Why trustees should pull together to focus on what matters
The Pareto principle states that 80 per cent of effects come from 20 per cent of the causes. In management terms this means a fraction of your efforts could have disproportionate outcomes.
For pension scheme trustees the application of this principle involves understanding what factors are most important in driving results, and therefore most deserving of attention and resources.
But what are the most important factors for trustees to focus on? And how can they ensure resources are used efficiently to encourage positive results?
Muse Advisory’s client director Ian McQuade said that although there is no template for trustees looking to focus their efforts, there are some unifying factors that should not be overlooked.
He said: “Having effective processes and having a board with a very clear vision is certainly important.” McQuade emphasised the importance of clarity of vision and strategy.
It’s possible for advisers to go off on their own agenda and sell their own pieces of work that may not benefit the strategy
“It’s about saying, ‘This is where we are going as a scheme’," he said. "And that strategy needs to be shared, it needs to be something that all of the trustees have bought into and it also needs to have input from the sponsor.
“Trustees have to make sure there is an appropriate method of agreeing that strategy so that everyone knows what the endgame is. Then you have got more chance of making the right decisions at the right time.”
However, the difference in knowledge between lay trustees and advisers can make the process more challenging. Adrian Kennett, director at professional trustee company Dalriada, said managing the divide between the two groups was crucial to maintaining the board’s focus.
“It’s possible for advisers to go off on their own agenda and sell their own pieces of work that may not benefit the strategy,” he said.
He added: “My job is to make sure the trustees understand what’s happening and to mould the advisers to the general scheme strategy.”
Professional trustee provider PTL’s managing director Richard Butcher also emphasised the importance of a clear strategy. But he warned of getting distracted from long-term goals by less important factors.
“It does require discipline to stay focused on the right things," he said. "If you don’t have discipline then obviously it’s very easy to get distracted. The discipline has to be exercised by the trustees but also by their service providers and their advisers.”
Butcher added: “You’ve got to try and focus your mind and stick to what is relevant as opposed to wandering off the point. You’ve got to remember your core theme, stay disciplined and stick to it.”
Europe's forthcoming Institutions for Occupational Retirement Provisions II legislation will require trustee boards to collectively have adequate qualifications, experience and knowledge.
Kennett said the requirement was originally intended for individuals, but that applying it to the entire board enabled a better approach.
He said: “It’s about putting the right blend of skills around the table. Lay trustees bring great knowledge of the history of the scheme. And if you’re negotiating with the employer [they are] who you need to speak to.”