9 Steps to Finding Value-Adding Non-Execs
In the first of our mini-series of NED blogs, we share insights from Christine Cross, experienced FTSE NED and speaker at our recent NED: Do I or Don't I event, on the non-executive selection from the board’s perspective. How do you go about finding NEDs that will bring genuine value to your board and business? Here’s some practical guidance on getting it right.
The need for value-adding NEDs
In today’s business world, there’s no debate over the importance of NEDs to Boards. But are they adding the value they should? That’s the question that many shareholders and business owners are asking. The oversight of NEDs has a big role to play in averting costly mistakes that damage brand reputation, share prices and the bottom line.
More than this, the right NEDs bring a different dimension to Boards. Their specialist knowledge, independent counsel and alternative perspectives have the power to enrich corporate strategy and deliver a tangible competitive advantage.
So how do you bring the right NEDs onto the board? Here’s a bite-site guide.
1. Establish the NED’s role
First up, it’s essential to focus on what NEDs are for. The board has two main responsibilities. Protecting the interests of shareholders and employees. And setting the strategy for a sustainable future (note the word sustainable). You need to be totally clear on how NEDs can help deliver on those responsibilities. They’re not window dressing.
2. Understand who you are looking for
Next, you’ll have to think very carefully about the specific qualities, experience and knowledge that will complement your existing board. Think about the stage your business is in now and where it is heading. Change, growth, mergers, digitialisation – there are many factors at play. What combination of governance expertise, strategic insight and specialist knowledge is required?
3. Be wary of looking outside your sector
The idea of transferable expertise is appealing. But first and foremost, a NED must understand the business and the sector in which they operate. If a NED doesn’t see or understand what’s broken, they have a limited chance of fixing it.
4. Match the candidate to company structure
The NED role is different across Public, Private and PE-owned companies. PLCs have their own governance around audit, remuneration and sustainability, so NEDS must suit that structure and the cycle of corporate life. In Private companies, the role is often more advisory in supporting owners. In Private Equity, focused NED expertise is often required in short, sharp doses, with sleeves rolled up. If you’re looking to be challenged strategically or bring in specialist expertise (perhaps marketing or digital/tech), you may not need a NED at all. A Business Advisor may be the better option.
5. Avoid recommendations
NEDs are often chosen after recommendations from board members or people close to the business. Even when intentions are good, this can lead to boards recruiting in their own image – perpetuating group-think and limiting the advantages that diversity brings. Using an interim or executive search firm ensures the necessary rigour and objectivity.
6. Focus on cognitive diversity
Diversity is a definite benefit to any board. Efforts to boost gender, ethnicity or age diversity are to be applauded. But this should never be about box-ticking. The important consideration is cognitive diversity – the different perspectives and life experiences a NED can bring.
7. Look forward not back
Cast an eye over some boards and they seem to be filled with the ‘Great and the good.’ There’s a lot to be said for a stellar reputation and an impressive track record. But you need someone to look forward – someone who is going to push and challenge you, not bathe in past glories.
8. Make sure their motivation is right
We’ve all heard stories about NEDs who turn up on the day of a board meeting, pick up their papers, ask some cursory questions, and then hurry off leaving their papers behind. The ‘lunch and kudos’ brigade. Your selection process needs to identify motivation. You’ll want to find a NED who feels an affinity for your business, who wants to give of themselves and is prepared for the time commitment.
9. Go beyond a group interview
As we mentioned in the previous blog, it’s vital for there to be the right dynamic between board and a new NED – built on respect and trust. Set up one-to-one meetings between the candidate and all board members to get a feel for chemistry. And invite them to a board meeting (under NDA) before they accept an offer, so they can see you in action. This way you will know if you’re right for each other.
Appointing the right NED can add huge value to your business. If you’d like support or guidance on hiring NEDs or advisors, or need a proven interim executive, please contact us by emailing firstname.lastname@example.org.