WHY EVERY BUSINESS SHOULD HAVE A NON-EXECUTIVE DIRECTOR
Professional legal advice, whilst extremely important, may not provide a solution for growth and improving business performance. Some SME organisations would benefit by 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.
“Experience, talent, leadership and key skills, particularly at director level, have never been so crucial to business growth, and in some cases survival,” explains Craig Burton of NED Connections, a unique organisation that connects non-executive directors with SMEs.
The NED Connections’ service works in tandem with, and complements the services provided by other professionals such as lawyers, accountants, insurers and venture capitalists. Whilst these professionals might already provide business advice in their specific field, some of their clients might well benefit from the next tier of support a non-exec’ director provides. Committed to seeing their clients prosper, some professional services providers have already helped their client companies tap into this valuable resource.
“Increasing levels of operating pressure on SMEs and owner-managed organisations can lead to some business needs being neglected, often because many of those organisations believe that they simply cannot afford to recruit at board level.”
That’s where a non-executive director 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.
Historically, NEDs have often been associated with large corporates where the need for objective guidance and corporate governance has 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 SME businesses and organisations become engaged with experienced and talented business people by bringing non-executive directors to their boards.
One such company, full-service design and marketing agency Magpie Communications, did just that. The communications agency, which specialises in youth and student campaigns, had arrived a point where it either invested and expanded or remained a niche provider with a modest, but healthy turnover.
The business partners had sought advice about mentoring and coaching, albeit informally and through networking, Magpie met NED Connections and was introduced to its talent pool. Realising that they could recruit a NED with sector-specific experience for around the same cost as junior designer, they took a bold step of bringing a NED to their board.
Non-exec’, Jules Caton, former MD of a marketing agency with 240 employees, was matched with Magpie from NED Connections’ bank of non-executive directors. Magpie director Ged Savva said. “We believe we had reached a point where a high calibre NED with marketing, design, brand and business experience would help us achieve our goals.”
Those goals were challenged by the incoming NED who initially concentrated on restructuring the financial strategy of the company which in turn redefined Magpie’s business plan. An off-site, full day strategy session followed where the boundaries set by Magpie were soon extended through thoughtful questioning and constructive criticism.
Magpie was encouraged to look beyond the sectors in which it is comfortable operating and already it is seeing growth in new areas. Board meetings are more structured and the NED is in very regular contact offering business advice and has also given creative input, resulting in a major new client win.
The NED’s agency boardroom experience positioned her as a natural choice from NED Connections’ talent pool. “It is a brave move for such a young organisation to engage a NED but it reflects their mature business approach,” she said.
Other 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 SME’s 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 brings 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 lacking on a board. 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 NED’s, 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 Wood’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 Johnson on 0330 1000 961 or gillian.johnson @nedconnections.com.
