The role of the non-executive director, and how to determine if they can benefit your business…
Non-executive Directors (or NEDs) are common within large organisations’ executive boards. The NED, as an outsider, can help bring a fresh perspective and vital insight into a business’ strategy – their objectivity and ability to see an overview of the whole organisation are huge assets.
NEDs are usually chosen because of their experience and knowledge, though not necessarily gained in that organisation’s industry. Transferable skills are important, as are the right qualities and commitment. Businesses are encouraged to have more than one NED but to not get carried away with their appointments – according to the Stock Exchange’s Combined Code, a balance is necessary to ensure that “no individual or small group of individuals can dominate the board’s decision-taking”. They believe that “non-executive directors should comprise no less than half the board.”
More than just short-term consultants, NEDs have the same legal responsibilities as a director employed by the organisation, and are invited to apply the same commitment as their in-house counterparts. Strategy is their focus, as is long-term direction and a steadying hand, rather than on day-to-day operational issues.
Given that their aim is to boost growth, should NEDs only see interest from conglomerates? Can a NED bring the same benefits and valuable advice to smaller businesses?
Ambitious companies looking for fast-growth are perfect collaborators for the NED. However, a company in this position should consider the following before jumping into any agreements:
What’s your goal?
Before you enrol a NED, you need to know what you want your business to achieve. What are your aspirations? What do you want the business to look like in a year’s, 5 years’, 10 years’ time? What will success look like? Are you planning to expand into different markets, or globally?
There’s not much point inviting a NED to bring focus to your strategy if there is no strategy there. Consider also, if you’re at the right point in your business’ journey to appoint a NED? An honest appraisal of your current position saves time on both sides.
What opportunities can they bring?
When considering which NED to work with, consider the opportunities they may bring with them. For example, can they open doors you’ve previously been unable to open? How well connected are they? What can they do for your business that another NED couldn’t do? Have they the right experience, earned at an appropriate level? What expertise do they bring as an individual? Do you need access to finance? Do you understand the help they plan to bring?
If they’re particularly connected, qualified and laudable, can you afford them, and what systems/measures can you put in place to ensure you get value for your money? Perhaps you plan to award equity in your business to the NED, rather than pay a day rate or alternative; if this is the case, consider that a NED is no longer objective and impartial once they have shares in your business, which could significantly influence the advice they give you.
Are they the right fit?
The best NEDs nudge and steer the companies they work with and challenge the owners’/directors’ thinking. Whilst it’s always nice to hire the person you get on with the most, will they still drive you in the right way, or will you spend more time talking about what you have in common outside of work, off topic? What dynamic will they bring – can they be the trusted, confidential adviser you’re looking for?
Though clashing personalities are not advisable, constructive criticism and the stance of devil’s advocate are both necessary and motivational. Ascertain the kind of support you need to progress, not what’s the easiest and most palatable, and consider whether the NED can deliver this. Ensure you have a contractual agreement that covers expectations from both sides, spelling out any particular issues or boundaries.
Can they commit?
How many hours a month are they able to devote to the growth of your business? What restrictions do they bring? Are they committed to the same goals you are? How long will they be around? Without the same vision and understanding of the work needed to be done, the NED may not prove to be the driving force your business needs.
There’s no doubt that a NED and their support can prove key factors in a thriving business, a short-cut to greater success. As with all business decisions, however, doing your homework and forming plans before jumping in will pay off in the long run.
Angela Sabin is a coach and senior practitioner with over 20 years’ experience of coaching senior management and directors, helping them to take control of their careers or to help them deliver better results. Contact Angela on 01302 220021, or via email@example.com.
Thanks to arztsamui at freedigitalphotos.net for use of the image.