It’s a classic story from the Good Book. There are two builders constructing houses. One builder sets his home’s foundation on sand; the other builder places his home on a foundation of rock. When the flood arrives, it sweeps away the sand foundation and destroys the house. However, the home with the stone foundation remains standing.
Why tell this story here? Because it’s just as relevant a budgetary lesson as it is a spiritual one. And you never know, sometimes the two areas overlap these days (one credit union CEO told me recently he was resorting to prayer as budget season approached).
But in all seriousness, you need to examine the foundation you set with this year’s budget. There’s a tendency to look at budgeting as a yearly affair, but mistakes made in one year’s budget can have multi-year consequences.
Your budget as a long-term play
How you budget directs your future. Sounds dramatic, but it’s true.
Investing in a new branch or not. Investing in a core conversion or not. Increasing marketing and training or decreasing marketing and training. Your decisions push you forward, send you back, or keep you still.
McKinsey & Company released a 2023 study showing the far-reaching effects of short-term budgets. Companies that resiliently invested during the 2008 downturn saw greater growth ten years after than companies that didn’t. In another example, United Airlines released a major marketing campaign amid the pandemic . . . when very little travel occurred. The following two years saw an increase in United’s passenger numbers and miles flown.
Don’t let this year’s budget sink you for several years. Think several years ahead now.
Here’s the difference between what a sand or rock foundation looks like here:
- Sand: You only look a year ahead, focusing on short-term cuts rather than long-term gains. You’re prudent . . . maybe too prudent. Investments always look like costs, and you sacrifice potential future growth.
- Rock: You’re strategically minded and try to gaze several years into the future. You still care about the market of tomorrow . . . but you also care about the market of the tomorrow after tomorrow. This doesn’t mean spending unwisely; it means investing intentionally.
Budgetary castaways
Sadly, there are have-nots in the budgeting world. Poor souls tossed overboard whenever leaders see cloudy weather or an iceberg ahead. Most often, these budgetary castaways are in a few areas:
- Branding
- Marketing
- Training
The problem is, these key areas are necessary to long-term growth. They seem expendable during hard times, but actually expending them makes hard times even harder.
Refusing to update your brand when it’s needed will put your organizational identity years behind the competition. Dismantling your marketing means no one will hear about your products and services at a time when they potentially most need those solutions. Foregoing training damages your service and leadership capabilities down the road.
Don’t spend irresponsibly or generate bloated, excessive budgets. But don’t chop these areas to pieces either. Keep the faucet running, so to speak, even if you have to tweak the cash flow up or down a little.
Here’s the difference between what a sand or rock foundation looks like here:
- Sand: It’s hard for you to see ROI from branding, marketing, or training. So, you slash these areas to the bone. This hinders your progress in the long-run, and it’s challenging to reestablish these programs later.
- Rock: You see the importance of branding, marketing, and training. You can’t give them massive budgets, but you make sure you continue performing these important functions. This creates future growth potential and flexibility to expand these areas as you scale.
There’s always a flood
The truth is: it’s not a matter of if the flood will hit credit unions . . . it’s a matter of when. Economic volatility, powerful competitors, regulatory upheaval—future risks abound. That’s why you need to look at every year’s budget as a foundation for what’s to come.
Ask yourself: when the flood hits, will you stand strong . . . or be swept away?
