PRINCIPLE SEVENResponsibilitiesTo promote harmonious effectiveness <strong>of</strong> your investmentprogram, define the roles <strong>of</strong> the trustees, the investmentcommittee, the business or investment <strong>of</strong>ficer and staff, keydonors, and your consultants, in writing, and make certain that eachunderstands and agrees.- 28 -
ResponsibilitiesOur first six principles have beenconcerned with the kinds <strong>of</strong> planning,processes, and controls essential to aneffective investment program. Theultimate issue is execution. And thatdepends on allocation <strong>of</strong> responsibilities– our seventh principle.While you have an array <strong>of</strong> investmentmanagement firms implementing yourplan, you must make sure that youhave a clear organizational structure fordecision making and oversight withinyour organization itself.To avoid slippage or confusion, responsibilitiesshould be spelled out in an“investment program responsibilities”document that should be part <strong>of</strong> theinvestment policy.Completeness and clarity are important.Let all players make suggestions.Who’s in charge? Who is responsiblefor risk management? Who for liaisonwith the investment managers? Who iskeeping an eye on investment costs?What do those individuals have to doto prove the success <strong>of</strong> their efforts?To whom do they report? How <strong>of</strong>ten?The answers, <strong>of</strong> course, depend on theparticular nonpr<strong>of</strong>it and the talents <strong>of</strong>its people. The difficulties you mightencounter are also quite individual.In allocating responsibilities, it isimportant to fully evaluate thestrengths and weaknesses <strong>of</strong> the entireorganization and develop a clearunderstanding <strong>of</strong> the resources neededfor each decision. This is particularlyimportant in setting priorities fordecision making to assure that themost important decision has thehighest level <strong>of</strong> resources.For a foundation, the founder orfounding family could pose an organizationaldifficulty. How much responsibilitydo they want to take? It should bespelled out in the document. The family’snatural authority could overhangthe structure <strong>of</strong> responsibilities you setup. Having family members participateactively in development <strong>of</strong> the responsibilitiesdocument could help achieveclarification <strong>of</strong> their own roles.The investment committee typicallyplays the key role. The latest<strong>Commonfund</strong> Benchmarks Studyindicates six members make up theaverage investment committee, somewhatmore among community foundations.In nearly half the nonpr<strong>of</strong>itssurveyed, the investment committeehad members who were not trustees;among community foundations, 80percent included non-trustees.A diverse membership is desirable, butyou do want to have some memberswith investment knowledge andexperience. Among the committees <strong>of</strong>a typical board, the investment committeedeals with the most complexand specialized subjects. Special expertiseis required, but so is commonsense and a variety <strong>of</strong> viewpoints.Experience suggests a few pointers foran effective investment committee:◆ Keep it small enough to allowdiscussion by all members.◆ Four or five meetings a year shouldbe enough.◆ When a decision seems too difficultto reach, try referring it to a subcommitteeor consult an outside expert.◆ Seek knowledge from your investmentmanagers and other outsideexperts.◆ Strive to maintain continuity<strong>of</strong> membership, attitudes, andphilosophies.◆ Keep your board informed.As in any group effort, the strengthand character <strong>of</strong> the people involvedmake the ultimate difference. We canassume that all responsible participantsunderstand the nonpr<strong>of</strong>it’s mission andare committed to its fulfillment. Still,they have to make sure they know howto work together.- 29 -
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