Fiduciary Excellence 101: Best Practices for Committee Success

[This is the first post in a multi-part blog series that will cover best practices for committees that have fiduciary responsibility. The series will focus on the foundation of good governance from both an “art” and “science” perspective.] 

Good governance is paramount for a fiduciary committee entrusted with the management and oversight of financial assets. Whether the assets are associated with a retirement plan, a foundation, or an endowment, a well-considered governance structure is crucial and will lead to optimal decision-making. Further, by adhering to principles of good governance, such as accountability and transparency, the committee can build trust among stakeholders and demonstrate a commitment to responsible financial stewardship. 

To create the conditions for good governance, committees should look at whether the appropriate model is in place for effective management and oversight. A practical aspect that is sometimes overlooked or unconsidered to a meaningful degree is the committee structure; more specifically, whether the committee size is positioned for successful decision-making. That is our focus here.  

What is the best committee size for decision-making? 

Finding the optimal committee size is key to fostering efficient and effective decision-making. Too large of a group may result in sluggish progress, while too small of a group might lack diverse perspectives. Striking the right balance and finding the Goldilocks zone is essential. 

The Perils of Oversized Committees 

Large committees, reminiscent of a crowded conference room, can suffer from a multitude of challenges. First and foremost, decision-making can be a cumbersome task as consensus becomes harder to achieve. Additionally, individuals within a large group may feel less accountable for the outcome, leading to diffusion of responsibility and lack of ownership over decisions.   

Communication breakdowns are another pitfall of oversized committees. With so many voices, ideas, and opinions, it becomes challenging to ensure everyone is heard and understood. This can result in key insights being lost in the shuffle, leading to suboptimal decisions. 

Due consideration should be given to the principle of collective intelligence, which can be thought of as the knowledge and wisdom that is gained from a collaborative group. However, research has shown2 a group’s collective intelligence is not strongly correlated with the nominal size of the group. Instead, the propensity toward social sensitivity, or how well individuals work with others, was a primary contributor.       

The Drawbacks of Small Teams 

In contrast, a committee that is too small may struggle with a lack of diverse perspectives. Homogenous groups are prone to groupthink, where individuals conform to the majority opinion rather than discerningly evaluating alternatives. This can stifle creativity and critical reasoning, hindering the committee’s ability to explore all available solutions. 

Small committees might also be overwhelmed by the workload, especially if committee responsibilities require extensive research or analysis. A limited number of individuals may lack the breadth of expertise needed to cover all aspects of a complex decision. 

An excessively strong personality within a small committee can also cause challenges, creating an imbalance that inhibits effective collaboration. Exemplified in the quote from Charles de Gaulle, “I have heard your points of view. They do not match mine. The decision is therefore unanimous.” Such a dominant individual may overshadow quieter voices and discourage free exchange of opinions. The collaborative spirit that is essential for successful committee work can be eroded, impeding the group’s ability to achieve its objectives, and compromising the overall quality of decision-making. 

Striking the Right Balance  

So, what is the ideal committee size? While there is no one-size-fits-all answer, a consensus among organizational psychologists and management experts suggests that a committee of around 5 to 7 members often hits the sweet spot.   

This size allows for diversity of thought while maintaining a manageable and communicative group dynamic. It fosters a sense of responsibility among members and encourages active participation. Moreover, the committee can adapt more swiftly to changing circumstances and make decisions in a timely manner. 

Research published by Marica W. Blenko, Michael C. Mankins, and Paul Rogers1 indicates once a decision-making group has seven people, each additional member reduces decision effectiveness by 10%. Numerous other studies show a similar outcome, pointing to an optimal committee size of 5 to 7 members.     

It’s also common practice to target an odd number of committee members to prevent ties and thus avoid deadlocks in voting. 

Adhering to a fiduciary standard of care should be revered with proper consideration given to designing the governance structure, including committee size and membership. The best committee size for decision-making is a delicate balance that requires consideration of the specific context, the complexity of the decision set, and the diversity of the expertise needed. By finding the Goldilocks zone, organizations can ensure their decision-making processes are not too big, not too small, but just right. 

1. Marcia W. Blenko, Michael C. Mankins, and Paul Rogers. Decide and Deliver: Five Steps to Breakthrough Performance in Your Organization. Harvard Business Review Press, 2010.   

2. Anita Williams Woolley, Christopher F. Chabris, Alex Pentland, Nada Hashmi, and Thomas W. Malone. “Evidence for a Collective Intelligence Factor in the Performance of Human Groups.”  Science Magazine, 2010. 

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