8. Overseeing Execution within Policy
Adapted from “Transforming the Dialogue: Fiduciary Essentials” by Frederick (Rick) Funston. Amazon, 2025
“Effective oversight requires asking the right questions,
not having all the answers.”
Staying in Control, Without Micromanaging
Every organization faces unique risks—whether sailing, racing Formula 1, exploring space, or running a public retirement system. Your board’s role isn’t to avoid risks entirely, but to manage them effectively.
Good oversight means you’re confident your system is under control, running smoothly, and on track to meet goals. You don’t have to know every operational detail—but you must be sure key areas are managed well.
The challenge is balancing oversight without slipping into micromanagement or losing sight of strategic priorities.
Your Oversight Role: Key Responsibilities
Your oversight includes confirming:
Investments perform as planned.
Benefits are accurate and timely.
Administration runs efficiently.
Performance and risks are actively managed.
Compliance with policies, laws, and fiduciary responsibilities.
In short: making sure your system does what it's supposed to do—and knowing quickly when it doesn’t.
Better Dialogue = Better Outcomes
Effective oversight starts with asking smart questions:
Are we having the right conversations?
Are we focused on policy implications, not just data?
Are we using our time effectively?
Your goal: encourage meaningful dialogue, leading to actionable insights rather than drowning in details.
Avoiding the Micromanagement Trap
Boards that micromanage undermine trust, cause confusion and delay and contribute to poor morale. Instead, focus your energy on strategic oversight:
Clearly define what management should achieve.
Set performance expectations (KPIs).
Monitor key results.
Ask management insightful, policy-focused questions.
Delegate confidently—but verify frequently.
Effective Oversight through Committees
Delegating oversight to specialized committees (like investment, audit, or governance) helps understand complexity. Committees can dive deeper into specific areas and keep the full board informed through clear reporting.
Remember: Committees advise; your board decides.
Why Policy Matters: Example of Investment Oversight
Your Investment Policy Statement (IPS) defines your investment strategy and risk tolerance. It's your roadmap—but it needs regular review.
Many boards get stuck analyzing quarterly data without discussing what it actually means. Instead, prioritize policy discussions over granular details:
Is performance aligning with long-term goals?
Are risks within acceptable levels?
Should strategies be adjusted based on current trends?
Keep policy implications front and center to avoid getting lost in the data.
Common Causes of Oversight Failures (and How to Avoid Them)
Oversight often goes wrong due to:
Data Overload: Too much detail obscures critical insights.
Expertise Gaps: Trustees don’t always know the right questions.
Groupthink: Reluctance to challenge prevailing views.
Communication Breakdowns: Key risks aren’t escalated quickly enough.
Missed Warning Signs: Early indicators go unnoticed.
To avoid these pitfalls:
Use dashboards for clarity.
Promote a culture of constructive questioning.
Clearly define escalation protocols.
Conduct regular training and development
Reducing Data Overload:
Dashboards
Simplify complex data, highlighting only what needs immediate attention.
Think of dashboards like your car’s instruments: you don’t need to know every internal detail—just that things are running as expected.
Dashboards:
Quickly show what’s working (and what’s not).
Flag significant deviations automatically.
Allow easy “drill-down” for deeper insights.
Exception-Based Reporting (EBR)
EBR highlights when performance deviates from acceptable ranges, immediately alerting your board to potential issues. Some simple examples:
The Vital Few: Choosing the Right Metrics
Focus on the key metrics that really matter—the system’s "vital signs":
Funded ratio
Investment returns (long-term)
Operational effectiveness and efficiency (accurate benefit processing times)
Compliance and governance
Member satisfaction
Avoid focusing on short-term fluctuations (like annual returns) that distract from your system’s long-term mission.
The Vital Few: Choosing the Right Metrics
Move beyond data to actionable insights. Use the "Insights Hierarchy":
Data: Raw numbers (trees)
Information: Aggregated data (forest)
Intelligence: Identifies meaningful patterns and anomalies
Insight: Clearly communicates policy implications and recommended actions
Each report to your board should clearly communicate insights, policy implications, options with pros and cons, and recommended action based on what’s best for all plan participants and beneficiaries.
Transforming the Dialogue: 10 Steps to Better Discussions
Set clear meeting expectations: Require policy-oriented discussions, not data dumps.
Develop structured reporting: Every report should highlight key implications and recommended actions.
Prioritize key performance indicators: Focus discussions on vital signs and tolerances.
Use visualization tools: Dashboards to simplify complexity.
Encourage constructive questioning: Foster a culture of challenging assumptions respectfully.
Stress-test regularly: Evaluate scenarios ("what ifs") to assess preparedness.
Integrate policy in reports: Clearly summarize policy implications and actionable recommendations.
Continuous education: Regular training and development on how data links to policy.
Pre-meeting briefings: Focus meetings on policy rather than explaining data.
Evaluate meeting effectiveness: Regularly review if discussions lead to actionable outcomes.
Lessons Learned: Overseeing Execution Successfully
Clearly define and track a handful of vital signs.
Set explicit tolerances for acceptable performance variation.
Use dashboards and exception-based reporting for clarity and rapid response.
Integrate performance and risk oversight—they are two sides of the same coin.
Maintain dialogue focused on strategic implications, not operational details.
Verify regularly. Confirm key controls work as intended.
Good oversight isn’t having all the answers—it’s about consistently asking smart, focused questions, then acting decisively when needed.
Stay focused, ask good questions, oversee wisely!
Want to learn more?
Board Smart subscribers, explore these resources:
Overseeing Execution within Policy Essentials
Primer on Performance and Risk (Podcast)
Exception-Based Reporting
Insight not Overload (Webinar)
Contact rfunston@funstonadv.com or Slussow@boardsmart.com
Click here to order “Transforming the Dialogue: Fiduciary Essentials.”
