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Retirement Plan Committee – Effectively Managing Group Dynamics

Retirement Plan Committee

Retirement Plan Committee — Effectively Managing Group Dynamics. Your retirement plan committee is the cornerstone of your plan’s governance and oversight. As such, its members play a critical role in making sure all of the plan’s decision-makers are fulfilling their fiduciary responsibilities and acting in participants’ best interests. But what do you do when they aren’t getting along, or when it seems like one or two of the members are commandeering the decision-making process? It may seem like a tall order to reign in such behaviors, but with some awareness and careful management of group dynamics, your committee members can be active, supportive, and helpful stewards of your plan.

We’ve written previously about how to build a successful, effective retirement plan committee, and how to establish or restructure an existing one. In this article, we’ll address how to manage the group dynamics within your committee. As we’ve discussed before, diversity in your retirement plan committee membership is a good thing — you want different backgrounds and levels of expertise to be represented. But let’s face it: when you get a group of people with varied skillsets and roles in a room together, there are going to be problems. It’s the nature of the beast.

For the sake of example, let’s say your committee is composed of five members. Two are senior executives from the C-suite, two are middle management, and one is a younger, junior-level employee. In this situation, it’s important to watch out for a phenomenon called groupthink, where certain members of the group may be hesitant to offer an opinion, and instead defer to the group consensus.

In this particular group, the likelihood is potentially high that the middle management and junior-level employees would go along with whatever the two senior executives decided. After all, in most organizations decisions are traditionally made from the top down, and that dynamic is likely to carry over into the retirement plan committee setting. However, that may lead them to make decisions that only reflect the interests of a particular group of employees — those at higher levels within the organization, in this case. Clearly, that is not in the best interests of all participants.

Keep in mind, however, the committees’ actions aren’t likely intentional — the group dynamic has the potential to drive decision-making in a way that is consistent with organizational and behavioral norms. That said, it’s important to keep a close eye out for these scenarios, and be mindful of avoiding groupthink whenever possible. Every member of the committee should have an equal say in the decision-making process.

As we wrote in our previous article: “A committee’s purpose is to challenge the status quo in an effort to improve plan governance, so it’s critical that those different perspectives be surfaced. In other words, give everyone a voice and a chance to be heard.”

Another scenario that can often play out in group settings like a retirement plan committee is something called “extremism.” In other words, because the committee is making decisions as a group, individual members may not feel as much responsibility as they would if they were making the decisions on their own. Therefore, phenomena like groupthink and momentum —where members of a group go along with the tide of the sentiment of the others — may push committee members to make extreme decisions that are way outside of their comfort zone.

Put another way, because they feel responsible for the decision as a group, members may feel less personal liability, and may even be pushed to make riskier choices than they might otherwise. Again, this is not behavior that is in the best interests of your plan or participants, so it’s important to be wary of this dynamic within your retirement plan committee.

When you sense that groupthink or extremism may be playing a role in the committee’s decision-making, it may be wise to postpone heated discussions or critical decisions for a future date, when possible. If it isn’t possible to delay the decision, it may help to take a short break from the meeting or seek a tie-breaking perspective from a more level-headed committee member.

When appropriate, it may also be helpful to bring in a trusted outsider who may not be a member of the committee, but who is still intimately involved with the retirement plan. They can bring a knowledgeable, yet fresh perspective to the group, and may be able to offer rationale and insight to help the committee come to a consensus that is best for the plan and its participants.

Managing group dynamics in your retirement plan committee can be challenging, but it is necessary to ensure they are acting according to the law and doing what’s best for participants. You can manage your committee and its members proactively, productively and effectively, especially if you know what to look out for.

Robyn Kurdek

Robyn Kurdek

Freelance writer with nearly 2 decades of financial industry experience, with niche expertise in the defined contribution (DC) industry. I also have defined benefit (DB) plan knowledge. I write all types of content for retirement plan participants, sponsors and advisors, including web copy, newsletters, white papers, fact sheets, blog posts, financial wellness articles, and more. "I speak DC."
Robyn Kurdek
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