Jul 082020
 

non-executive director

One of our NEDworks subscribers recently sent us an e-mail asking where all the well-paid, private sector NED roles are?

There were just three private sector vacancies last month .. Is that all the vacancies from across the whole country? Am I missing something here?

If it is, what are you doing to improve this position as it is hard to believe that this represents the market for NED roles for the UK?

The truth is that the vast majority of private sector businesses do not have any NEDs at all and those that do rarely advertise vacancies – preferring to select from known associates and trusted advisors.

That is why most of the vacancies which are advertised are from the public and voluntary sectors – and competition for those is very keen.

Most of our members who have secured private sector NED roles have done so through the tried and tested route of working with businesses as a consultant, coach or mentor in order to establish themselves as trusted advisors before then naturally progressing to the board.

Despite what some of the other NED networks will tell you there is no secret seam of lucrative private sector NED roles that only they can unlock

What we advise is to establish yourself as an experienced NED on a public or voluntary sector board (many of which these days are paid roles) whilst cultivating your network of private sector businesses.

So here are some Dos and Don'ts to help you get started in finding your ideal NED role:

Do

  • Find out exactly what is involved in being a Non-Executive Director, Trustee or Governor. Even if you have served as an executive board member it pays to brush up on your knowledge of Corporate Governance - the Excellencia How to become a Non-Executive Director course is an excellent place to start (you can compare NED courses on the NEDworks website)
  • Spend some time on your CV and letter of application - being a Non-Executive Director requires a different skill-set to your executive roles so a NED CV will be different - there is advice on writing a CV on the NEDworks web-site
  • Make sure your LinkedIn profile is up to date and features any current or previous NED, Trustee or Governor roles you have had.
  • Spend time on your LinkedIn profile statement and headline
  • Expand your LinkedIn network - abandon any idea of only connecting with people you know well or have met in person - upload your contacts to LinkedIn and connect with as many as you can. Accept invitations from recruiters - especially those that specialise in NED roles.
  • Search your LinkedIn network for contacts who already have NED roles and message them to ask how they got them - particularly private sector roles.
  • Take up the opportunity to speak with the Chair or recruiter if it is offered - it is an opportunity to find out more about the role and you will be remembered when it comes to shortlisting for interview

Don't

  • Restrict yourself to only considering private sector roles - public and voluntary sector roles are advertised much more often, public sector sector NED roles are often remunerated at similar levels to the majority of private sector roles and public and voluntary sector roles offer excellent Corporate Governance experience.
  • Assume that because you have had a successful executive career you will be a shoe-in for a NED role - there are many more applicants for NED roles than there are positions available even for pro-bono roles so it pays to take applications seriously with a well-written CV and letter of application.
  • Be put-off if you don't get an interview after your first few applications - persistence is required in order to secure the right role. Always ask for feedback after an unsuccessful interview to help you with the next application.
  • Underestimate the time commitments for a NED role - where an advert says 1 to 2 days a month you can double or treble that figure in order to do the job properly especially if it is your first NED appointment - being a Non-Executive Director involves much more than just turning up for the board meeting and trying to read the board-pack as you go - most of the work is done outside the board-room and you need to allow sufficient time.
  • Think that you can replace your executive salary with NED fees. Recruiters will tell you that you can typically earn £1,000 per day as a NED which sounds reasonable but you can only realistically take on between 3 and 5 NED appointments at any one time and the time commitment is likely to be much more than advertised (see above)

Being a Non-Executive Director can be extremely rewarding, emotionally engaging and intellectually stimulating, especially as part of a portfolio career but it does require a significant investment of time and effort to establish a NED career.

Well-paid, private sector, NED roles are out there but there is no magic short-cut or secret path to finding them.

Good luck with your search, let me know if I can help you along the way and here's to making 2020 the year you take the first steps in your NED career.

David Doughty david.doughty@nedworks.net

Jun 192020
 

When driving a car or riding a motorbike, what use is data on the performance of the engine for the last hour vs. the previous three months? Yet most reports for business are built on detailed analysis of historic or specific deals, while the sales teams are focused on closing future business. A commercial dashboard needs to support moving the business toward the desired goals whilst enabling the monitoring of key performance metrics: the analogy of a car dashboard, providing data on speed, engine temperature, and remaining fuel, for example, enables informed decision-making and more accurate predictions of future success, i.e. whether arrival at the destination will be timely; whether there is enough fuel for the journey.

As a director, is the board getting the right data to create the right conversations and learning?

Unlike a motorbike, which does not provide historical data, commercial teams and boards are likely to be working with a mix of sales reports and dashboards: what each person sees will depend on the type of business and their role in the organisation. Non-Executive Directors, who are not in the business on a daily basis, will be forced to rely on both forms of data, to enable a clearer understanding of how the commercial teams are operating, to learn what factors are driving their successes and failures, and to ensure the business is learning from its activities. In truth, most SME’s have grown by chasing the business directly in front of them, fixating on the next order and pushing the business harder, not always stopping to learn the lessons of both failure and success. This simple approach which delivers results in the short term, driving high earning sales teams to keep running and deliver without taking the time to reflect and improve, is not sustainable as a longer-term strategy.

Sustainable success requires a regular cadence of reflection and analysis: the business needs to look at what is working, as well as what could be improved, to develop insights that drive positive change. Most importantly, directors need to be sufficiently well-informed so they can ask the right questions at, or even before board meetings, so as to maintain the level of scrutiny of the commercial team their role requires.

Below is an example dashboard for a commercial team selling a generic product or service. Taking a little time to review the data presented here is a useful exercise in identifying potential problem areas of performance: the inquiring reader should come away with a minimum of four questions for the commercial team come the next board meeting.

There are a range of questions which could be asked, none particularly right nor wrong. Here are four example areas which certainly merit further discussion with the appropriate commercial function:

  1. Marketing: The highest average contract value is generated by ‘Paid Leads’ at £5.35K. These leads however only constituted 10% of the total lead activity - what might be the result of increased focus on paid leads?Why focus here? The average value of a converted lead is £3.86k; the value of the paid leads is higher at £5.35k . An increase in paid leads of 100 might reasonably be expected to return potential additional sales of £149K
  2. Sales: The average sale cycle length is 22.2 - 40% of this time is spent on the Opportunity and Proposal stages; the time spent in Negotiation is equally long. What are the reasons for the protracted period of negotiation? How might we change this to re-balance how the commercial team is spending its time? How might our customers react?Why focus here? Selling adds value in any negotiation; to reach an agreement, value is traded between the vendor and the customer. Spending more time selling should increase sales and profit equally.
  3. Sales: There has been an 11% increase in the length of the selling cycle in the last period but only a 2% increase in the average size of the deal. What is slowing the selling process? Why is the deal size is not increasing at the same rate?Why focus here? Is there an internal process that is stopping the company from closing opportunities and increasing sales? The current data suggests that some factor is causing the time and effort required to close a sale to increase significantly, but with little or no increase in reward (revenue). Understanding the cause of this phenomenon - which needs urgent attention - would be of paramount importance to the business’ future success.
  4. Sales: The Follow-up Contract Rate of Isabell and Kaleb drops off significantly after the 2nd follow up call when compared with Ryan or Steve. How is this affecting their sales performance?Why focus here? Most business is won through understanding the need, selling the value, and then the tenacity of the commercial team. Isabell and Kaleb appear to be very active for the first few contacts, but they then seem to stop connecting with the customer. What is the result? Are sales being unnecessarily lost? Might training and coaching be required to get could get them back on-track? The number of contacts required to successfully close a sale is often underestimated by sales and non-sales people alike: below is a useful statistic which clearly underlines the importance of commercial-team-tenacity:

If you have any questions or comments, please feel free to share them at www.Sales-Hacks.ltd - we can always learn from each other.

The key to a good dashboard or sales report is its alignment with the goals of the company and its utility in measuring the output of the activities that enable the goals to be achieved. The example dashboard has 6 data points enabling the sales teams and their leaders to quickly and easily understand how they are performing, and by interrogating the data most boards can promptly answer the key questions concerning company performance: whether the company is heading in the right direction, and how likely it is that the company will achieve its goals. If the answer to either of these questions is negative, or worse still, the commercial team cannot answer the questions, the subsequent discussions are likely to be trans-formative for both the company, its employees and its directors.

At Sales-Hacks we are supporting NED’s , boards and their sales leadership; to use their data to drive the business harder while allowing all levels to understand the language and key topics to support SME’s and large corporate organisations to understand each other and align. For more information visit www.Sales-Hacks.ltd

As part of our work we have partnered with Excellencia Limited delivering online and face to face training courses for Boards or NED’s on ‘Sales for Non-Sales Directors’ for more information please visit www.excellencia.co.uk

Jun 182020
 

Before we answer the first question, here’s another: what percentage of companies have marketing strategy as an item on the agenda of their regular board meeting? 75%? 50%? It’s tough to guess, but probably fewer than you might think. So here’s a simpler question: how frequently is marketing strategy discussed at a board meeting which you regularly attend? Every meeting? Every other meeting? Once per year? Once ever?

Based on personal experience and peer-to-peer discussions, it seems that marketing strategy is an infrequent topic on many boardroom agendas. But why is that the case? Perhaps because it sounds like something Jessica Hynes’ character, Brand Consultant Siobhan Sharp of 2012 and W1A fame, might come up with? Getting strategic about marketing? If that was the image boards had of marketing strategy, it would be unsurprising to learn that many directors probably don’t get as involved with it as they should, and instead happily abdicate that responsibility to another.

Or perhaps it is that many directors don’t really understand what marketing strategy/strategic marketing is, or how it is different to branding or advertising, and the concepts and jargon of strategic marketing are so scarily lacking in familiarity that they would rather sit still and say nothing, unable to make even the most minimal contribution to the discussion, than venture a potentially incorrect opinion, and appear foolish or ill-informed.

Either way, abdication as an approach has its dangers, as it potentially places those directors in too-remote a position to assert any influence or control over a critical element of the destiny of the organisation they are leading, blunting their effectiveness and diminishing their value. Indeed, what is required of directors is quite the reverse.

Strategic Marketing: Why NEDs and boards need to be in-the-know

Back to our first question, then: when is it okay to leave marketing to the Marketing Department? The answer is…never! Especially if you had happened to be talking with the late David Packard, co-founder of Hewlett-Packard (now more familiar as HP), as it was he who coined the following:

“Marketing is too important to be left to the Marketing Department”

This quote - from which the title of this piece was paraphrased - neatly illustrates Packard’s view of marketing, which he saw as the responsibility of everyone throughout the business, as it is the core around which the business is built. What Packard was really saying, of course, is that the business needs to place serving its customers at its core, because that is what marketing is really about. This view is echoed by another quote reproduced here, this time from Peter Drucker:

“Marketing is not only much broader than selling, it is not a specialized activity at all. It encompasses the entire business. It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view.”

Bringing these ideas together with the central role of the board of directors - to safeguard the future of the business for which they are responsible - leads to the inevitable conclusion that, as marketing is critical to the long-term sustainability of that business, the directors are therefore ultimately responsible for it, also. This means that the directors need to be familiar with the central concepts of strategic marketing, so that they can ensure the marketing strategy the business is pursuing aligns with its vision and overall strategy with respect to achieving its objectives, and so that they can satisfy themselves of its likelihood of success; and by implementing appropriate measures and controls, enable corrective action where necessary to be swiftly taken.

For existing executive directors, especially those with a commercial background, this is probably not-too-challenging a task, as they are likely to have come across elements of marketing strategy in previous roles. But what about non-commercial directors, such as finance or HR professionals? And possibly more challenging still, what about Non-Executive Directors, especially those joining a board as a lay member. For boards and new NEDs alike this presents an unwelcome challenge: boardrooms require increased diversity to remain relevant, and need to attract out-of-sector NEDs representing a broader range of stakeholders; New NEDs want to add value to their employers, and also perhaps to make themselves more attractive so as to secure additional appointments, as they seek to substitute a portfolio career for the daily grind of the nine-to-five.

Who needs to do what, and when?

There is an element of joint responsibility here, as well as one of urgency: Chairs of existing boards, for whom board effectiveness is a measure of performance, are perfectly positioned to identify knowledge gaps and observe low-levels of contribution during meetings from both executive and non-executive directors, and can therefore propose actions to address these issues, such as organising training for the board, to be delivered by a suitably-qualified provider or training company. NEDs, both new and existing, need to be prepared to invest in growing their portfolio career, and should seek out opportunities for personal development to make themselves more attractive to boards, actively addressing any areas of inexperience or knowledge-gaps, so that they can present more of a well-rounded business profile to recruiters and chairs alike.

In closing, we revisit an old adage often attributed to Abraham Lincoln:

“Better to remain silent and be thought a fool than to speak and to remove all doubt.” 

Whether or not it really was Lincoln who spoke the words, their meaning is clear: better not to contribute to a discussion when you don’t understand the topic. Unfortunately for directors, silence is not a viable option, as a meaningful contribution is expected, if not at least desired, as part of the director’s fiduciary duty to the business, and in the eyes of the law, ignorance is no defence. This being the case, and as understanding marketing strategy must be the minimum expectation, NEDs and boards need to move swiftly to address knowledge gaps in this area. Only when the entire board fully understands the marketing strategy will the outcome of any boardroom discussion accurately represent the opinions of all of the directors, and any action chosen have been properly debated prior to reaching an agreement. Then, and only then, can it be said of the board that it functioned effectively, and of the directors that they truly fulfilled their obligations.

Duncan Hall is the founder of Experigy Ltd., a business growth consultancy specialising in Marketing, Sales, Customer Experience and Continuous Improvement. More information is available on the company website

He is also the writer of the "Marketing for Non-Marketing Directors" training course, which he delivers in association with Excellencia https://excellencia.co.uk/courses/director-essentials/marketing-for-non-marketing-directors/

Jun 062017
 

Institute of Directors commissioned report highlighted value Non-Executive Directors bring to family businesses

In 2015, then Ulster University post-graduate Caoimhe McGuinness explored the role of Non-Executive Directors (NEDs) in SMEs in Northern Ireland in a report commissioned by the Institute of Directors.

Interviews were conducted with executives and non-executives on company Boards including family businesses, and every Director interviewed felt the NED contribution undoubtedly added value to the firm, with most believing the NED role helped improve profitability.

The key differentiator between a family business and other private sector companies tends to be the breadth of experience round the Boardroom table. A family firm often grows organically and family members who join may not have benefited from working in another company or from specific training in running a business. While this isn’t of itself a handicap to business success, it can result in a narrower view, which could limit growth potential.

And that’s exactly where an independent, NED can add value to a family business.

Strategy

Strategy formulation was considered one of the most important roles a NED plays. Directors often get caught up in the day to day management of the company so an independent outsider with time to devote to developing a strategic plan can be extremely valuable.

A NED can act as mentor providing ‘wise counsel’ to the executives, particularly the Managing Director, offering a ‘shoulder to cry on’ and providing advice from someone who understands the business but is not involved in day-to-day operations.

Challenge and credibility

When it comes to Boardroom decision making, sometimes it takes an outsider to challenge the decisions a Board is making, and to question the potential impact on the health of the company. This is why the NED needs to maintain their independence. It is worth noting that the majority of respondents in the IoD research stated that the NEDs had helped them greatly by forcing them to arrive at decisions faster, ‘pushing them over the final hurdle’.

The presence of a respected and competent NED on a Board helps enhance the company’s reputation and credibility; which is particularly beneficial when it comes to sourcing external financing. A competent NED will also keep the Board right on issues of good governance.

Finding your NED

I’ve referred several times to independence and competence. These qualities should be at the forefront of your mind when you are looking for a non-executive director for the family Board. You also need to think about the gaps in the current Board’s experience, knowledge and contacts.

It might be easy just to approach a family friend or your old bank manager, for example, but the choice of a NED should be considered with the company’s strategy in mind. If, say, you’ve never exported and want to grow the business in that way, you’ll want someone with experience of overseas markets. Or if the company has grown quickly but your structure and governance procedures haven’t changed, then a NED who has the IoD’s Chartered Director qualification will have the necessary experience and skills.

IoD Northern Ireland’s NED Register already contains the biographies of over 30 potential NEDs. Everyone included has undertaken training in good governance, many are Chartered Directors or hold the IoD Diploma in Company Direction, and all are committed to continuing professional development. Find out more about the Register at www.iodni.com/the-ned-register IoD can also identify potential NEDs not on the Register if you can’t see anyone with the experience you need.

Jan 262017
 

Yes, believe it or not, if you have a reasonably good appreciation of business, corporate governance and sustainability risk, you can offer valuable support to Boards of private companies, charities and others. How?

sunsetWell, you need to have a good appreciation of what Corporate Governance is! You may be familiar with GRI's Governance pages. Or you may be aware, and have used, the governance indicators from the SGI. Alternatively you may know about sustainability as a set of "ESG" issues - environmental, social and governance. This is the language of the financial and investment community and is commonly used on listing rules in stock exchanges.

But I found that the How to become a Non-Executive Director course run by David Doughty at Excellencia is a great way to improve your chances of tailoring your skill set to benefit Boards, and find organisations to approach.

"A six year old could be a good NED, it's about taking a fresh angle, thinking creatively"

The course took place in Bristol one wintry day. We learned about the NED role, Directors' duties and liabilities, NED skills and case studies, and how to secure a role. We also learned that most practicing NEDs don't fully understand the role of a NED (allegedly).

"A non executive director was a bit like a bidet - no one knows what it does, but it adds a bit of class" Michael Grade, former chair, BBC

But business sustainability professionals naturally have a strong moral compass (allegedly), and as long as they understand that they are there to support the success of the company and its Board then they can be of benefit.

NEDs and Directors have the same liabilities but different responsibilities. Independence of NEDs means they can be the fresh pair of eyes and ears to support (i) the way the company meets its commercial objectives and (ii) the effectiveness of the Board.

We learned that Boards often forget that one of the key motivations for Governance is ensuring the availability of human resources (not just financial resources). Sustainability practitioners understand business success from a wider perspective (sometimes called People Planet Profit), and HR quality, safety and metrics are core to their work.

Also, we learned that many Boards may see financial risk as their highest risk, but in fact it's not. Reputation is the biggest risk factor. Sustainability professionals understand how different functions, operations and performance can affect reputation (and market cap) as a result of impacts right across the 'value chain' of a company. You want examples? Give us a call!

Also, we learned that Board composition needs to be diverse. Not just ethnicity and gender. But backgrounds, levels of creativity, thinking out the box, risk perspectives from different quarters are all apparently of use to a Board (they just may not realise it though!).

And we'll not forget the statutory duties of a Board with respect to legislation relating to health & safety, environment, corporate manslaughter, anti-bribery, modern slavery... Sustainability people live and breathe this.

The Companies Act 2006 also is hot on ensuring the success of a company accounts for long-term decisions, supply chain responsibility, environmental impact, community impact and reputation (for example). And the duties it confers are owed to shareholders AND stakeholders. Stakeholder engagement is so core to sustainability approaches that it's good to see this in the Act.

So, there are plenty of good reasons why sustainability folk can help a Board. In Bristol, we all thought that if you don't have the qualifications that companies and recruiters list in NED vacancy notices then perhaps they haven't fully understood what's required of a successful Board themselves! Maybe they have, but it doesn't hurt to ring them up and probe...

And if you read the FT, you may have read that NED is role for which no one is qualified.

"The list of attributes required of a non-executive director is so long, precise and contradictory that there cannot be a single board member in the world who fully fits the bill" FT 2013

So, to recruiters and Boards out there, think you know what you need? We learned that it's worth double checking. We look forward to supporting your Board!

Alex Nichols

Oxford, 2017

About the Author

Alex Nichols

Alex Nichols provides Sustainability and Corporate Responsibility services for a positive business impact

  • 20 years of professional sustainability management consulting experience.
  • Solid international experience in sustainability strategy, reporting, materiality, stakeholder engagement, assurance, training delivery.
  • Clean technology marketing and promotion.
  • Deep working knowledge of the GRI framework and other reporting guidelines and standards.
  • Experienced trainer in certified sustainability management courses
  • Diverse sectors including automotive, construction, mining & metals, paper & pulp, waste, energy, food & beverage, rail, tobacco and manufacturing.
  • Successful industrial, NGO and government projects.
  • Global track record: Europe, Turkey, Brazil, Jordan, Malawi, UAE and Australia

Jan 152017
 

When I left the NHS five years ago, becoming a non-executive was just not on my bucket list.

Mandy Wearne Non-Executive DirectorAlthough I am an NHS lifer, when I left, it was to set up my own health business with a friend and frankly it has been a blast! We have had our ups and downs but on the whole a move from the trials of public sector life, was welcomed.  My own business has however given me a different perspective on public service and I think I will be a better NED for it.

My entry point into the world of non-executive recruitment has really come from other people. When I think back over my career that seems to have happened a lot! Someone has said – ‘you'd be good at that job’ and the next thing I would take a pause from what I was doing, check it out with people I rated and the next thing I would be applying for another challenge.  So my first tip would be, if you are not sure about applying or have not had any luck so far, listen to what your networks are telling you and test it out with people you trust to give you a straight answer. A NED post may or maybe be for you.

Mandy's tips for applying

  1. Brush up your CV
    You can get more information about writing a NED CV here
  2. Get to know NED recruiters
    It pays to build relationships with specialist recruiters - and don't forget to ask for feedback
  3. Make it personal
    Choose a NED role that you can be passionate about

So what are my tips about applying? First, brush-up your CV. Make sure your achievements are FAB. By that I mean, think about your career achievements in terms of ‘Features’, ‘Analysis’ and ‘Benefits’. Can you clearly describe what you did and what you achieved? Can you quantify it? Can you clearly attribute benefits and to who and what? This really helps when you are asked at interview ‘tell me about’ or ‘can you give me an example of when’…

My second tip, the NHS NED recruitment is normally through a recruitment company. Get to know them. If needed, invest in a meeting with a recruitment consultant. They will be able to help you present yourself in the most positive way. More importantly, if you get to a first level interview with them, no matter the outcome, get their feedback. It will really help your interview or to steer you towards future applications.

My final tip is ‘make it personal’. I know being a NED in the NHS is going to challenge me but the NHS is in my soul and has played an important part in who and what I am. It will require big dollops of energy and resilience and a new style of leadership from me. So whatever direction you go in, make sure you choose a NED role that you are passionate about. For me, I am returning to where my NHS career started. The timing is right; it feels a bit like coming home.

Mandy Wearne

January 2017

About the Author

Mandy Wearne MPH, RHV, RM, RN, Dip Nursing (dist)

Non-Executive Director at Aintree University Hospital NHS Foundation Trust

Company Director at Inspiration NW

 

Feb 152016
 

If you are a Non-Executive Director are you a guinea pig or a highly trained professional?

Guine Pig Director

Over 130 years ago, in the 1870s, company directors were not very highly regarded. In 1871 Temple Bar magazine refers to them as “Guinea pigs” – “the pleasant name for those gentlemen of more rank than means who have a guinea and a copious lunch when they attend board meetings”

This derogatory term for a board member persisted. In 1895 A J Wilson said “A man who lives by getting himself placed upon the Boards of a number of companies whose business he can have neither the time nor the qualifications to assist in directing, is a ‘guinea pig’.”

They even coined the verb ‘guinea-pigging’ to describe the practice of acting as director of a company for the sake of the guinea fees. It was said that a large number of the ‘bubble’ company boards of the 1928 boom were packed with ‘guinea-pig’ directors.

Fast forward to today – it is 22 years since the publication of the Cadbury report which established our current thinking regarding Corporate Governance and in that period we have made great strides in improving the way the boards of our listed companies are run in the UK.

The UK Corporate Governance Code, even though it only applies to listed companies, has been adopted by the boards of many large un-listed companies and is seen as a best practice guide to running a limited company.

One of the key principles of the Code is the importance of having Non-Executive board members and we have seen the rise in portfolio career directors, typically middle-aged men and women who have retired from their corporate careers and have taken up a number of Non-Executive board positions.

So, are these people “Guinea Pigs” or highly trained professionals?

Unfortunately, despite all the advances in Corporate Governance and the associated pre-eminence of the City of London as a global financial centre, the numbers of company directors who regard their role as a profession in its own right are few and far between.

It is 15 years since the Institute of Directors established its Chartered Director qualification and yet there are now just under 1,200 Chartered Directors sitting on boards out of a total of 5.6million directors registered at Companies House in 2014.

My own experience working with boards of all different shapes and sizes in the private, public and voluntary sectors would lead me to believe that the majority of company directors have no, or very little, training to equip themselves with the skills and knowledge necessary to undertake their roles effectively.

In terms of Non-Executive directors, we still seem to have a number of “Guinea pigs” – the titled, current or former politicians and the well-connected who occupy a string of boards without seemingly having the qualifications to do so.

It is a great thing that anyone with £17, an internet connection and 5 minutes to spare can form a limited company and become a company director – ease of creating a business entity is seen as a major competitive advantage when it comes to inward investment.

However, that does mean that we have a large number of company directors who are blissfully unaware of their duties, roles and responsibilities as set out in the 2006 Companies Act.

Being a company director requires much more than simply knowing the law, however. In the case of Non-Executives, the board’s ‘critical friends’, the skills needed are completely different from that of the executive director.

There seems to be a general disinclination for directors to get trained. Is this something to do with not wanting to be seen to not know everything? – or is there an assumption that if you have got so far in your career as to be appointed to a board then there is nothing more to learn?

Or, dare I say it? – is there a gender factor here? Are men less willing to admit that they need to learn what being a company director entails than women?

Certainly there is no shortage of training courses out there, from half day on-site training costing a few hundred pounds through to the 6 month Financial Times Non-Executive Director Diploma at £5,900 and the Institute of Directors Chartered Director MBA-level qualification at £12,500. (click here to see our directory of NED training courses)

So the question is – if you are a company director are you a guinea pig or a highly trained professional?

Jul 102015
 
non-executive director

Need a Non-Executive Director? Here’s how to avoid the pitfalls by Caroline GourlayCaroline Gourlay
June 30, 2015

A good non-exec director can do wonders for an SME, bringing 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’t always seem to get non-exec appointments right.

I want to explore some of the pitfalls, but first let’s go back to basics:

What makes a good NED?

NEDSometimes 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 seasoned NED, who also works on board effectiveness and trains NEDs, has identified ten characteristics of good non-execs, which, perhaps, could be categorised into three key areas:

  • Intellect
  • Integrity and commitment
  • Inter-personal skills

Intellect

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.

Integrity and commitment

Obviously, you want a NED with high ethical standard who’ll 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.

Inter-personal skills

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’s a role that requires the credibility of a good leader but it’s no place for a huge ego.

Finding this combination of talents is a tall order, so it’s not surprising that companies don’t always get it right. Here’s how to avoid some of the pitfalls:

Understand how to use a NED well

bidetLord (Michael) Grade once likened NEDs to bidets: “No one really knows what they’re for but they add a touch of class”.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’t tolerate challenge and rarely listen to anyone else’s ideas, then, frankly, you don’t 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.

Be clear about what you need

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?

Don’t be over-awed by a big CV

If someone’s had a ‘big job’ it’s 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’t 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.

Don’t over-emphasise sector experience

A good NED will be able to get to grips with the key issues facing a business whether or not they’ve worked in that sector before. Sure, they’ll have to learn about the sector but if they have a strong intellect and the commitment to do so, that shouldn’t 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.

Be wary of people who are too close to you

It’s not unreagolferssonable to start with your own network when looking for a NED, but be objective – 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’s probably going to be a ‘he’ in this instance, isn’t 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.

Use a rigorous assessment process

There seems to be a reluctance in some companies to put NEDs through the same selection processes as other directors. Maybe they’re seen as less important or maybe there’s 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’re getting a good ‘un and b) they’re a good fit for your organisation. Naturally, I’m going to suggest using a psychologist to find out what they are really like, but whatever you do, do more than have a chat over dinner.

As always, I’d be interested to hear your views: caroline@carolinegourlay.co.uk.

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

If I didn’t send you this blog directly but you would like to sign up to receive these random psychological musings on a regular basis, please register here. Thanks for reading.

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Photo credits

NED: OEA -OAS

Bidet: Kevin Yank

Golfers: Sue Cline

Apr 232015
 

working with the board

Challenges

Boards of organisations of all shapes and sizes in the private, public and voluntary sectors face new challenges due to the way society expects businesses and not-for-profits to behave.

These challenges have been brought about by the corporate excesses of the last century and the dramatic failures of the financial sector, particularly banking, around the world since the 2008 crash.

Whilst demanding a new way of thinking from boards and their directors, the new legislation and corporate governance code also provides new opportunities for coaches, mentors and consultants to work with boards, either on a one-to-one basis or as a team.

Keywords

corporate governance, directors, non-executives, coaches, mentors, consultants

The Challenge for the Board

Corporate Governance in the UK as set by the Corporate Governance Code and the 2006 Companies Act has a very different feel to it in the 21st century than in previous times when it was assumed that a director’s duties started and finished with making sure that shareholders received an adequate return on their investment.

Today, company directors are expected to create and maintain a sustainable business which creates wealth for its stakeholders, employees, customers, suppliers and shareholders and adds value to society at large – in sharp contrast to the ‘unacceptable face of capitalism’, asset-stripping, short-termism which was prevalent in the 80’s and 90’s.

In parallel with this sea-change in company governance we have also seen the rise of a new breed of leadership, reflecting the need to engage and empower employees rather than keep their ‘noses to the grindstone’ or their ‘feet to the fire’.

The Board’s prime purpose is to set and maintain the organisation’s Mission, Vision and Values. Often it is the values, which are seen as ‘soft and fluffy’ by a significant number of Small to Medium-sized Enterprises (SMEs) which cause directors the most difficulty.

Yet, as we have seen recently with Tesco, it is when a business loses sight of its core values (protests against new stores and boycotts by farmer suppliers) there is probably much worse to come.

The Challenge for the Coach

Given these changes in the ways boards are expected to work we can expect similar changes in the support that boards and directors require. For example, it is now commonplace for executives to have a personal coach or coach/mentor and the government backed GrowthAccelerator programme, now re-badged as the ‘Business Growth Service’, has funded a number of business coach interventions for SMEs with high growth potential.

CV Large

Boards are also looking for more permanent support in the form of Non-Executive Directors (NEDs). Looking at the skillset required to be an effective NED it is clear that there is a significant overlap with the skillsets of Consultants, Coaches and Mentors. Indeed many people have built successful portfolio careers by performing a number of these roles at the same time (though probably not with the same client).

Diagram 1: The Board support model

Board Support Model

Examining the four roles, it is useful to consider them in pairs, sitting at opposite ends of a spectrum, as shown above. On one axis we have the Coach / Mentor spectrum and on the other the Non-Executive Director / Consultant spectrum. That is not to say that the two axes are mutually exclusive – in any given situation, individuals can perform a number of roles, although one will always be dominant.

NEDs

In the UK unitary board structure, Non-Executive Directors have exactly the same legal duties and responsibilities as the Executive Directors. In a way, this is what gives them the authority to be listened to at Board meetings – they have just as much to lose as the executives if anything goes wrong.

They do, however, perform completely different roles to the executives, who are full-time employees with functional responsibility for running the business. Non-Executive Directors are part-time, ‘hands-off’, officers of the company who take a longer term-strategic view. The NED role is best summed up by the two words ‘critical friend’, and it is striking the right balance between challenge and support that makes a NED effective.

Coaches

In the context of supporting the board, a Coach is a catalyst – someone who will enable the board members, either individually or as a team, to develop and face challenges by self-realisation and awareness.

Mentors

Business Mentors provide guidance from the perspective of having ‘been there, done it and got the T shirt’. The end points of the Coach / Mentor continuum are well understood but there is much debate about where Coaching stops and Mentoring begins. In my experience, at board level, most support is delivered somewhere near the middle of the spectrum – with a mixture of coaching and mentoring as appropriate. This is likely to be delivered to individuals and the board as a whole.

Consultants

The prime difference between being a Non-Executive Director and a Consultant is that a NED has the same legal duties and responsibilities as all the other board members, whereas a Consultant only has a duty of care to deliver a specified programme of work.

There is a commonly held misconception, particularly amongst SMEs, that having a NED on the board is a cheap way of getting consultancy. NEDs should be wary of this and should try to avoid getting sucked in to a ‘hands-on’ role within the business.

There are times in the life of a business or not-for-profit when it is appropriate for everyone, including NEDs, to get stuck in to resolve specific issues – and there is nothing wrong with this, providing it is not a regular occurrence.

I have known cases where, in order to avoid conflicts of interest, NEDs have resigned from the board, undertaken a piece of consultancy work and then re-joined the board when the work was completed. This is a little extreme, but as with the Coach / Mentoring axis, in reality individuals may be asked to provide a mixture of Non-Executive and Consultancy support and the key is to make sure that the nature of the engagement is fully understood by the board with transparent arrangements for remuneration and performance management.

The Challenges of Diversity

Much is being made these days of the need for greater Board Diversity in terms of gender, ethnicity and disability. There is certainly a body of evidence to support the proposition that a more diverse board is more effective when it comes to making strategic decisions, and I fully support the move towards greater board diversity, especially with regard to having more women on board.

However, there is no clear agreement as to how this increase in board participation by women, ethnic minorities and those with a disability should be achieved. Countries such as Norway and Germany have imposed a legally enforceable quota for gender diversity, but even within these countries this move is not generally supported – especially by the ‘women on boards’ pressure groups. The feeling here is that women should be appointed to the board on merit and not as part of some box-ticking arrangement.

It is generally agreed that the make-up of the board should reflect the demographics of the employees, which in turn should be similar to the demographics of the wider community. The problem is that this is likely to take some time to achieve, and until there is a sufficiently large pool of diverse candidates to draw from, something more radical needs to be done to address the problem.

This is where our pool of talented, experienced, Non-Executive Directors, Consultants, Coaches and Mentors can play a significant role. Due to the ‘baby-boomer’ population bulge, there is a significant number of people with relevant commercial experience ideally placed to support boards as they become more diverse.

Unfortunately, it is these people, often white men, who are classed as ‘male, pale and stale’ and find it difficult to secure NED appointments. As the majority of boards are not diverse and the number of candidates with the desired characteristics, in terms of diversity, is low then this inevitably means that people will be appointed to boards without the necessary skills, experience, background or qualifications – thus reducing the effectiveness of boards which is exactly the opposite outcome to the one that is intended.

There is a solution to this problem and that is to use Associate & Alternate Director appointments to introduce new blood to the board without diluting its effectiveness. Combined with suitable support from experienced board members, this approach can achieve the aims of the board diversity agenda in an acceptable timescale.

Developing Associate and Alternate Directorships

An alternate director is someone who reports to a functional executive director and can take that director’s place at the board if the executive is unavailable. It is a way of ensuring that the key business functions are always represented at every board meeting and, by exposing non-board level staff to the workings of the board, it is a way of succession planning for the board.

Similarly, associate director appointments can be used to add new Non-executive Directors to the board in a non-voting capacity, so that they can gain valuable board experience and grow into the role rather than being thrown in at the deep end.

In both cases, formalised arrangements for coaching and mentoring the alternates and associates by the executives and non-executives are put in place with suitable one-to-one ‘buddying’. This arrangement benefits from the significant skills, knowledge, background and experience of the established directors to bring-on the aspirant directors before their first formal board appointment.

I’m a coach – get me in here!

Boards in general and SME boards in particular are reluctant to take professional advice. This may be due to the common perception that the meter is always ticking, racking up exorbitant bills whenever advice is sought form an accountant or lawyer. But it is essential that boards, in all sectors and of all sizes, take appropriate advice. Insolvency practitioners often tell me that if only businesses with financial difficulties had contacted them sooner they might have been able to save them.

This reluctance to seek external advice is particularly difficult for consultants, coaches mentors and those looking for non-executive director appointments. There are a great many boards out there, many of them are dysfunctional, and would benefit greatly from some external support. However, relatively few make effective use of what is available.

One of the key duties of a board is to manage the strategic risks inherent in the business. Effective risk management and assurance provides a framework for the board to determine how it should devote its time, paying particular attention to the areas where it should seek external advice and support.

The 2006 Companies Act

Companies have been around since Elizabethan times, yet it is the 2006 Companies Act, which for the first time, defines exactly what a company director’s duties are. One of the most important of the seven duties is the requirement for all directors to promote the success of the company.

The Act goes on to explain that this means having regard (amongst other matters) to:

  • The likely consequences of any decision in the long term;
  • The interests of the company's employees;
  • The need to foster the company's business relationships with suppliers, customers and others;
  • The impact of the company's operations on the community and the environment; and
  • The desirability of the company maintaining a reputation for high standards of business conduct.

Implications for future coaches and mentors

In pursuit of these objectives, with the goal of creating and maintaining sustainable businesses, boards can make use of the guidance and support provided by Non-Executive Directors, Consultants, Coaches and Mentors.

If you have the skills to work with boards in these roles, then it is vital that you have a thorough understanding of the issues facing boards in the 21st Century which are shaping the way in which businesses of all shapes and sizes in the private, public and voluntary sectors need to be run.

References

The UK Corporate Governance Code 2014

https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf

The 2006 Companies Act

http://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf

The Business Growth Service

http://www.greatbusiness.gov.uk/businessgrowthservice/

What skills do Non-Executive Directors need?

https://www.nedworks.net/non-executive-director-careers/skills-non-executive-directors-need/

The UK Model of Corporate Governance Institute of Directors

http://www.iod.com/intershoproot/eCS/Store/en/pdfs/policy_publication_The_UK_Model_of_Corporate_Governance.pdf

Is your board dysfunctional? Australian Institute of Directors Volume 11 Issue 11, 12 Jun 2013

http://www.companydirectors.com.au/Director-Resource-Centre/Publications/The-Boardroom-Report/Back-Volumes/Volume-11-2013/Volume-11-Issue-11/Is-your-board-dysfunctional

About the author

David Doughty is a Chartered Director with a Masters in Company Direction from Leeds Business School. He works with boards and their directors in the private, public and voluntary sectors to improve their effectiveness and the performance of the organisations that they lead. David is a registered and approved GrowthAccelerator Coach and a certified EQ Mentor

You can contact David via E: david@doughtymail.com or M: 07876 653 563.

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Published in

The future of coaching and mentoring: evolution, revolution or extinction? Part 1

Journal of the Association for Management Education and Development

Volume 21 ● Number 4 ● Winter 2014

Apr 102015
 

Falling foul of the law can have serious consequences for Non-Executive Directors - here are 10 steps you can take to avoid it happeningNED3

The 2006 UK Companies Act, which sets out the legal duties and responsibilities of Company Directors, is one of the longest pieces of legislation ever written. Falling foul of the law can have serious consequences for directors including personal and potential criminal liability yet many directors, particularly NEDs, take on their roles in blissful ignorance of the law.

Before becoming a company director you should have a basic understanding of your legal duties and responsibilities and you should check for indemnity provisions in the company articles of association and your Directors’ and Officers’ (D&O) insurance arrangements.

Once in post, here are 10 things you can do to avoid the potential pitfalls:

  1. Remember that compliance is the responsibility of all directors – not just the Company Secretary, Chair, CEO or other Executives.
    Whilst individual directors may have particular responsibility for the day-to-day mechanics of compliance, it is the board’s responsibility, collectively, to ensure that the statutory requirements are met. Filing annual returns and accounts may be the job of the Finance Director or Company Secretary but persistent failure to file on time can lead to penalties being imposed on all the other directors, including the NEDs. Make sure that the board receives regular assurance on compliance matters and do not assume it is being taken care of by the other directors.
  2. Check your status as a Company Director.
    Many Non-Executives start working with boards as advisors or consultants before they are formally appointed as NEDs and assume that as they are not registered as a company director at Companies House then the law does not apply to them. If you actively take part in board meetings or hold yourself out to be a director then you run the risk of being classified as a “shadow’ or “de facto’ director and thus share the same legal duties, responsibilities and liabilities as the other board members. Make sure that your legal status and that of the other board attenders is clear.
  3. Keep accurate records of board meetings.
    Every board meeting agenda should contain an item which gives directors the opportunity to review the minutes of the previous meeting. Make sure that you use this opportunity to make any corrections that are required to ensure that the minutes accurately record the discussions that took place together with any resolutions and actions. Pay particular attention to items where your personal contribution is mentioned. Keep your own copy of board minutes for at least six years after you have ceased to be a member of the board..
  4. Be aware of key statutory filing requirements.
    Make sure that you know when key documents such as the annual accounts and annual returns need to be filed. You can use the Companies House web-check facility to check that the business is up to date with its filing requirements. Also be aware of other matters such as certain shareholders’ resolutions, allotments of shares and the appointment of new directors, which need to be notified to Companies House within specified time limits.
  5. Familiarise yourself with the Articles of Association and other constitutional documents.
    One of the prime duties of a company director, as set out in the 2006 Companies Act, is to ‘act within powers’. These powers can be found in the company’s Articles of Association together with any shareholder agreements or contracts which form the constitutional documents for the business. As soon as you are appointed to a board you should read these documents and familiarise yourself with the specific requirements for the calling of a shareholders’ meeting or provisions relating to directors’ meetings and remuneration. The board should review the Articles on a regular basis to ensure that they are still relevant to the operation of the business
  6. Take all reasonable steps to avoid conflicts of interest.
    ‘Declaration of interest’ should be a standing agenda item for a board meeting, giving directors the opportunity to declare a personal interest in an item to be discussed at that meeting. There should also be a register of interests, reviewed annually, which records the external interests of board members and their immediate families. These are both particularly important for NEDs who are more likely to have external interests than the executives. However, simply declaring an interest is not necessarily all that a director has to do to avoid a conflict of interest. It may be appropriate to physically absent yourself from the board meeting for the duration of the discussion of a matter where you are conflicted and have this absence clearly recorded in the minutes. In some cases directors resign their posts and re-join the board once a conflicted matter has been resolved.
  7. Avoid accepting benefits from third parties.
    Taking a bribe from a potential supplier is clearly wrong but what about corporate hospitality? As with conflicts of interest, many boards keep a register to record gifts or hospitality given to directors or senior managers, usually above a set amount. They also have specific policies and procedures that directors should adhere to. The best advice though is not to accept anything, even a sandwich or cup of coffee if it could be interpreted as an inducement by a third party.
  8. Watch out for insolvency.
    After failing to file your statutory documents on time, the next most heinous crime a director can commit is ‘trading whilst insolvent’. A company is insolvent if it cannot pay its debts when they are due to be paid. Many businesses, especially start-ups or those with high growth can sail near to or actually become technically insolvent. They can then only continue to trade if they have a reasonable belief that they can trade out of their insolvent position. It is vital therefore, for the board to seek external advice from an insolvency practitioner as soon as possible in order that there is independent confirmation of the reasonableness of their position. Failure to act promptly and responsibly can leave directors open to unlimited personal liabilities.
  9. Speak out – do not ignore warning signs.
    If you have concerns about any company decisions, or the content of any documents such as accounts or board papers, make your views known. It is your duty to act with reasonable skill, care and diligence. The 2006 Companies Act does not differentiate between executive and non-executive directors – as a board member you are jointly and severally liable for all board decisions and can become personally liable if the board knowingly does something illegal.
  10. Get trained to become a company director.
    A Non-Executive Director appointment can be a very rewarding career move but it is not something that should be entered into lightly. In addition to performing due diligence on the business, a prospective NED should fully understand the duties and responsibilities of a company director.
    Excellencia provide a 1-day course for prospective NEDs (How to become a Non-Executive Director) for £330 (ex VAT)

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