NON-EXECUTIVE
DIRECTORS
Should you be looking at hiring a non-executive director? Business Cornwall talks to two experienced NEDS about how it could help take your business to the next level.
An executive
decision
If you look up the definition of a ‘NED’ in a dictionary, you might be in for a bit of a surprise. It is a derogatory term applied in Scotland to hooligans, louts or petty criminals – ‘non-educated delinquents’!
“Removed from the day-to-day running of a business, a NED can bring a fresh perspective and challenge practices that have become embedded within an organisation but may no longer be adding value,” says Sarah Trethowan. “This degree of challenge may not always be a comfortable process for a business owner, but it is a valuable one.”
The popularity and benefits of hiring a NED have never been greater
Thankfully, in a business context, the truth is altogether more sober and reassuring. A NED is an acronym for non-executive director. And according to the Institute of Directors (IoD), the non-executive director’s role is to provide a creative contribution to a board by providing independent oversight and constructive challenge to the executive directors.
Historically NEDs haven’t always enjoyed the best of reputations and you might be familiar with the old joke “what’s the difference between a non-executive director and a supermarket trolley?” “A supermarket trolley has a mind of its own, but you can get more food and drink into a non-executive director!” However, such misconceptions have long been consigned to the dustbin, and the popularity and benefits of hiring a NED have never been greater. So, what is a NED and how could one benefit your business? They don’t have any responsibility for the day-to-day running of the business and consequently tend to be part-time. But they can add real value to a business through their experience, knowledge and independent perspective.
Robert Salvoni says appointing a NED can help a business “revisit or turbo-charge” its strategy.
“You also get access to their network, and any NED worth their salt should be able to introduce advisers, partners and
even customers to your business,” he says. “I think it is important for a NED to at least cover their direct costs to a business, whether through incremental sales or reduced costs, even before adding any less immediate or strategic value. It is really important that a NED, especially to an SME, is not viewed as an overhead.” WHAT ARE THE PROS AND CONS? Sarah believes the pros of hiring a NED far outweigh any cons. “Employing the services of a NED is a cost-effective way to bring new ideas to your business and ensure the decisions you are making are the right ones,” she says.
HOW DO I BECOME A NED? On the other side of the coin, rather than looking to take on a NED, perhaps you are ready to be one yourself? Robert Salvoni has some advice. Being a NED can be incredibly rewarding, providing challenge, variety and potentially a really good career. Personally, I have relished seeing the Cornish businesses I have been involved in thrive, having helped attract millions of pounds of investment and taken on dozens of new employees. However, it isn’t for everyone, and those who do take this route need to understand their obligations, commit to achieving certain professional standards and build up their expertise over time. Just having run a business, even a very successful one, does not give you all the tools you need to support others in achieving the same. I strongly recommend joining the IoD and participating in their Professional Development Programme, with Chartered Directorship as the gold standard. Just as important as Executive track-record and professional knowledge is NED experience – the classic Catch 22! Fortunately, there is an easy solution. Volunteer as a trustee of a local charity, arts foundation, local business support group or other NFP, ideally while you are still working as an Executive. I still try to balance fee-earning roles with NFPs. Not only can you make a great contribution to causes that you believe in, they are a great learning and networking opportunity which can result in lasting value and friendships. Experience gained in tackling the real challenges of an NFP are pure gold to build your value and currency as a commercial NED.
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