In its new review of how group decisionmaking theory applies to the operation of a typical plan investment panel, Vanguard Investment Counseling and Research said investment committees are best at five to 10 members.

A properly sized group can take advantage of the power of a vigorous discussion and disagreement without getting bogged down in too many like opinions, Vanguard said.

“Heterogeneous groups appear to be highly important because they can broaden the experience of the group and engender healthy debate,’ the report said. “As such, investment committees should strive for member diversity in knowledge, skills, abilities, personality, attitudes, and demographics. Committee members who express different opinions can remedy the negative effects of groupthink, can reduce confirmation bias, and can ameliorate the polarizing effects of groups.’

If necessary, researchers said, the committee can rely on a “devil’s advocate’ or can simply invite outside members to attend and participate in meetings.

It’s also helpful to be able to rely on a number of people’s recall about how the company dealt with a particular situations in the past. “So, for example, solutions to problems or questions can often be solved when different group members recall how things were handled in the past,’ the study said. “In addition, group discussions can trigger recall of important memories in group members that would not occur when individuals work alone.’

Other findings include:

• Committees can facilitate the use of expertise by providing the group with background information about committee members by giving out resumes, bios, or curricula vitae every time a new member joins the committee, or at the very least once a year.
• Social loafing can be minimized when each member’s contribution to the group can be clearly identified, when group members trust one another, when involvement in group activities is high, and when members are made to feel personally responsible for their inputs and the group’s overall performance.

“Taking these steps cannot guarantee successful group decisionmaking,’ the Vanguard researchers concluded. “It is clear, however, that investment committees can improve their performance. By following basic guidelines when forming and operating their committees—guidelines based on fundamental research on group decisionmaking—committees can reduce the problems associated with group decisions while leveraging the full power of their members.’