Admit mistakes and encourage discussion to prevent repetition
Create a learning culture
The basis of actuarial training is the ‘control cycle’, and the principles of this apply to any trustee or corporate environment.
The idea is that an original hypothesis can be tested against the arising reality, leading to the original hypothesis being modified, retested, and so on in an endless cycle.
This culture of ongoing evaluation encourages stakeholders to ask questions and analyse outcomes, supporting their learning, development and ultimately, the board’s performance.
Seek diverse opinions
In order to have an effective team, the trustee board should aim to have a diverse and informed membership who are there to contribute and challenge. This can be achieved in several ways, such as through education, training and role-play.
Board dynamics are often driven by the chair, meaning it is vital to have an effective one. They must be able to select a winning team, which is comfortable participating in constructive arguments with the objective of reaching an informed decision.
A team consisting of members from varying professional backgrounds and demographics ensures that the outlook is broadened by the collective experience, which can lead to more robust decision-making.
Take advantage of expertise
A trustee board will not be able to function without advisers and service providers. For the board to deliver optimal outcomes there must be an effective service provider selection process focused on appointing competent and appropriate advisers.
The most expensive service provider who offers the most complicated solutions may not be the best or most appropriate for a specific scheme. That is not to say advisers should not be challenged. Never accept their premise without question; after all it is trustees who bear the responsibility in the end.
The trustees should also seek alternative sources of knowledge – they should attend industry events, request training from other/alternate advisers and should also aim to complete the Pensions Regulator’s online trustee toolkit.
They should also engage themselves with the industry to know what is happening more widely – set up alerts for regulatory news, read trade press and attend conferences. There are always new products that may be useful to all sizes of scheme.
One of the most difficult things for any person to do is to admit to making a mistake, but the quicker a trustee can take responsibility with humility, the quicker they can devise an action plan to do everything in their control to make it right.
They will then be prepared for the consequences and can get on with rebuilding trust. To support this approach, put in place a defined process for members who want to raise concerns. Following this, the mistake and lessons learned must be documented, so that it is not made again.
Share your findings
Pre-empt issues by studying the mistakes of others. Other trustees have made mistakes from which we could all learn. Some mistakes have been picked apart publically and some can be explained by advisers and fellow trustees.
A very useful exercise when embarking on a major project is to work with your advisers to perform a premortem. Trustees can plan for common negative outcomes and work backwards to determine what could lead to the failure. This will facilitate a positive discussion on threats, increasing the likelihood that the main issues are identified.
People make mistakes, but working together to avoid needlessly repeating your own, or those of others, is essential if you want to reduce the likelihood of being pulled in front of the House of Commons for a gruelling question and answer session.
As Churchill also said: “If you simply take up the attitude of defending a mistake, there will be no hope of improvement.”
- Use pre and postmortems often, around each meeting and project.
- Diversify your board – appoint individuals who contribute and challenge
- Admit errors and encourage discussion to prevent repetition