plan Scorecard

I’ve had an opportunity to read many different financial institutions’ strategic plans over the years. After you strip out the largely irrelevant sections talking about the company’s history, organizational structure, and short-term economic forecasts, what’s left often isn’t much that you could realistically call ‘strategy. It’s frequently just a  list of vague initiatives to be pursued with no overarching vision of what the company is trying to achieve.

Today’s reality is that the financial services industry is experiencing rapid changes in technology, competition, and customer expectations. A company’s survival is dependent on how well it anticipates and navigates these changes.

The strategic plan needs to acknowledge the drivers of success in today’s world, and then define an optimal future direction from an array of different alternatives. It then becomes a critical roadmap that defines how the company will remain competitive. It should paint a compelling vision of the future that employees, board members, and other stakeholders can understand and will both motivate and inspire them.

The plan must be drafted based on a clear and comprehensive understanding of industry trends and best practices, along with an objective assessment of the company’s current limitations and development needs. It should then outline the goals, methods, and initiatives that the company must pursue in order to achieve the vision.

Scorecard

The following scorecard provides an outline of topics within major categories that company executive management and Boards of Directors should consider as they develop or update a strategic plan. It can be used as a tool for participants to use to evaluate the current plan and identify areas that might need further development, or as a discussion guide during the planning process. If you would like a PDF version of just the questions, please click here.

If you do choose to use it as an assessment tool, you might try assigning a value of 0 to 3 for each topic based on the following criteria:

0 – Topic not addressed
1 – Mentioned in passing with no elaboration
2 – Good basic description/overview
3 – Quality, in-depth discussion

Comparing the results for each question could highlight topics for additional research and discussion.

Business model

Almost all banks and credit unions have their roots in the traditional model of delivering products and services through branch offices. But banking has changed, and other business models have emerged that can complement or replace the old physical distribution model.

A strategic plan may focus on a specific business model, but it is useful to include a discussion of other options to indicate why they were either chosen or ruled out. And since the world is constantly changing, decisions that were made in the past should be revisited periodically. The plan should include a review of the various alternatives, with a discussion of their relative costs, effectiveness, and ability to scale.

Discussion topics:

1. Traditional branch banking – the expansion into different geographic areas by opening new physical offices.
2. Digital banking – delivery of banking services through mobile and online applications.
3. Banking as a Service (BaaS) – making the bank’s charter and banking services available to non-bank companies to offer services to their own customers without having to obtain a banking license.
4. Platform banking – a model where the bank creates a digital platform that can integrate with third-party service providers so that it may offer additional features and functionality to its customers.
5. Embedded banking – involves integrating elements of the bank’s product or service features into the digital platforms of non-financial institutions.
6. Niche banking – a focus on serving a specific segment of the market, catering to the unique needs and preferences of that target group.
7. Green banking – supports projects and initiatives that have a positive impact on the environment, minimize the negative environmental footprint of banking operations, and encourage businesses and customers to adopt sustainable practices.
8. Crypto-banking – the integration of cryptocurrencies and blockchain technology into traditional banking services or the development of new banking platforms specifically designed to support cryptocurrencies and other digital assets.
9. Financial advisory services – offering wealth management, investment advisory, and financial planning services to help customers make informed financial decisions and expand their investment options.

Competition

Competition for customers is intense and comes from a variety of local, regional, national, and international institutions. Understanding the markets and strategies employed by competing institutions can help identify future strategies that your company should consider to help differentiate services, create unique value propositions, and ultimately strengthen your competitive position in the market.

Discussion topics:

10. Identify and analyze key competitors, both traditional banks and non-traditional financial service providers.
11. Demonstrate an understanding of competitor strengths and weaknesses, products and services, pricing, market share, customer experience, and growth strategy.
12. Compare competitors in terms of digital offerings, user experience, customer service, or pricing to attract new business

Bank systems and technology

Having modern technology systems is essential for a financial institution to remain competitive in the current fast-paced, increasingly digital banking environment. Yet many companies continue to operate with core systems designed 20 or more years ago, along with other key processing systems that may be equally antiquated. The plan should review the adequacy and limitations of current technology systems in key areas

Discussion topics:

13. The adequacy of the core processing system in supporting the new and evolving technologies that will be needed to support the company’s longer-term growth strategy.
14. The quality and competitiveness of digital banking systems, including their ability to offer a seamless, convenient, intuitive, mobile-first banking experience to customers and support the integration of new features from third-party application developers.
15. The ability of account opening systems should support a simple, fast, seamless experience for customers to open new accounts through mobile and online channels while supporting robust identity verification and fraud detection technologies.
16. The ability of digital loan application and approval systems to expedite the entire loan process from initial application, through underwriting, approval, and boarding on the core system.
17. The effectiveness of cybersecurity systems in protecting the bank’s and customers’ data and ensuring the safe and secure functioning of all other systems.
18. The ability of advanced payment systems to process various forms of payments quickly and securely, including mobile payments, wire transfers, and cryptocurrency transactions.

Technology trends

Keeping abreast of current technology trends is crucial for banks to stay competitive, maintain operational efficiency, and meet changing customer expectations. In addition to discussing current trends, it should also highlight a process through which the company maintains an awareness of emerging trends and communications that information to key decision-makers.

Discussion topics:

19. Highlight key technology trends such as AI/machine learning/chatbots, Robotic Process Automation (RPA), cloud computing, open banking, blockchain/cryptocurrencies, and real-time payments
20. Identify individuals or teams assigned the responsibilities of identifying, exploring, and regularly communicating potential opportunities with emerging technologies.
21. Encourage senior managers, executives, and Board members to attend industry events and conferences where they can be exposed to the latest trends and innovative practices in the industry.
22. Create a Research and Development (R&D) budget for exploring and implementing innovative new solutions and technologies

Partnerships

In today’s rapidly evolving financial landscape, partnerships can play a crucial role in helping financial institutions remain competitive. A company’s strategy should discuss the objectives and types of partnerships it will pursue and the governance model that will be used to ensure regulatory compliance.

Discussion topics:

23. Fintech partnerships can be used to enhance their digital offerings, improve customer experiences, and create new revenue streams.
24. Big Tech firms such as Google, Amazon, or Microsoft can help the company enhance its digital infrastructure, develop more innovative services, and reach a wider audience.
25. Regulatory technology (Regtech) companies offering solutions that can streamline compliance, reduce risk, and improve operational efficiency.
26. Data analytics firms can support strategies to leverage big data and advanced analytics to gain customer insights, improve decision-making, and create more personalized customer experiences.
27. Other potential partnerships with universities, research institutions, or industry organizations such as the Alloy Labs Alliance can support research and development initiatives, access to talent, and continuous learning for employees

Whatever type of partnership the company may pursue, it’s important to define internal responsibilities and a structured process to evaluate potential partners based on strategic fit, potential benefits, risks, and alignment with the institution’s vision and values.  This is particularly true given evolving regulations in this area.

Data

The importance of the collection and effective use of data cannot be overstated. Data is essential to drive management decision-making, manage business risks, and understand and respond to customer needs. The details of a company’s data strategy may be contained in a separate more detailed, technical document. However, a high-level discussion of the key components of an effective data strategy would include:

Discussion topics:

28. The identification of the specific business goals and objectives that data analytics will help to achieve.
29. The internal resources and technologies, both current and planned, that are devoted to the capture, storage, management, analysis, and reporting of data to support the company’s goals.
30. A brief overview of the sources from which data are currently being obtained, along with any significant gaps that need to be filled.
31. Identification of the parties responsible for data governance, including data management, change management, data quality, and data privacy.

Marketing

Marketing is a critical function for financial institutions as it directly influences customer acquisition, retention, and satisfaction. It also helps to differentiate the bank from its competition, promote its products and services, and enhance its brand image – all of which contribute to its overall competitiveness.

Discussion topics:

32. Highlight the current role of the Marketing department, along with any changes needed to achieve future business objectives
33. Discuss the adequacy of resources being allocated to the marketing function to attract employees with strong skills in areas such as data analysis, digital marketing, content creation, and strategic planning.
34. In addition to traditional marketing tools, provide an overview of key digital marketing capabilities in areas such as social media marketing, email marketing, search engine optimization (SEO), content marketing, and online advertising
35. Describe the ability of the Marketing area to collect, analyze, and utilize data effectively to inform marketing strategies, including customer data, market trends, competitive analysis, and campaign performance metrics
36. Describe the metrics in place to evaluate the effectiveness of marketing initiatives in driving customer acquisition, retention, and satisfaction.

Human resources

Identifying the technical and other skills that employees will need for a company to remain competitive in the future is a key part of strategic planning. And given the intense competition for employees with strong skills requires a well-considered approach to recruitment, retention, and retraining.

Discussion topics:

37. The importance of workforce planning in order to understand the company’s current and future talent needs in order to keep pace with technological trends and their potential impact on business operations.
38. Outline a recruitment strategy that clearly defines the company’s value proposition for employees in terms of salaries; benefits, work-life balance, opportunities for learning and development, and a positive work culture.
39. Discuss opportunities for continuous learning and skill development through training/re-training programs or tuition reimbursement for employees seeking to improve their skills.
40. Highlight employee retention strategies, including creating clear career progression paths, recognizing and rewarding performance, offering flexible work arrangements, and ensuring a positive and inclusive work culture.
41. Address succession planning to prepare for the future by identifying potential leaders within the company and providing them with the training and experiences they need to step into key roles.
42. Discuss how the company promotes a diverse workforce that encourages innovation and adaptability and also expands the pool of potential employees for recruitment purposes.

Customers

It is essential that companies understand the characteristics and needs of a company’s current customer base, as well as identify and understand potential new customer segments for market expansion and growth.

Discussion topics:

43. How the company’s current customer base is segmented within business lines by various factors such as demographics, behavioral patterns, purchase history, psychographics, and profitability.
44. Highlight the various needs of current customer segments, and the products, services, expert advice, and other outreach that the company offers to address those needs.
45. The process by which insights into evolving customer needs drives internal product and service development.
46. Risks posed by any lack of diversification of the customer base by demographics, industry, product usage, geography, or other factors.
47. How customer surveys, feedback forms, or direct interviews are used to gather insights about customer satisfaction, needs, and expectations.
48. Discuss the challenge posed by the ongoing fragmentation of relationships, with customers maintaining accounts with multiple financial institutions.

Organizational culture

A company’s organizational culture plays a crucial role in its success, especially in today’s fast-paced, competitive, and technologically advanced business environment. Given its importance, does the plan attempt to objectively assess essential aspects of a successful culture.

Discussion topics:

49. The ability to quickly adapt to changing market conditions, customer expectations, and technological advancements. This includes being open to change, encouraging innovation, and being able to make quick, informed decisions.
50. A focus on the customer, where meeting their needs and continually striving to improve their experience are top priorities.
51. Encourages teamwork, cross-departmental collaboration, and open communication to help drive innovation and problem-solving.
52. An emphasis on continuous learning and development by offering training and development opportunities, promoting a culture of curiosity, and encouraging employees to take on new challenges.
53. Creating a diverse and inclusive culture that can lead to more innovative ideas, better decision-making, and a more comprehensive understanding of diverse customer bases.
54.  Fostering a culture of accountability, where employees take responsibility for their actions and decisions, combined with transparency from leadership to build trust and engagement among employees.
55.  A system of recognizing and rewarding employees for their contributions to improve motivation, morale, and retention.
56.  A culture that encourages resilience that can help employees navigate challenges and learn from inevitable setbacks and failures.
57.  Creating a strong culture of ethics and integrity is vital, with clear expectations for ethical behavior and decision-making.
58.  Embracing digital transformation and the willingness to use technology to improve processes and outcomes to help keep pace with significant changes in the business landscape and position the company for future success.

Other items

Note that I haven’t included any scorecard items related to the standard strategic plan content such as mission, vision, and core values statements. These can provide context for strategic planning by identifying the company’s purpose and guiding principles. Unfortunately, they are often vague or generic and may not tie to actual behaviors and strategies within the company.

Strategic plans usually include a self-assessment section that summarizes perceptions of the company’s Strengths, Weaknesses, Opportunities, and Threats (SWOT). This exercise can lead to valuable discussions and can help define a baseline for where the company is today. But this type of analysis also tends to be highly subjective, fails to prioritize issues, is limited by the perspectives of the participants, and lacks the depth needed to evaluate complex strategic issues.

Related to this is the issue of identifying distinctive competencies by asking the question “What does the company do particularly well?”  A candid answer to that for many companies may be “nothing”. It’s important to set egos aside and be frank here. Rather than try to force an answer to the question, it may be better to reframe it as “What would we like to do well?” This will allow you to create a strategy, grounded in reality, to build a distinctive competence in an area where you can compete effectively.

The traditional plan may also contain sections that discuss the company’s history, its organizational structure, and the current economic environment. These are primarily informational sections, and if included are best relegated to appendices so as not to distract from the communication of the more important information related to the company’s strategy.

Finally, most plans end with a lengthy list of aspirational items or goals that get labeled “strategic initiatives”. It is very common for these initiatives to suffer from:

• Failure to directly align with the company’s overarching strategy.
• Lack of clarity and specificity by being stated in vague terms without clear and measurable objectives.
• Being overly ambitious and not feasible given the company’s resources or market conditions.
• Lack of adequate financial or human resources, or management attention, to be successful.
• Having too many initiatives which can spread resources too thin and dilute focus.
• Having unrealistic timeframes for completion, or projects that are anticipated to start so far in the future that it’s almost guaranteed that they will be superseded by other priorities.

To address these potential failings, it’s important to be realistic and specific when developing strategic initiatives, align them closely with the company’s broader strategic goals, adequately resource them, and manage change effectively. Prioritization, clear communication, and periodic review of the initiatives are also crucial for their successful implementation.

Conclusion

As you rate your strategy on the factors listed above, also be on the alert for one or more of the four hallmarks of a bad strategy:

• Fluff – a form of gibberish masquerading as strategic concepts or arguments. It uses inflated words and esoteric concepts to create the illusion of high-level thinking.
• Failure to face the challenge — bad strategy fails to recognize or define the challenge. When you cannot define the challenge, you cannot evaluate a strategy or improve it.
• Mistaking goals for strategy. Many bad strategies are just statements of desire rather than plans for overcoming obstacles.
• Bad strategic objectives. A strategic objective is set by a leader as a means to an end. They are bad when they fail to address critical issues or are impracticable.

For anyone interested in developing a better understanding of the poor state of strategic planning at most companies, I recommend the book “Good Strategy Bad Strategy: The Difference and Why it Matters” by Richard Rumelt.

One final issue to be mindful of is that the people charged with the responsibility of creating a strategic plan are usually determined by their position within the company, not by their ability to think strategically. Having an executive management title or being on the Board of Directors does not automatically mean that the individual has the unique combination of analytical skills, foresight, creativity, awareness of current trends, and interpersonal skills needed to engage in a meaningful strategic discussion.

Oftentimes, an outside perspective can be beneficial. External consultants can provide a fresh perspective, free from internal biases, and can also bring experience and expertise in strategic planning.

Happy Planning!