The Non Executive Director (NED) role is typically defined by the key pillars of: governance + strategy + finance + risk. Finance and risk should be a NED’s specialist subjects and one that they are comfortable in providing insight and direction. In reality this is not always the case and some boards of directors may be organised on the basis of individual NEDs having ‘responsibility’ for certain areas of corporate activity, rather than being an expert in all of the key areas.
NEDs in action
The day to day role of the NED is both challenging and critical, but only being part-time in the business it can be difficult to understand fully all of the issues and to feel an integral part of the organisation – if you just attend board meetings you can feel a bit of an outsider. NEDs do rely heavily on executive management to provide accurate and relevant information and there are examples where NEDs might feel that the information they receive is selective and watered down.
The input of NEDs may also depend on the life-cycle of the organisation and whether an organisation is in steady-state, expansion or in crisis mode. In a steady-state environment the board generally will adopt a passive monitoring approach, however more proactive and direct intervention may be needed when an organisation is growing rapidly or if it is having to respond to challenging internal or external circumstances.
NEDs are appointed based on their knowledge and experience – they should bring to the board a range of different perspectives and provide an independent, broader view drawing on their previous roles and responsibilities. The ability to benchmark the organisation’s approach to certain situations acts as a positive challenge to executive management’s thinking – “in my previous role at company x this worked well because” … “but this did not work so well because” ….
Tips for preparing for a NED role
“Boards’ need more diversity” … “Boards’ need people who understand business” … “Boards’ need people who positively challenge the status quo” …
Treasurers can respond positively to the statements above and have a head start on a number of other professionals given finance and risk areas are a key element of the NED role. The skills and attributes of a treasurer align well with the requirements of being a NED (strategy-led; financially literate; enquiring mind; communicator; listener). Treasurers should be stepping up to the plate to perform NED roles.
To help you chart a course there are 6 simple tips to consider on the road to becoming a NED.
- Start early, set your objectives and make a plan – What are your strengths and weaknesses? Plug any gaps with extra training or education.
- Start with small steps – There are a range of NED-related roles in a variety of organisations such as schools, charities and sports bodies – what are your interests? – where can you gain some useful initial experience in a non-threatening environment
- Re-write your CV – Look at your CV in the light of taking on a board-level role. You will need to revamp and re-shape the document to sell your ‘value’ – it will be a very different CV to your current employment model. This may link to point 1 above re: highlighting gaps and development areas
- Get your current employer to sponsor you – Look to get on the ladder early and ask your employer to support you – it will help your development and bring new ideas back into the organisation. A number of organisations are building this into their talent Programmes.
- Raise your level of networking – NEDs must network, network and network. The trick to finding out about the right opportunities – and which ones are realistic – is to adopt a methodical approach about who can help you. Think about who you can approach to ask for help, especially reactivating past contacts and thinking more broadly about new ones.
- Find a mentor – Talk to a NED in your organisation, they might be able to help or talk to an industry body such as NEDA to get some advice and find the right person for you.
Boardroom diversity continues to be a hot topic, especially from an age, experience and new skills perspective. More, younger executives should be given the opportunity to take on external NED roles at an earlier stage and treasurers are well qualified to do this. The mantra from the 2018 Non-Executive Director Awards was that: ‘the need to populate British boardrooms with able, diverse and enthusiastic NEDs is more important than ever’.
Louis Cooper is the CEO of the Non-Executive Directors’ Association, a freelance Governance and Risk Consultant and a member of the Institute of Chartered Accountants inn England & Wales. For more information on being a NED contact Louis via: firstname.lastname@example.org or visit www.nedaglobal.com