Role of Board of Directors in Strategic Planning

Directors of credit unions have the responsibility for setting the direction of the credit union and exercising overall control. As such, they are ultimately responsible for strategic planning and any other activities that contribute towards the overall financial health of the organization.

A strategic plan is an effective way to assess a credit union and identify its strengths and any weaknesses that exist. Like other organizations, credit unions are not immune to the state of the economy, and their wellbeing is dependent upon economic growth, the impact this has on membership, their earnings, and their net worth.

The board of directors plays a crucial role in continually assessing the state of the credit union and looking at ways of strengthening its position and taking prompt action to counter any threats. The strategic planning process affords them a broad overview of their options. One strategy that is proving to be effective is that of merging with other credit unions.  Information from the National Credit Union Administration (NCUA) shows that voluntary credit union mergers often have positive outcomes. The effectiveness of a strategic plan is greatly influenced by how it is managed and the participation of the board of directors in the process.

The Purpose of a Strategic Plan

The purpose of a strategic plan is to develop a comprehensive assessment of the organization, and, in particular, to identify the business opportunities that exist, the challenges it faces, and the credit union’s strengths and weaknesses.

It is best performed as a formal exercise that goes through several distinct phases, usually over a period of time. This gives directors and role players the time and opportunity to thoroughly assess the business, arrive at a clear understanding of the credit union as it currently stands, and to develop an action plan to take it forward.

The Strategic Planning Team

Participation by the board of directors is a prerequisite. Apart from their fiduciary responsibilities, the NCUA regulations specify that the board of directors is responsible for the general direction and control of a credit union. Among their responsibilities is the need to evaluate the full array of strategic options that provide the best options for the members, including the possibility of a merger.

The Strategic Planning Process

Much of the strategic planning process involves structured brain-storming activities as the team dissects the business and carefully identifies its critical elements. Directors play a key role in this process because of their broad knowledge and oversight. The quality and outcome of the strategic planning process is directly related to the level of input from key personnel.

Directors may also consider bringing in outside expertise to supplement decision making processes, especially if complex solutions such as mergers are being considered.

Insights Arising From the Strategic Planning Process

A strategic plan provides directors with a comprehensive view of the current status of the credit union, where it is heading, what opportunities exist, and identifies changes that may be required to meet business objectives.

The plan will show if the credit union is in good shape and, if not, what its weaknesses are. Action plans developed as part of the strategic planning process give the board of directors new direction to address these critical issues.

For example, it would reveal if there was a need to attract new members or to improve financial returns, along with specific action plans to achieve these goals. Alternatively, the process may show a credit union merger would strengthen the organization and widen its reach. No matter the outcome, strategic planning helps focus attention on what needs to be done to improve credit union performance.