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Tired of Implementation Overload?  3 Tips for Prevention

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If you’re tired of feeling scattered and stressed about implementation, try the following tips:

1. Break the cycle of everyone scattering to get back to “work” after strategic planning

As you are scheduling your strategic planning process, simultaneously schedule solid blocks of time for key stakeholders to get together and think strategically about implementation.

One of the most effective approaches is to jump-start strategic implementation by having teams dedicate a couple of days together to hammer out the priorities and necessary resources most likely to drive the success of the strategic plan.  Keep the momentum going by regularly scheduling smaller blocks of time for the team to dig into strategic progress and, when necessary, agree on “recalculating the implementation route.”

2. Don’t immediately turn implementation over to the project team

Implementation is significantly better if the senior team follows the disciplined practice of Project Portfolio Management.  This works because the same leaders who decide and drive strategy are also in the best position to understand the overall picture of priorities for human and financial resources.  In order to effectively steer implementation of the strategy from the top, this group doesn’t need to be in the details, but they do need to articulate clear, concise objectives.

3. Stay focused on the big picture

The Project Portfolio Management process keeps the senior team informed without being mired in the minutiae.  In order to trigger the right conversations for effective decision-making, the senior team needs ready access to a 10,000 foot view of what is happening with strategic implementation as it relates to the strategic plan.

These are just a few tips to drive successful implementation of strategy.  If you are interested in learning more, please read our recently published c. note, Disciplined Strategic Implementation is a Competitive Advantage for 6 organizational habits you can develop within your organization to create this competitive advantage.

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A Potentially Flat Rate Environment May Not Translate to a Flat Cost of Funds

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Shortly after the Fed met a few weeks back, some credit unions likely breathed a sigh of relief.  Deposit pressures were building and the cost of funds seemed positioned for a sharp increase.  But with almost perfect timing, in came the Fed indicating no further rate increases in 2019.  While many have changed their market rate expectations, it is important not to go on cruise control.  Regardless of what happens to market interest rates, the cost of funds may still be on the rise.

The primary contributor for a potential rise in the cost of funds is a continuation of recent liquidity challenges.  Sure, market interest rates play a key role in the cost of funds, but liquidity, or lack thereof, also has a significant impact.  As shown in the graph below, loan growth has vastly outpaced share growth in recent years.  This trend has caused some credit unions to dig deep into the liquidity toolbox for solutions.

Based on the types of what-if scenarios requested from credit unions, member certificate promotions continue to be a popular liquidity tool to help replenish liquidity.  While member certificates can be a quick alternative, it can come at a cost.  Liquidity challenges have pushed certificate rates higher and in many cases, certificate rates are higher than Treasury rates.

Source:  CD Rates for May 2019, Bank Rate, 05/01/19

 

While there are plenty of credit unions feeling good about their deposit rates and overall liquidity position, remember that high deposit rates from other institutions could cause members to move.

It is not just liquidity and high cost liquidity solutions applying pressure to the cost of funds.  Credit unions have also recently been performing what-if scenarios increasing money market rates.  Why would money market rates increase if market interest rates are not increasing?  Part of the reason could be described as “catch-up” from being able to lag the increase in market interest rates.  As short-term rates increased from essentially 0% to 2% the past few years, many credit unions were able to hold non-maturity deposit rates relatively flat over that period.  As market rates potentially settle in at 2%, some catch-up may follow.

Potential increases in money market rates and ongoing liquidity pressures are just a few considerations currently impacting the cost of funds.  Changes in technology, member behavior, and the overall economy will likely introduce a new host of factors in the future.  While uncertainty remains, the key is in helping decision-makers understand that a potentially flat rate environment may not translate into a flat cost of funds.

We are seeing strategically-minded ALCOs and management teams view this as an opportunity to reassess their strategic positioning with respect to meeting short and intermediate funding needs.