Rachel Croft says over- or under-confidence and not being decision-ready are just some of the things that get in the way
As a favour to an old friend on the board, I was set a challenge by a large pension scheme recently: ‘What are the potential pitfalls that you think could adversely impact our decision-making?' "Yikes" I thought, "How do I answer that question in a meaningful way and without risk of appearing to criticise?"
Having drawn on the 300 years or so of combined experience of my trustee colleagues, here are just a few highlights (or lowlights) from the list that we came up with. The first step in avoiding these pitfalls is to spot them, so in the spirit of better governance, I call out the following:
Pitfall 1 - Over- or under-confidence
"I've been a trustee for 20 years - why do I need training?" An unwillingness to continue to develop in an increasingly complex environment can prevent trustee boards from understanding the full range of strategies and risk management solutions available to them.
Sometimes the reverse behaviour comes into play: "I've only been on the board for a short time, what could I possibly add?" Being willing to ask questions without (or perhaps despite) the fear of revealing less knowledge than others, can provide healthy challenge to a board.
Pitfall 2 - Not seeing the wood for the trees
It's all too easy to get bogged down in the detail of long meeting agendas and therefore miss or not allocate enough time for the strategic issues.
Pitfall 3 - Not being ‘decision-ready'
Many trustee boards meet only quarterly, which, notwithstanding delegation to one or more committees, means there are perhaps only a handful of opportunities a year to make the major decisions required to drive the scheme forward. It's unfortunate then to see decisions being deferred because, for example, advice is not adequately scoped, or papers are circulated late or not fully understood.
Pitfall 4 - The fear of uncertainty
Sometimes, faced with a "toughie", it seems easier to stick with what's more comfortable, continuing with what was done before, following what other schemes do or simply accepting advice. While many of the issues that trustees grapple with are common, each scheme has its own unique set of circumstances and these change. Once understanding has been achieved and an objective debate concluded, fear should not be allowed to prevent strong decision-making.
Pitfall 5 - Rocky relationships
For some trustee boards, managing the relationship with the sponsor can be rather fraught. Either there is a difficulty or lack of experience in trustees adopting a commercial negotiating position with their own employer, or perhaps a long-standing mistrust or poor communication makes it difficult to understand the sponsor's position. Either can get in the way of a collaborative discussion in which the parties work together to achieve an outcome that works all round.
So if you recognise the potential for your trustee board to fall foul of any of these traps, what can you do differently? Here are a few high-level pointers:
• Agree the key strategic goals, identify and plan the decisions that need to be made, and structure meetings accordingly;
• Make the best decision possible, and remember that "no decision" is a decision in itself;
• Ensure relationships are built with the sponsor and other key stakeholders through mutual understanding of each others' objectives and ongoing dialogue;
• Get your advisers on board to support you in the way you want to work and to remind you of it when needed!
• Ask "what can we do differently next time?"
Having spent some time thinking about the pitfalls that could await unsuspecting trustees, I was glad to have been asked the question and to make renewed efforts to avoid them myself! I hope that sharing them is helpful to other trustees too.
Rachel Croft is director at Independent Trustee Services
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