{"id":616,"date":"2015-06-30T20:39:42","date_gmt":"2015-06-30T20:39:42","guid":{"rendered":"https:\/\/carolinegourlay.wordpress.com\/?p=465"},"modified":"2020-09-08T16:34:54","modified_gmt":"2020-09-08T16:34:54","slug":"do-you-need-a-ned","status":"publish","type":"post","link":"https:\/\/www.carolinegourlay.co.uk\/do-you-need-a-ned\/","title":{"rendered":"Need a NED? How to avoid the pitfalls when engaging a Non-Executive Director"},"content":{"rendered":"

A good non-exec director can do wonders for an SME,\u00a0bringing experience and a different perspective, acting as a sounding board and challenging the exec team to ensure they focus on the right stuff: the important not the urgent, the long-term strategy, good corporate governance and so on. And yet companies don\u2019t always seem to get non-exec appointments right.<\/p>\n

I want to explore some of the pitfalls, but first let\u2019s go back to basics:<\/p>\n

<\/h2>\n

What makes a good NED?<\/h2>\n

Sometimes NEDs are recruited for their specialist skills and knowledge or their contacts and reputation in a particular market. Other times, companies just want a generalist who can bring a different perspective. In either case, however, there are certain characteristics which seem to determine success. David Doughty of Excellencia<\/a>, a seasoned NED, who also works on board effectiveness and trains NEDs, has identified ten characteristics<\/a> of good non-execs, which, perhaps, could be categorised into three key areas:<\/p>\n

\u2022 Intellect
\n\u2022 Integrity and commitment
\n\u2022 Inter-personal skills<\/p>\n

<\/h2>\n

Intellect<\/h3>\n

As David points out, NEDs, who dip in and out of businesses, need to assimilate a lot of information quickly and get to the heart of the matter. They need to be able to stand back and take a strategic perspective and their judgement needs to be sound.<\/p>\n

Integrity and commitment<\/h3>\n

Obviously, you want a NED with high ethical standard who\u2019ll ensure sound corporate governance and speak up if something goes awry. You also need someone who is motivated to do the necessary preparation (reading board reports and so on) and is not already so committed elsewhere that they have little time or attention for your company. On the other hand, a NED needs the discipline to understand the boundaries of the role and resist the temptation to start actually doing stuff.<\/p>\n

Inter-personal skills<\/h3>\n

NEDs need exceptional relationship building skills. They need to be able to find a place in an established team with people they probably see a few times a month at most. They need to be able to support and challenge; to handle conflict maturely and know how to build consensus. It\u2019s a role that requires the credibility of a good leader but it\u2019s no place for a huge ego.<\/p>\n

Finding this combination of talents is a tall order, so it\u2019s not surprising that companies don\u2019t always get it right. Here\u2019s how to avoid some of the pitfalls:<\/p>\n

Understand how to use a NED well<\/h2>\n

Lord (Michael) Grade once likened NEDs to bidets: \u201cNo one really knows what they\u2019re for but they add a touch of class\u201d.\"bidet\"<\/a> If you just want a NED as a status symbol and expect them to simply turn up, say something erudite but unthreatening, then approve your plans, then you might as well not bother (unless you work for a plc, when you will have bidets imposed upon you). If you can\u2019t tolerate challenge and rarely listen to anyone else\u2019s ideas, then, frankly, you don\u2019t deserve the services of a good NED. It takes maturity on the part of the exec team (particularly the MD or CEO), as well as on the part of the NED, to make the relationship work.<\/p>\n

Be clear about what you need<\/h2>\n

As with all appointments, the clearer you are about what you are looking for, the more likely you are to find it. Do you need someone with particular expertise or knowledge to plug a skills gap on the board? Is it really important that this person has contacts and a good reputation in a particular market? Or do you just need someone to bring a different perspective and help you stay on track?<\/p>\n

Don\u2019t be over-awed by a big CV<\/h2>\n

If someone\u2019s had a \u2018big job\u2019 it\u2019s natural to be impressed. Maybe they built a successful company from scratch or had a senior corporate role where their annual budget was ten times your company turnover. But that doesn\u2019t automatically make them great NED material. They may have an autocratic management style and be used to people falling in line with them. They may have been successful by staying close to the day-to-day operation and not know how to make sense of a business from a distance. In the worst case scenario, their previous company may have been successful despite them.<\/p>\n

Don\u2019t over-emphasise sector experience<\/h2>\n

A good NED will be able to get to grips with the key issues facing a business whether or not they\u2019ve worked in that sector before. Sure, they\u2019ll have to learn about the sector but if they have a strong intellect and the commitment to do so, that shouldn\u2019t be an obstacle. Too many companies seem to look for someone who has worked in an almost identical organisation to their own, but then miss out on the fresh perspectives and insights of someone from outside their own world.<\/p>\n

Be wary of people who are too close to you<\/h2>\n

It\u2019s not unrea\"golfers\"<\/a>sonable to start with your own network when looking for a NED, but be objective \u2013 is your recently retired pal from the golf club really likely to have all the skills you need? And if he does (let’s be honest, it\u2019s probably going to be a \u2018he\u2019 in this instance, isn\u2019t it?) will he be able to challenge you? And what happens if you fall out? You need someone you can work with but who can also keep a degree of distance.<\/p>\n

 <\/p>\n

Use a rigorous assessment process<\/h2>\n

There seems to be a reluctance in some companies to put NEDs through the same selection processes as other directors. Maybe they\u2019re seen as less important or maybe there\u2019s a degree of deference shown to these (generally) older, more experienced people that makes assessing them feel inappropriate. But the quality of non-execs varies and, as with any appointment, you need to know that a) you\u2019re getting a good \u2018un and b) they\u2019re a good fit for your organisation. Naturally, I\u2019m going to suggest using a psychologist <\/a>to find out what they are really like, but whatever you do, do more than have a chat over dinner.<\/p>\n

As always, I’d be interested to hear your views: caroline@carolinegourlay.co.uk.<\/p>\n

I really must thank Ian Parker of verve4growth,<\/a> who knows a thing or two about board effectiveness, for acting as a sounding board about this blog.<\/p>\n

Photo credits<\/p>\n

NED: OEA -OAS<\/a><\/p>\n

Bidet: Kevin Yank<\/a><\/p>\n

Golfers: Sue Cline<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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