How to monitor the effectiveness of your trustee board

This is, however, an area that many trustee boards and scheme sponsors have been focusing on for a while, with many already having carried out reviews of trustee board effectiveness and performance.

An effectiveness review often enables a trustee board to identify quick wins that make running the scheme easier and more efficient

With the benefit of this experience, there are a number of ways in which trustees can review the efficacy of their scheme’s governance in this new landscape.

It seems clear that the chair of the board of trustees is now explicitly viewed as the individual accountable for improving governance.

A review of performance will therefore have the best chance of success if owned by the chair, who is best placed to encourage engagement with the review, its aims and its recommendations.  

How to conduct a review

The most helpful reviews evaluate both inputs and outcomes. 

Traditionally, effectiveness reviews have focused on inputs, perhaps because these are the easiest aspects to measure.

However, a pension scheme is there to deliver benefits to members. Therefore, it is the outcomes and — given the long-term nature of schemes —  progress towards these outcomes that ultimately determine the performance of the trustee board.

Inputs are the factors that contribute to the quality of board and committee decision-making.

Examples of key factors are:

• Board composition and the existence of the appropriate range of skills and experience

• Identification of training needs, the training itself and the application of knowledge and skills

• Support to the trustee board

• Meeting papers, structure of meeting agendas and use of meeting time

• Commissioning of advice, the advice itself and the way in which trustees work with their advisers

• The level and quality of participation in discussion and decision-making

In order to measure outcomes, setting clear strategic objectives for the scheme is a good starting point.

Risk management, business planning and trustee agendas can then be linked to the strategic objectives to provide focus for all involved in running the scheme. 

Board performance can then be measured by reviewing progress against the objectives in the business plan.

External feedback is key

Many trustee boards carry out a self-assessment exercise, usually by way of a questionnaire, and then discuss the results.

While this is a useful way of obtaining feedback at an individual level, including external feedback is key to obtaining an objective view of the effectiveness of the board.

This can be achieved via an independent observation of board and committee meetings, and/or by an external facilitator carrying out interviews with trustees and other key individuals such as representatives of the sponsoring employer and advisers. 

There is also a case for having a two-way dialogue with advisers to comment on the trustees’ effectiveness and where improvements can be made. It is also a good idea to obtain the sponsoring employer’s views.

However, before the review is carried out it is important to agree how the results will be discussed and any actions agreed. 

Taking sufficient time out of the usual meeting agenda for a separate session usually yields better results.

Reviews can improve trustee performance

An effectiveness review often enables a trustee board to identify quick wins that make running the scheme easier and more efficient.

Such a review allows strengths and weaknesses to be identified and should ultimately lead to a highly engaged and energised trustee board.

By facilitating discussion on what really matters it can also bring about a more strategic approach to trusteeship. This means leading the scheme and driving it forwards, which goes beyond receiving information and approving recommendations. 

Rachel Croft is a director at Independent Trustee Services