Why every business should have a non-executive director
Good financial management alone, whilst important, may not be the whole solution for growth and improving business performance. Some SME organisations would benefit from seeking the advice of other specialists, such as those in marketing or HR for example. For others, there is clear evidence that enhancing board performance by taking on a non-executive director (NED) might well provide a solution.
NED Connections is a unique new organisation that connects non-executives with SMEs. The NED Connections’ service works in tandem with, and complements the services provided by, other professionals such as accountants, lawyers, insurers and venture capitalists.
While these professionals already provide advice, some of their clients might benefit from the next tier of support a non-exec provides. Committed to seeing their clients prosper, some professional services providers have already helped their client companies tap into this valuable resource.
“Experience, talent, leadership and key skills, particularly at director level, have never been so crucial to business growth and, in some cases, survival,” explains NED Connections’ Gillian Johnson.
“Increasing levels of operating pressure on SMEs and owner-managed organisations can lead to these needs being neglected, often because many of those organisations believe that they simply cannot afford to recruit at board level.”
That’s where a NED comes in. As defined by the Institute of Directors, a NED is a person who is not an employee of the company and usually works part-time. NEDs have the same legal duties, responsibilities and potential liabilities as executive directors, but they are expected to bring a different perspective to their role. They should make a creative contribution by providing objective criticism. They are expected to focus on board matters and not stray into executive direction.
NEDs are usually chosen for their breadth of experience, relatively high calibre and personal qualities. They may also have some specialist knowledge that will help the board with valuable insights. Of utmost importance is the degree of objectivity they can bring to the board’s deliberations by virtue of their independence from the management of the company and any of its interested parties.
NEDs are often associated with large corporates where objective guidance and corporate governance have never been more in demand. However, the SME sector is no different to its bigger brother. SME organisations still need guidance, governance, additional expertise and fresh thinking. It’s critical that our SME businesses and organisations become engaged with experienced and talented business people by bringing non-executive directors to their boards.
Many business owners and leaders appear to agree. Some who already act as non-executive directors and others who have NEDs on their boards argue that SMEs have been largely ignored where non-executive directors are concerned.
One such business owner, Margaret Wood MBE, owner of ICW (UK) Ltd in Wakefield employed a non-executive director and claims that, without a NED, her specialist glass panel manufacturing business might not have survived.
“In any business you can become very insular. As owner and managing director of a business I needed someone to challenge me, make me think about what I was doing and plan the way forward.”
Bringing a NED on board provides not only business experience, but often a raft of relevant contacts that can be useful in helping an organisation grow, prosper and even develop new markets. Some NEDs are taken on board because they have a specific skill or experience that is lacking on a board – HR, finance or marketing for example. Others are taken on because they have useful industry experience and contacts.
However, there needs to be very careful matching of individuals with organisations. There are strict legal requirements placed upon NEDs, and it is not just about connecting people with organisations. Equally it is not just a case of bringing in friends or somebody who may have been a senior executive in a big company but has no empathy with the requirements of a growing SME business. In Margaret’s view: “The key thing is finding the right fit of person for your board.”
For those organisations that do find and engage the right person, the benefits can be significant. It can also be very cost-effective. As Margaret concludes: “Finding the right person as a NED brought me a huge return on investment.”
To watch and hear Margaret Wood’s account of her NED experience plus comments from other business leaders on this issue, go to www.nedconnections.com.
For further details on NED Connections, contact Gillian on 0330 1000 961 or gillian.johnson@nedconnections.com.
