Four tips for effective Non-Executive Directors
Alison Loudon CA, Chairman Consolidated Carriers Limited, and Kevin Lyon CA, Chairman, Mono Global Limited, share their tips on succeeding as a Non-Executive Director, ahead of the New ICAS Conference on 27 November.
A growing number of privately owned companies are bringing Non-Executive Directors (NEDs) onto the board. Which raises the question - why?
A critical friend
A new Board member has two great advantages over everyone else around the table. He or she can ask lots of questions in areas where the status quo has been accepted for years (always good fun) and bring a fresh perspective, supported by a very different set of experiences.
The key to the "value add" is to ensure that the fundamental issues are on the agenda, are debated openly and constructively, that decisions are taken - and that the business is moved forward. The role has often been described as that of a critical friend. Here are four important roles of the Non-Executive Director.
1. Get agreement on strategic direction
The starting point should be to get agreement on strategic direction and how that strategy fits the market and competitive landscape. This does not need to be worded in business school jargon. A clear articulation is needed of where the business is trying to go and how the Board thinks it can get there.
2. Make sure the right resources are in place
The second issue is then to test that the right resources are in place to support and deliver the plan – and when they aren't to make sure they are put in place. This clearly has to cover the physical assets of the business in terms of factories, shops or plant; the financial resources be it debt or equity; and the skills of the team. This final point has to start in the boardroom with an examination of whether the right people are doing the right jobs and can lead to difficult – but necessary – conversations about who is in the top team.
3. Provide support on problems and opportunities
A good NED should be on hand to advise on opportunities and/or problems, though the prime responsibility for this resides with the Chairman. The role of the CEO – covering vision, leadership, team building, motivation and running the business in all aspects - is the loneliest job in the company. It can be difficult for the CEO to confide in his team and he has no peer with whom to share his doubts. So the relationship between CEO and Chairman is key to the business and in addition to bringing business knowledge and sound judgement to the table, the Chairman's role must also cover mentoring and supporting the CEO.
4. Draw on your experience from all sectors
A common discussion is whether the NED needs to have relevant sector experience. There is no question that there are occasions when a deep understanding of an industry or an extensive contact book or network can be valuable. However there are also companies where that depth of knowledge is already in the executive team in spades and a different set of experiences are of more value. The ability to stand back from the issues and draw on experience from different sectors can often help the Board identify a new solution.
The effective NED must balance challenging and testing a Board with supporting and mentoring the CEO. While this is not always straightforward, it is critical to making a difference to company performance.