What can a Non-Executive Director do for me?
Need an alternative view on a big decision? Want to raise your consultancy’s profile? Planning for a sale? Developing a new vision and strategy and need to test it? Is there an impasse between the executive directors that needs unblocking? Concerned no-one is scrutinising your accounts?
A non-executive director (NED) can help the leadership team address these challenges and more. And all for a modest outlay.
What is a non-executive director?
A non-executive Director is a member of the board of directors, but is not part of the executive management; NEDs stand back from the operational running of the business. NEDs have the same legal responsibilities and potential liabilities as the executive directors, but importantly they do not have to be shareholders in the business.
So what does an NED do?
The role of the NED is best described as a ‘critical friend’ – someone who takes their responsibilities towards the company very seriously but who is also able to stand back and give an objective and critical perspective on what’s happening in that firm.
These responsibilities fall into four areas:
Strategy: he or she constructively challenges and contributes to the company’s vision and strategy. An NED uses their experience to develop and enhance the strategy to ensure the company has a clear, robust and realistic plan for the future.
Performance: The NED monitors and questions how well the firm’s leadership is meeting the agreed objectives.
Risk: The NED ensures that the major risks affecting the company are identified and managed. Financial risks and control of those risks is a particular focus. A good NED will be able to interpret and question company accounts and financial metrics.
People: The NED plays an important role in agreeing executive directors’ remuneration and also in succession planning and appointment of the executive management.
Importantly the NED’s first loyalty is to the organisation itself (and the shareholders of that organisation) not specific individuals working within that organisation.
Who makes a good NED?
The NED needs to be someone who understands the difference between an executive and non-executive role. They know it’s the executives’ job to run the business; it’s the NED’s job to ensure the right strategy, risk controls and management team is in place. Ideally the NED will have some experience of the design business. The NED is not a decision-maker, so he or she needs excellent communication and influencing skills.
A good NED is also an ambassador for your company and whilst he or she isn’t a new business developer, the NED usually has a wide network of both client and industry contacts that can be mined for the benefit of the firm. The NED should be an engaging and confident networker representing the firm to all important groups of stakeholders.
And the best NEDs are committed and confident, not egotistical. They must have strong principles and act as a conscience for the shareholders, whilst contributing in a constructive way. The NED must be ready to ask difficult questions, be persistent and stimulate debate.
Finally the role of an NED can be demanding. The NED needs to take the time to understand their organisation and its challenges. They also need the energy and resilience to fulfil the role, especially when the going gets tough.
How do I appoint an NED?
The first step is to articulate what skills and experience you need on the Board to help you grow the business. Then draw up a job description and conduct a search – there are experienced NEDs listed on the DBA’s Experts Register. The existing Board should interview the candidate NEDs choosing someone with not just the right technical skills and experience but also someone who has a good cultural fit.
About: Adrian Day
As a qualified Non-Executive Director with the Financial Times’ Post-Graduate Diploma, Adrian has 30 years’ experience as a Director/Leader in design firms including Landor, Siegel & Gale, Further, Ziggurat and Uffindell.
Adrian is an accredited member of the DBA Experts Register.