Why You Need an Institutional Trustee for Your Organization

This article is an excerpt from the Shortform book guide to "Servant Leadership" by Robert Greenleaf. Shortform has the world's best summaries and analyses of books you should be reading.

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What is an institutional trustee? Why do trustees need to have more than just financial responsibilities?

Many people probably assume that trustees only worry about finances in organizations. But as Servant Leadership by Robert K. Greenleaf points out, trustees, ideally, should be prioritizing the social responsibility of institutions.

Continue reading to learn about the ideal role of institutional trustees.

The Role of Trustees in Ideal Institutions

Greenleaf argues that a faulty institution can only become an ideal institution if the trustees who govern it are servant leaders. Traditionally, trustees are people who are responsible for ensuring that an institution meets its financial responsibilities—for example, a bank’s board of trustees makes decisions to ensure that the bank is profitable so that account holders’ money is safe, employees are paid, and shareholders profit. institutional trustees, though, prioritize the institution’s social responsibility over its profits. For example, the trustees for an ideal search engine company would prioritize accurate search results over more profitable promoted content.

(Shortform note: Other experts question whether trustees can responsibly balance their fiduciary and social interests since one may come at the expense of another. In the late 1990s, the Business Roundtable (an influential group of business lobbyists) argued that a company’s sole purpose is to generate profits for shareholders. But recently, the Business Roundtable switched to stakeholder capitalism—an approach that tries to create value for all stakeholders, from investors to customers, instead of pursuing profits at the expense of society or the environment. Some experts consider this a smarter approach because if businesses harm society, their profits won’t be sustainable in the long term.)

Greenleaf explains that trustees play a separate but equally important role than administrators do. While trustees’ main priority is envisioning institutional excellence and enacting the policies that make it possible, the main priority of administrators is to execute that vision based on the policies trustees have set down. Trustees’ decisions have bearing on the institution’s daily operations, and trustees collaborate with administrators to figure out how their policies are best implemented, but trustees have little to do with mundane operational matters.

(Shortform note: The board of trustees is the governing body of an institution—they decide how to manage the institution so that investors profit. Typically, boards of trustees are appointed to govern private institutions, while boards of directors are their elected counterparts in public institutions—but the terms can be used interchangeably. Theoretically, boards of trustees or directors hire administrators to keep the institution running smoothly from day to day, but in practice, many trustees/directors serve dual governing and administrative roles.)

Greenleaf says that trustees are essential for institutional success because they have an overhead view of the bigger picture, which makes them more likely to be open to change. Administrators and employees tend to be biased in their own favor—they see themselves as competently carrying out their duties, and they need to have faith in their competence to be motivated to work. Since trustees are removed from the day-to-day operations of the institution, they have a different perspective: They can more clearly see where the institution is failing, and that doesn’t demoralize them—it motivates them to come up with solutions.

(Shortform note: Greenleaf asserts that trustees have more insight into an organization’s overall performance, but some experts argue that those who are directly involved in day-to-day operations have more insight about how to execute organizational goals. For example, in Superforecasting, Philip Tetlock and Dan Gardner describe the military principle called “mission command,” where higher-ups determine their overall combat strategy but leave the actual execution of that strategy to those who are on the ground. The idea is that being involved in daily operations gives you more specific, concrete (as opposed to theoretical) information about your current situation—which enables you to know the best action to take next.)

How Trustees Can Build the Ideal Institution

Greenleaf says that to build the ideal institution, trustees must do the following:

1) Envision institutional excellence—this means seeing how their institution can improve the lives of everyone it affects and setting the bar high to give the institution something to aim for. Trustees’ vision should be clear enough for them to create concrete objectives and plans to meet those objectives. (Shortform note: Your vision of institutional excellence should be high but achievable—experts note that perfectionism can impede performance for a few reasons. If you or your organization never meet the goals you set because they’re too high, you might damage your self-confidence or that of the people you lead. As a result, challenges can cause more anxiety than your organization is capable of combating—instead of rising to the occasion, team members will be too afraid of failure to even try.)

2) Proactively seek out and hire the best executive team for the institution—this is how trustees can ensure that their vision of institutional excellence will be carried out. (Shortform note: According to human resources experts, the qualities of a good executive hire include inquisitiveness, the ability to handle stress gracefully, the confidence to be herself, and a high level of empathy.)

3) Make financial and policy decisions that ensure the institution meets its social responsibility—this is how trustees convince the public that the institution is both trustworthy and worth engaging with. (Shortform note: For Greenleaf, it’s not enough to pursue profits—your institution should also add some value to society. In Built to Last, Jim Collins and Jerry Porras write that this is key to sustainable business success. They explain that visionary companies—those that are profitable in the long-term—are motivated by both profit and a core philosophy. This core philosophy is the combination of a company’s purpose and values, and it guides the company as it pursues broader aims and contributes to society.)

4) Moderate the use of power within the institution—using performance reviews, trustees can ensure that the institution and its leadership aren’t abusing their power and influence, but actually contributing to the greater social good. (Shortform note: The United Nations outlines several steps you can take to eliminate corruption in your institution. These include understanding and proactively quashing any opportunities for corruption, embedding anti-corruption sentiments into your organization’s culture, and keeping an eye on the efficacy of any anti-corruption strategies you implement.)

5) Ensure the institution’s success—by gathering data about the institution’s performance, trustees can determine how well their vision of institutional excellence is being carried out. Based on that information, they can make policy changes to help the institution meet its goals.

(Shortform note: According to John Doerr in Measure What Matters, ensuring institutional success requires that you first determine what “success” means for your institution and then measure it appropriately. To clarify your definition of success, Doerr advises identifying your institutional objectives—the most important concrete tasks you hope the institution will achieve—and setting time-bound mini-goals that will help you accomplish them. To measure your success, Doerr suggests scoring and reflecting on your progress toward these objectives at the end of every quarter or year, depending on how large or complex the objectives are.)

Greenleaf also says that to support their function as servant leaders of the institution, boards of trustees must be radically reorganized so that power is shared equally among all trustees. He explains that traditionally, boards of trustees are organized hierarchically, with a single leader at the top of the chain of command. This has at least three disadvantages: The single leader has too much power and may be inclined to abuse that power, those below her find it hard to communicate honestly with her, and she has more responsibility than one can handle without hurting herself in the process—for example, by relying on stimulants like caffeine and nicotine to power through heavy workdays.

(Shortform note: Greenleaf’s suggestion that boards should be reorganized so that power is shared equally mirrors a management philosophy that’s gaining in popularity: co-leadership. The co-leadership philosophy maintains that it’s better to have two (or more) people in charge than one because it promotes diversity among those in power, supports new and better ways of thinking, and gives more people the opportunity to become leaders. Some research also suggests that co-leadership enhances profits, but note that this research is about organizations with two CEOs—not about organizations that divide power evenly among trustees).

Instead of the traditional organization, Greenleaf recommends that the board be composed of a group of equals who are represented by a chair. The chair should be selected by the board of trustees on the basis of their belief that she’s completely dedicated to the institution’s success and capable of collaborating effectively with administrators. The chair’s responsibilities include closely overseeing the institution’s day-to-day management, ensuring that administrators meet performance goals, and gathering information the board needs to optimize the institution’s performance.

(Shortform note: While in Greenleaf’s formulation, the chair is just another trustee who also serves as a representative of the board, traditionally the chair wields much more power and influence. For example, their votes typically count more than other board members’ votes, and other board members may be inclined to follow the chair’s lead when making policy decisions.)

Why You Need an Institutional Trustee for Your Organization