The relationship between trustees and their scheme administrator is critical to good pensions governance. But are both sides focusing on the right details? Greg Rice, member services manager at Trafalgar House, gives some tips
A terrible addiction has been spreading through the administration industry. It is an addiction that has been slowly eroding the relationship between administrators and trustees for years and it’s one that shows no sign of slowing.
It’s an addiction so strong that many now seem to clamour for the next big high that can only come from discovering a new statistic. Yes, statistics are the new dependence.
Since the introduction of electronic work management systems, an obsession has grown with measuring and reporting on statistical-based activity. Work cycles, pend states, holding times, outliers, average processing, end-to-end, triage, internal rework, external rework, errors, complaints, compliments and quantitative/qualitative data are but a few examples of the indicators recorded and reported upon. Perhaps feeling the need to mirror the reports of actuarial and investment compadres, administrators now produce weighty tomes packed full of charts, tables and comparators that are designed to blow clients away with the level of insight and analysis that can be performed on internal operations. But does it bring any benefit to clients?
The expectation is that clients should understand the finer nuances of business process management, so as to define the quality and resilience of their administration service from the vast swathes of numbers and charts produced.
Why do administrators do this?
Firstly, because they can – and because the technology know-how to create this highly granular level of operational analysis is there. Sophisticated and flexible technology has afforded us a greater insight into administration operations than ever before. Railing against years of criticism about the industry not managing work effectively or reporting adequately, many have become giddy on the power afforded to them through adopting business process management platforms.
Secondly, administrators assume that because what they know is important to internal operational effectiveness, that clients will also want it and should know about it. Whilst it’s true that administrators should have these tools and statistics at hand to manage their operations, do trustees really need to know every single detail?
Data is important and useful, but naval gazing isn’t. Many of the statistics recorded and shared tell clients nothing about the quality, accuracy or standard of service scheme members receive.
What’s the solution?
1. Report by exception
Administrators need to start with a more sensible and pragmatic dialogue with clients that begins with reporting on an exception basis. This will help trustees and pension managers to focus on the few key indicators that impact operations from a risk or delivery perspective, and should start by agreeing what won’t be reported on. What normal operating parameters do you feel comfortable with? If your administrator is delivering services within 99% of agreed turnaround times, do you really need this reported regularly? When you take your car in for its MOT and they tell you it’s passed its emission tests, do you ask for the analysis results and spend 15 minutes discussing them? No, because you’re satisfied the car is performing within agreed, pre-determined parameters.
2. Focus on qualitative measures
Qualitative measures such as errors, complaints and compliments are the obvious indicators, but it would be wise to also consider customer feedback benchmarks, staff turnover rates, data quality and levels of calculation automation. Trustees, too, should think about the vital statistics which are never shown in administration reports but are fundamental to the ongoing success and security of the administration service – for example, client losses and wins and the outcome of data security and process audits.
The power of statistics works in both directions: what is measured will get the attention of a scheme’s administrator, so demand to see the statistics that will make a real difference to the standard of service for members or operational resilience.
3. Lead the conversation
Treat an administrator’s attendance at the meeting in the same way as managing the service on a day-to-day basis. Question them about difficult cases or things they’ve found that haven’t worked well, which could be improved, or what the focus will be over the next quarter. The best examples and working relationships with trustees and administrators are those that that involve more time spent talking about the service, rather than focusing on SLA delivery charts.
4. Check for the warning signs of poor performance
No future plan or developments
Administration reports tend to be entirely reflective, commenting only on what’s happened. Rarely is discussion about the future ever raised at trustee meetings. Despite what is believed, pensions administration is, and should be, a dynamic, ever-evolving industry. We should, as an industry, be continually looking towards new technology to enhance the service and reduce risk and costs. A huge part of this is developing new communications and tools to improve member engagement. Administrators are finally embracing a more customer-centric approach to service delivery, meaning new training and development opportunities for staff.
A future service development roadmap speaks volumes about a given administrator. Those without one probably lack the investment and foresight to keep pace with industry standards and are treading water – there should never be a time when administrators are not working towards new developments.
Professional, well-trained administrators are in demand and the rising interest in project work means that jobs opportunities are plentiful. Administrators will now quickly change jobs if operations are failing with their current employer. High staff turnover rates or frequent changes in the personnel of a scheme’s delivery team are often telling signs of underlying service or process issues.
Delivering on non-core projects
In recent years the focus for good administration has moved well beyond core service delivery. Trustees and pension managers are now increasingly looking for administrators that can support and deliver all manner of complex de-risking or data improvement programmes. If costs and timescales for these projects are escalating, this probably suggests that existing resources are being stretched thin. Limited resources in any part of an administration operation is not a good sign. It either points to an administrator not being able to attract the right talent, or to them losing professional experience to competitors.
If administration is to continue to evolve for the benefit of trustees and members, we need a ‘data detox’.
Trustees need to take back control of the conversation when it comes to administration. We cannot expect or rely on trustees to wade through reams of pointless charts and tables in the hope that they will spot some abstract anomalous service figure as an indicator of service failure. We need to embrace an exception-reporting approach where only events outside of agreed parameters will be reported upon. We must look forward as well as back by talking about the future and what’s on the horizon.
Trustees should be looking beyond the day-to-day activities of administration operations and consider the wider risks and activities of their administrator’s business to truly understand whether the service they are accountable for is well-placed for the future.