7: Approving Key Decisions, Then Prudently Delegating
Adapted from “Transforming the Dialogue: Fiduciary Essentials” by Frederick (Rick) Funston. Amazon, 2025
“The art of delegation is one of the key skills any leader must master.”
Why Delegation Matters
As a trustee, you hold significant responsibilities, but you can't do everything yourself, nor should you. Effective delegation helps you balance oversight with efficiency.
Public retirement systems operate within a framework where jurisdictions (like states or cities) retain certain powers, but delegate day-to-day responsibilities to boards like yours. Similarly, your board delegates operational authority to your Chief Executive (CE) and staff—but you retain ultimate accountability.
Let’s explore how you can approve key decisions effectively, delegate prudently, and maintain clear boundaries and responsibilities.
Understanding Who Does What
Jurisdictions typically retain big-picture responsibilities (like setting benefit formulas), while your board handles operations (like managing investments):
This separation helps to assure oversight and accountability, but sometimes can create tensions due to competing interests or unclear roles.
Common Challenges (and How to Handle Them)
Challenges between jurisdictions and boards often include:
Conflicting priorities (short-term budgets vs. long-term stability)
Unclear authority (who makes which decisions)
Political pressures (decisions driven by politics rather than fiduciary duty)
Funding disputes (underfunding or shifting burdens between generations)
To minimize these conflicts:
Clarify roles with regular communication.
Maintain transparency with clear reporting.
Rely on independent expertise (actuaries, consultants).
Foster strong partnerships to align goals.
What Decisions Should Your Board Approve?
Your board needs clarity on what requires explicit board approval. Typically, key decisions needing your approval include:
Significant investment changes
Major financial commitments
Hiring of key officers (CE, auditor)
Changes to critical policies (funding, investment, compliance)
Budgets
Clearly define which decisions you retain and which can be delegated, keeping in mind that your overall responsibility remains yours alone.
Ensuring Due Diligence
Due diligence is about doing your homework before making big decisions. It involves carefully assessing risks, verifying information, and exploring options. It’s not just best practice—it’s essential for prudent governance.
Due diligence might involve:
Legal reviews
Financial analysis
Operational assessments
Stakeholder impact evaluations
Effective due diligence:
Protects your system from unexpected problems.
Demonstrates your fiduciary prudence.
Strengthens your decision-making process.
Ensure management presents comprehensive summaries of due diligence efforts and recommendations.
Continuously Improving Approval Processes
YBoards should regularly review how effectively their decisions work. Conducting Post-Implementation Reviews (PIRs) helps identify lessons learned and continuously refine decision-making processes.
A PIR involves:
Comparing outcomes with initial expectations.
Gathering stakeholder feedback.
Identifying improvements for future decisions.
Regular PIRs keep your board adaptive and responsive to evolving challenges.
Delegating Prudently: Empower, Don't Micromanage
Once you approve key decisions, empower your CE and staff to execute effectively. Provide sufficient resources, clear authority, and ongoing support. Misalignment (like unclear authority or inadequate resources) undermines even the best plans.
Your role as trustees isn’t to micromanage operations, but rather to oversee outcomes. Remember the mantra: “Noses in, fingers out!” Stay informed, involved, but avoid meddling in daily details.
Effective Delegation: What it Looks Like
Here’s how successful delegation works:
Clear Scope: Define explicitly what's delegated (and what's not).
Alignment: Make sure delegation aligns with your strategic goals.
Resources: Provide adequate resources and clear authority.
Accountability: Set measurable goals (KPIs) and review regularly.
Communication: Require transparent reporting and timely updates.
Oversight: Regularly monitor through committees and audits.
Ethics: Enforce ethical standards and legal compliance.
Contingencies: Define clear escalation procedures for urgent issues.
Periodic Reviews: Regularly revisit and update your delegation framework.
Empowerment: Trust your CE and team, providing autonomy while maintaining oversight but verify.
Delegating to Your Chief Executive (CE)
Selecting and managing your CE is one of your board’s most important tasks. Think of the CE as your ship’s captain. You (the board) represent the ship’s owners. While you have the ultimate authority and accountability, you need to trust your captain to run day-to-day operations.
Your CE should:
Understand clearly what is expected.
Be empowered with the necessary authority and resources.
Be held accountable through clear performance metrics.
Communicate regularly with the board about performance and risks.
Key Elements of Financial Management
Sound financial management is crucial. Here are key components:
Strategic Budgeting: Align budgets with long-term objectives.
Transparent Reporting: Provide timely, accurate financial reports.
Internal Controls: Protect assets and manage financial risks.
Cash Flow Management: Maintain liquidity to meet obligations.
Investment Oversight: Ensure prudent, diversified investing aligned with risk tolerance.
Lessons Learned: Effective Delegation and Approval
Clearly define and regularly review your approval and delegation processes.
Always conduct thorough due diligence before approving decisions.
Continuously improve by reviewing outcomes and refining processes.
Empower your CE through clear delegation—don’t micromanage!
Ensure alignment of resources, authority, and accountability.
Maintain open communication and transparency.
Invest in sound financial management to sustain long-term system health.
By thoughtfully approving decisions and prudently delegating authority, your board can confidently guide your system toward long-term stability and success.
Want to learn more?
Board Smart subscribers, explore these resources:
Approving Key Decisions, Then Prudently Delegating (Podcast)
Financial Management Essentials (Transcript)
Financial Management Essentials (Podcast)
Delegate confidently, lead wisely!
Contact rfunston@funstonadv.com or Slussow@boardsmart.com
Click here to order “Transforming the Dialogue: Fiduciary Essentials.”
