In this post I will describe the first steps and approaches of (small to medium size) German retail banks when organizing their strategic planning process. Some of these aspects are valid for all types of small to medium size companies; at least they offer the option to compare your strategic planning process with the banks’ processes. In general retail banks undertake two different steps in order to analyse the external environment and to assess organisational capabilities.
- Regular benchmarking activities during the business year. In case of major performance dropping the management will start certain measures (e.g. a new planning process) in order to improve the organisational situation.
- Annual strategy conference. Due to the organisational restrictions (e.g. in terms of human capital; SME do not run a separate department for business development or strategic planning) the management has to pool strategic planning capacities on an annual strategy conference.
Benchmarking also serves as a strategy assessment tool for small retail banks. Hence it will be discussed in the near future in another post. (Hence I would recommend to visit Eddielogic again in the next couple of weeks.)
Most banks focus their analysis activities on the preparation and execution of the annual strategy conference. This conference is THE strategic planning summit.
Structure of the strategy conference. This conference will often take place in the form of a 2- or 3 day workshop were the board of directors, some selected senior managers and a moderator discuss the past development as well as those measures which are required to achieve the desired corporate future. These discussions also include a results review of the “old” strategy.
In general the selection of senior managers considers the importance of their business units for the entire organisation. Senior managers might also be chosen for the reason of their expected contributions to the workshop or their skills and knowledge related to strategic management. Of course, selection of senior managers can be an instrument of negotiation processes, too. You have to have in mind that strategic planning is also a discussion and negotiation about budgets, projects and organizational resources. However, since the number of senior managers within this group of banks can consist of up to 15 managers it can be argued that a selection is appropriate in order to ensure efficient discussions during the workshop.
The role of the moderator is often administered by an external person; in most cases by an external consultant. In particular larger banks have their regular consultants; in that cases these consultants moderate the conference. Since the consultant is familiar with the formal as well as the informal structures of the bank (this can be a crucial feature in some planning phases) he might be able to balance different approaches (e.g. discussion styles or negotiation power) during the conference. In some cases consultants did not only moderate, they also stressed weak points. To ensure an efficient discussion as well as to moderate difficult issues this approach has been proved and tested within different banks.
The preparation of the strategy conference is very important for the conference success. In most cases all business unit managers of the bank are called to explain their current status compared to the desired strategic direction, to describe gaps and to develop ideas for future corporate development. The quality and the scope of this preparation heavy depend on existing skills of the organisers. In some cases “standard tools” like SWOT and Porters 5 Forces are used to analyse the situation and to identify gaps. Collection hard data and summarizing soft information is crucial at this stage. For the latter one I have to recommend to allow extra time in order to identify the real core of personal opinions.