What does TPR say?
The main points of TPR's guidance were:
- Having a diverse board will allow you to manage the scheme well
- When you recruit and select trustees, you should think about the needs of the board as a whole
- You should review the performance and effectiveness of the board annually and refer to the objectives in your business plan
Read the guidance here.
What do we think?
Much of what TPR has said in the skills and experience guidance has merit and continues from the previous month on training and improving knowledge. What is there makes sense.
The emphasis on skills analysis, filling gaps, board evaluation and trustee assessment, and disclosing how the board collectively is fit for purpose to run the scheme (and with confirmation that DB Chairs statements are to be introduced), are all important for trustees to consider and address. We’ve talked about this frequently in the past and in response to last month’s guidance. There are also plenty of examples on our 21st Century portal. It’s worth stressing again the importance of training plans with one-to-one discussions, and having board protocols around trustee tenure and skills-based selection with staggered retirements aligned to board workflow.
TPR wants boards to actively seek to improve trustee diversity (in its wider sense) and encourages trustees to work with employers to achieve that. It’s a good aim but hard to achieve in schemes that are closed with few active members. Options could include moving towards a smaller board, positioning the trustee role as a development opportunity, encouraging applications in other areas of workforce skills (communications and social media? process and engineering? customer service?) and opening MNT selection to deferreds, with requisite checks and balances on conflicts.
Or a wider consideration of external expertise can help – a professional trustee, an experienced external MNT (if scheme rules allow), skilled chairman. A specialist as a co-optee on committee work, if not for a trustee role (investment? admin oversight? corporate transactions?), as a further way to fill any gaps.
TPR also wants boards to evaluate and, ask themselves questions about effectiveness, and use feedback to improve trustee decision making – recognising soft board skills and behaviours need talking about too. This guidance is informed by UK board practice in all sectors outside pensions – TPR has been behind the curve possibly due to the ‘one size fits all’ issue. In practice many of the larger schemes’ board have been doing this for some time and the trend to review is growing strongly, as examples on our portal show.
Board evaluation with clear objectives in mind is useful as it is more likely to focus on impact rather than process, generate board discussion and identify action on changes that are needed.
Chairs may need support in starting down this track if they or other trustees haven’t done such things in their careers – some trustees may not have had experience of work-based ‘assessment’ at all before this.
It’s better when the evaluation method doesn’t get stale - questionnaires can get boring to fill in and box ticking will likely result. External input does add value if done well, as part of a cycle. There are plenty of ways to refresh the board’s approach – a cycle over three years is a good idea, as is common in other areas of financial services where change is endemic. For example, in any one year you could look at a specific aspect of board governance such as: scheme strategy, risk and engagement on significant decisions; skills, decision-making and effective behaviours; committee effectiveness and future needs; trustee self-assessment with one-to-one discussion, feedback. You can also spend another year working with individual trustees in more depth, perhaps incorporating aspects of ‘360’ feedback.
Independent review and support to ‘hold the mirror up’, or to update the board’s own assessment questions and facilitate discussion of results are both good ways to refresh, or to start evaluation.
A review timed around significant change or knotty issues leading to change can work well, such as helping the board to take stock in the year after a change in Trustee Chair, or where the board’s ways of working, and maybe also its composition and succession processes, need to be updated.
What do others do?
Trustee selection for skills, knowledge and diversity
These examples illustrate how a plan for selection can be used positively in trustee board appointments.
We have worked with many clients who take a proactive approach with the employer and with members to selecting and appointing new trustees; to refresh skills, fill identified gaps and increase board diversity.
All use a clear role and person specification setting out the range of skills, competencies and any particular skills or experience it would be helpful for candidates to demonstrate. This includes diversity.
In our first example, the Employer positions company appointed trustee roles as a planned development opportunity for middle to senior managers, liaising with the Trustee chair on skills needs, based on the trustee board’s succession planning work. This helps attract some younger candidates, and more women.
Another client has used selection via an independent panel to shortlist suitable candidates for member-nominated appointments. In this case, there is still an election process, to choose from the shortlist. The selection test is ‘general suitability for the trustee role’ to encourage diversity of background.
Where it is difficult to find active members to appoint, or if skills are in shorter supply, some clients have appointed experienced independent member nominated trustees. Others have extended eligibility to deferred members (with conflicts safeguards) and/ or to more retired members with relevant career skills.
Several clients have used thorough external search processes to appoint independent or professional Chairs, working up a detailed role and person specification, liaising with the Employer as required.
Hearing all voices to help trustees make positive changes
This trustee board had experienced difficulties. We helped them ensure everyone’s voice was heard in planning for changes, to identify better ways of working and governance improvements.
A sensitive assignment with a trustee board that had experienced a difficult set of circumstances. There was a need to update and clarify roles, and improve relationships, decision-making and ways of working. Some strong areas of governance needed replicating elsewhere in the structure.
One of the powerful ways the trustees did this was through a series of workshops we facilitated for them to ensure that all trustee voices were properly heard.
Outcomes of this work included board compositional change and a code of conduct, with clearer role profiles and an improved training plan. The skills ideally needed in the next Chair and in a specialist committee co-optee were agreed and the search process approved. A revised trustee remuneration policy was researched and implemented.
The committee structure was updated and a framework of responsibilities, delegations and reporting was drawn up, with revised terms of reference flowing from it, to assist decision making and assurance work.
Using board evaluation for trustee development
These trustees updated their independent board evaluation and used the one-to-one meetings with trustees to identify areas of performance, skill and knowledge to strengthen for the work ahead.
This client asked us to update the board evaluation work we had helped them to carry out previously, to see how things had progressed and identify aspects of performance the board needed to address which would have a beneficial impact on the future governance of the scheme.
Within this work, one-to-one meetings with each trustee were held to review their role and contribution, skills and strengths, and areas of the trustee role, skills and knowledge to develop, in light of the forward strategy for the scheme and the trustee’s business plan. The balance between board and committee work, and their roles within this, were also considered.
A refreshed skills matrix and training plan, personalised with each trustee, and drawn together for the board was one outcome. A more structured approach to decision-making, with timely training, clearer papers and more simply explained advice is another ongoing focus. Greater use of chairing skills in meetings, with trustees better equipped to contribute effectively, is the third important area the board is working on.
A trustee board checking on progress after improving governance
This trustee board illustrates the importance of reviewing that intended changes have been successfully implemented in ways that still work for the future.
Following on from a governance review, we supported this trustee board with implementation of new practices which required sensitive engagement and a comprehensive review of process documentation.
The result of the changes was a board more focused on strategy and risk oversight, with fewer committees and enhanced delegation to the scheme’s executive team. Trustee and committee business plans, role profiles, terms of references, policies and handbooks were re-drafted.
We also facilitated a self-assessment exercise for the board and pensions team to review progress.
Trustees updating their ways of working and using one-to-ones
This trustee board has worked over a period of three years to improve board governance, using evaluation, review and trustee one-to-ones, with worthwhile results.
We worked with this pension scheme to develop as a more strategically-focused and nimble board. To help align all trustees to new ways of working, a trustee charter and trustee role profiles were developed to focus on the trustee’s role, particularly in respect of decision making.
Training or “best practice” sessions pertinent to the forthcoming agenda have been implemented to help focus on key strategic outcomes. The trustee board has recently undertaken a facilitated self-assessment to review how well the changes have been embedded and identify further improvements. This has included one-to-one discussion and development planning for each trustee and the board as a whole.
How can we help?
- Evaluation and assessment for trustees and trustee boards: what is board evaluation and trustee assessment, why is TPR encouraging them, what approaches can be used, the benefits and costs.
- What impact can good skills have; what would help you use these skills; what can be done differently; next steps
- Problems that can arise and what to do about them; your own decision examples; the decision process; your future decisions; next steps
- How diverse is your board – skills and experience, personalities and decision style, background and culture; options to improve what you have and how you use it; practical steps you could take; next steps.
- Independent expert review: is your board fit for purpose, how well do you run the scheme, what works well, what changes would help most for the future, how to compare, key things to improve
- External facilitation of a board’s own self-assessment: to check are we asking ourselves the right questions, what themes and trends emerge from the results, what could we learn from others
- Experienced facilitation to help trustee boards consider outcomes of an evaluation/review, decide what to take forward, the intended impact of changes, and to agree some next steps
- We also help trustees review how particular committees are working, what would help to build or sustain effectiveness for changes ahead, facilitate discussion of ideas to agree a way forward.
- Performance, skills and training needs and any additional support or other changes that would help for the trustee year ahead
- Holding conversations with each trustee to talk about their role, governance ideas, skills and development, training needs and contribution to trustee work in the coming year, or supporting the Chair to do this; and reporting back to the board on board skills analysis, gaps and training plans.
- Using this to inform the board’s training plan and consider how to fill other gaps, succession needs
- Discussion with the Chair and/ or the trustee board to reach a landing on gaps and succession needs
- Drafting role profiles and person specifications for new trustee and chairing appointments, to inform the selection process.
- Panel member or Chair during the selection process (which might include interviews)
- Liaison as needed with other Panel members, the Panel’s support team and trustee board Chair.
- Discussion and fine tuning of the draft policy – typically with a trustee working group or committee
- Explaining and discussing the recommended policy with the board to walk through its application, leading to board approval and adoption, and any follow up required.
Trusteeship training – interactive training session
Board skills, decision making and diversity – interactive training or workshop session
Board evaluation, board self-assessment, committee reviews and board discussion of results
Trustee self-assessment, Trustee one-to-ones, adding ‘360’ peer views
Skills and gap analysis, training plans, succession planning, building trustee role and person specifications
MNT selection panel
Trustee remuneration policy
Muse Advisory helps trustees and companies to better govern and manage their pension schemes. We believe that good governance leads to improved outcomes for members; through better fund performance, effective and proportionate management of risk, value for money and cost efficiencies and strategic and dynamic decision making.