The Changing State of Bank Board Strategic Planning

By Debra Cope

No matter how a bank board’s strategic planning role unfolds, the purpose of director involvement is well defined from a regulatory standpoint. The board is responsible for reviewing and approving a written strategic plan that is consistent with the bank’s risk appetite, capital plan and liquidity requirements.

This article originally appeared in the January/February 2020 issue of ABA Banking Journal Directors Briefing. Subscribe now.
Regulators expect that plans will answer: Where are we now? Where do we want to be? How do we get there? And how do we gauge our progress?

How boards attain these goals varies from bank to bank. Some boards have dedicated strategic planning committees; others review strategic plans at the full board level. Some are involved throughout the development stage, participating in discussions and retreats. Others review the plan near the end of the process.

Perhaps the most critical thing is that the strategic plan should be “a living document,” says Jeff Dick, CEO of MainStreet Bank, a $1.2 billion-asset bank in Fairfax, Virginia. “It has to be dynamic, and it’s a good practice to have a mid-year check in.”

Five-year strategic plans were once the norm, but that is changing. At a time of rapid technological change, “it’s hard to envision a five-year window,” says Onker Basu, a senior director with Cornerstone Advisors. “We focus on a three-year planning cycle with the proviso that you look at least annually at what might change. Events that might occur and force you to course-correct could include an external shock or a merger.”

To get a handle on what to expect in strategic planning in 2020, I spoke to a bank CEO, two consultants who work extensively in planning, one of whom also serves as a bank director. Their comments are excerpted below.

Anita Gentle Newcomb
President, A.G. Newcomb, Columbia, Maryland
Director, Luther Burbank Savings, Santa Rosa, California

I can’t imagine a bank thriving without a strategic plan. For many banks, this is a pivotal time in their history, with so much disruption occurring. Any strategic blind spots will loom large as time goes on and as they fall further behind their competitors. The retail industry is rife with examples of those who were blinded by outdated approaches. This environment requires being bold by stepping out of your comfort zone, innovating, revaluating and questioning old approaches.

The most identified strategic priorities of late are bank-wide digital strategy, growth of operating revenue and the customer experience. In the area of revenues, smart loan growth, deposit growth strategies, and pricing discipline and the growth of noninterest income are very important. And understanding what customers desire in digital and human interactions, identifying gaps and rectifying those that cause the greatest tension or pain are priorities.

Jeff Dick
CEO, MainStreet Bank, Fairfax, Virginia

We have moved to a three-year plan, which we review in depth with the board at least every two years. We monitor our progress steadily because if you’re not doing well with your short-term plan, how are you going to achieve your longer term goals?

We’ll hold our strategic planning board retreat this February. Our plan is very much created by management and presented to the board. We look to the board to serve as a credible challenge to management. Directors should press management about whether their plans and expectations are realistic. I think we’ll hear questions like: What happens if we don’t achieve the plan? Do you have the resources you need? How can we help?

The strategic planning should consider whether the value proposition is sufficient for your investors. Some other topics to think about include the status of your core processing relationship, capital markets access and asset quality.

Onker Basu
Senior Director, Cornerstone Advisors, Scottsdale, Arizona

It is very important to maintain clarity about the board role versus senior management role in strategic planning. Boards don’t create strategic plans, but they do help to shape them. The board should offer opinions and insights, but allow management to create and ultimately own the plan. A line is crossed when the board gets into discussions of “how-to” as opposed to “what.”

The board or its strategic planning committee are accountable and responsible for making sure there is actually a strategic planning process. If they choose to hire outside help, it’s appropriate for them to be involved in that selection if they want to be.

Questions boards should ask include: What is management’s plan for talent management? What about digital transformation? Should growth be organic or will it be accomplished through mergers and acquisitions? What is the strategy for risk management?

Strategic Planning Questions for Discussion in Executive Session

Before the board adjourns a strategic planning session, it should consider meeting in executive session, says MainStreet Bank CEO Jeff Dick. Questions such as these can thus be raised in a non-threatening way without management’s presence.

• Did everyone understand items discussed and conclusions reached?
• Does anyone have questions or comments to bring forth anonymously?
• Do the results seem logical, achievable and relevant, given bank’s markets?
• Is there additional information needed before voting?
• Do you have any outstanding concerns?

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About Author

Debra Cope

Debra Cope is editor-in-chief of ABA Banking Journal Directors Briefing.