As summer begins, bank leaders are already looking ahead and starting the important conversations that will shape next year’s strategic plan. For community banks, strategic planning is no longer just about setting goals. It’s about identifying the priorities that will help the institution remain relevant, competitive, and financially strong in a rapidly changing environment. The most effective plans address the issues that are both urgent and foundational. Leadership continuity, deposit growth, fee income, technology, cybersecurity, enterprise risk management, and long-term growth. These issues make up the top five strategic planning objectives we see most community bank’s strategic plans.
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These issues then become a strategic objective in the strategic plan, so they get done. Otherwise, they are only conversations that keep getting pushed into the future. If you are developing your next strategic plan this fall, consider these top five objectives and ideas to accomplish them.
Top Five Strategic Planning Objectives
Succession Planning – the leadership is getting older!
It is not a secret that the leadership of community banks is getting older. Somehow, the young team that started working together years ago are now thinking of retirement. So where do you start?
There are two critical components to succession planning:
First, you need to write down your succession planning process. The process should include how you identify employees who are retiring and their potential successors. Describe how you identify emerging leaders and high potential/high performing employees. Then describe how you communicate to the potential successors, so they know they have a future in the company. The next step is to create a Personal Development Plan that includes training on the knowledge gaps. This training must also include any “soft skill” gaps identified and mentoring opportunities.
Second, you develop a succession plan for each leadership or key position at the bank. The succession plan should include the tasks and functions that the successor will take over eventually. Each task or function must have a timeline or date when it will be implemented. The plan should include who is involved in the transition of responsibilities and how it will be done. Track when each activity is completed and communicate with leadership (or the Board for the CEO transition) as appropriate.
It is critical for all community banks to always have a formal succession planning process and a plan. This is a dynamic document that changes as people retire and/or if the potential successors leave before transitioning to their new position. This is an HR function, and unfortunately, many community banks don’t possess the knowledge to do it. Also, even if HR has the knowledge, they cannot do it on their own. This is a collaborative effort between HR and the management team.
Implement Treasury Management to increase business core deposits and fee income.
It is rare to hear a community bank say they don’t need deposits. If you’re in that position, congratulations. You are the exception. Most community banks are seeking low-cost, business core deposits to combat the Net Interest Margin (NIM) compression. The other objective banks want to accomplish is to bring new fee income. Most banks need new non-interest income, again to fight the decreasing NIM battle. The answer?
Multiple strategies exist. But community banks that want to increase deposits and fee income desire to implement or formalize their Treasury Management department. How do you get started?
If you’re starting from scratch with few TM services offered and no staff to sell or support, then you need to establish the infrastructure which includes:
Staffing:
You need at least three people. One to sell TM services, one to implement and support the services, and one to open accounts. Initially, these can be a “hat” for someone’s job. However, once you start selling services, it takes dedicated staff and technology to service your customers.
Technology:
You must establish a strong systems infrastructure. These include your core system, online banking platform, and account analysis system. These three systems must integrate well amongst themselves and also with other TM services providers.
Processes:
Once the infrastructure and the staff are ready, then you need to establish your sales and onboarding processes. You also need to have a process for ongoing support and maintenance, to retain your TM customers.
Training:
Lastly, once everything is set up and ready to go, you must train your entire staff. The branches need to learn about TM to refer businesses to the Treasury Management Officer (sales). The TMOs must understand all the TM services to sell and cross-sell them. The TM Support team must learn to implement and support all the services. The TM Operations team needs to understand how the TM services operate to solve any issues. Business Bankers (lenders) are the main referral source to TMOs, so they need to learn to identify when their loan customers need TM services.
Most community banks have some of these components and just need to formalize the department. In that case, you need to ensure you train everyone involved in the sales, onboarding, and support processes. The team needs to know “who does what” in the entire customer journey – from prospecting to onboarding to ongoing support and maintenance.
Stay on top of technology – both for innovation and to enhance cybersecurity mitigation.
When we conduct an ERM Risk Assessment, undoubtedly, cybersecurity is always one of the top three risks for most community banks. Regardless of how strong your IT Security and Cybersecurity Programs are, you cannot rest. Banks must continually invest in technology to combat cyber incidents and fraud that can originate from third-party providers.
Currently, banks are brainstorming on how to integrate AI into all areas of operations in a “safe and sound” manner. Employees already started using it, so institutions must catch up and establish their AI policy immediately. The key is to tell employees what is not allowed and the consequences for violating the policy. Then add a “dynamic” section to add allowed tasks as your bank learns how to use AI safely for various functions.
Additionally, community banks must stay on top of technology to innovate and gain efficiency. Besides AI integration, another reason banks are including technology in their plans is to maximize their current technologies across the board. There are a lot of software and core capabilities that banks are paying for and are not using. Therefore, maximizing current technology is a great strategic objective for banks to pursue.
Formalize Enterprise Risk Management – regardless of asset size.
Often community banks fear that implementing or formalizing their ERM Program will attract the examiners’ attention. And it’s on the contrary. Having a formal ERM Program regardless of your bank’s asset size is part of the “M” in CAMELs rating. The examiners want to ensure that the Board and leadership understand their risks (in all risk categories). They want to make sure you know your top risks and are mitigating and monitoring those risks. In short, you know your bank’s top risks and your leadership is managing them all.
There are other benefits to having your ERM Program formalized too. By forming your ERM Committee, the silos dissolve. Everyone learns about the risks in each other’s areas. And they understand that the bank can fail if any area is at high risk without the proper mitigating strategies. Therefore, it builds the team. You also discover inefficiencies across the bank, so it gives you the opportunity to improve all around.
You formalize your ERM Program when you have these key components in place:
ERM Policy, internal ERM Committee and Charter, Board Risk Committee and Charter, designated Risk Officer, Board Appetite & Tolerance Statement, and ERM Risk Assessment. You are already conducting hundreds of other risk assessments. But one you may be missing is the high-level ERM Risk Assessment where you assess each risk category.
Grow – assets, loans, deposits, market share, geographically – to survive.
Lastly, community banks are on a mission to grow. Regardless of how old your bank is, you need to grow. Your bank must compete in bigger markets and with non-banks/Fintechs that provide the same services you do without regulatory burdens. Customers, even in rural areas now request more technology capabilities through their online banking. Small businesses want more accessibility to their accounts and faster payments.
The reason why “growing” as an objective is important is because if you don’t have it as a goal, your bank will shrink. Banks are now exposed to losing depositors and loan customers, at any time. Therefore, one of the strategies should simply be to “retain customers at all costs.”
The bank’s executive management together with the Board Directors must lead the effort and provide strategic leadership to the institution. As you start your strategic planning process, consider these top five strategic planning objectives. Identify strategies to accomplish these important objectives and include the entire staff.
Strategic planning is more than an annual exercise. It’s the opportunity to turn important conversations into clear priorities, measurable action steps, and accountability across the organization. Whether your bank is focused on succession planning, treasury management, technology, enterprise risk management, or growth, the key is to be intentional and proactive. Community banks that address these top five strategic planning objectives now will be better positioned for the future. They’ll be ready to serve their customers, support their employees, and strengthen their risk management practices. Additionally, they will remain competitive in the current financial services environment.
