Non-executive directors need to be able to bring a touch of inspiration to the boardroom without having an opinion on everyone and everything. Yes, good governance, business know-how and a nose for risk are all essential skills, but what the chairmen of companies looking to grow the top line now want are NEDs who can provide powerful insights on emerging markets, innovation and strategy.
Call it the stardust factor, if you will. Criticaleye spoke to a range of NEDs to find out the qualities needed in order to stand out from the crowd…
1) Be Ready to challenge
“It’s not solely about supporting the executives; it is fundamentally about challenging them,” says
Sir Michael Lyons, Chairman of The English Cities Fund and a Criticaleye Board Mentor. “The hallmark of a healthy company is one that is interested in the quality of its governance and the challenge provided by its NEDs. Actually, companies should be proud of NEDs who are a bit of an awkward squad.”
Every NED has a duty to fully understand a business.
Vanda Murray, Non-executive Director at construction and support services company Carillion and also Chairman of alternative energy concern VPhase, comments: “You can only ask the right questions if you are well-briefed, know the people, have done your homework and kept up-to-date with information.”
You have to be involved and be able to really add something to the debate: being a good non-executive director is no longer enough.
Glen Moreno, Chairman of education company Pearson, comments: “The most important thing is to get issues front and centre, focusing heavily on strategy, risk and change. Boards are increasingly better at having strong strategic discussions and that has changed over the years.”
2) Find the Primary Source
To stay in touch with what’s going on in the business NEDs must make time to talk to people outside of the boardroom and although there may be some resistance from executives, you need to use your powers of persuasion.
After all, the more knowledgeable you are about the context for decisions, the more credible your judgement and input will be with the executives (plus there's the small matter of your reputation to think about too).
Vanda says: “You need to do a number of visits over the course of a year because that’s the only way you can get a clear view on succession and whether the conversations in the boardroom are genuinely playing out operationally.”
3) Your Business Needs You!
Once you’ve established a portfolio career, managing your time becomes a skill in itself.
Theresa Wallis, Non-executive Chairman of medical technology concern LiDCO and NED of a number of small-cap companies, comments: “If one company is going through a merger or other extensive challenges, it can be extremely busy. Likewise, for those who also have a busy executive role, the time needed for the NED roles can expand or contract enormously.”
Vanda says that people do underestimate the time commitment and urges caution when taking on multiple NED roles. “More than one may become demanding, whether it’s a transaction or an unforeseen issue, and you need to find enough time in the week to give extra days when required,” she says.
4) Be an Influencer
NEDs may have to be more punchy than in times gone by, but the old mantra remains true that it’s the executives who call the shots.
Brendan Hynes, who became Chairman at beauty and cosmetics designer Swallowfield in July following five years as CEO of drinks business Nichols, comments: “It sounds obvious but the biggest challenge is to remember you’re not the chief executive and that you retain your independence. You’re not there as a ‘yes’ man for the CEO; you have to bring balanced, independent judgement to the table which also means you have to listen a lot more than perhaps you did as a CEO.”
It’s about influencing rather than dictating.
Vin Murria, Non-executive Director at AIM-listed renewable energy firm Greenko Group, and a recent NED appointee to the board of Chime Communications, comments: “You’re there to provide corporate governance capability, guidance, information and knowledge. But in the end it is the executives that are responsible for the business and they must do what they need to do for it to succeed. Being a NED can sometimes be frustrating, so it is important that you are comfortable with your role and that you remember you're there for the greater good of the business.”
Aleen Gulvanessian, Partner at law firm Eversheds, says: “You need to challenge in a supportive and constructive manner – the nightmare NED is one who is always sniping at the executive. You have to be objective because as a NED you’re most effective when you’re independent and not too close to the business.
“The most important thing is not to try and say or do too much too quickly. As a NED it’s very important to observe and absorb the business before trying to make a difference. The worst type of board meetings are when everyone feels they have to say something or they’re not deemed to be making a contribution. Don’t feel you have to say anything unless you’re actually adding value.”
5) Know the Risks
The inherent dangers to a business have to be appreciated but not to the extent that it quashes the ability to respond to commercial opportunities.
Cheryl Black, NED at Skipton Building Society, comments: “Post financial crisis, more is now expected of the NED in terms of risk and governance… there’s definitely a greater level of engagement required in the role.”
Brendan says: “You’ll need a firm grasp of what the key risks are in the business and whether they are understood. Is the commercial reward for taking those risks being sensibly evaluated and presented? Often in business, people are taking much bigger risks than they think and no one really understands their implications.”
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On paper at least, the role of the NED hasn’t changed particularly in recent times (unless you’re a Remco Chair). But it figures that as business models are overhauled and strategies taken apart and reassembled, those individuals who can provide something different are going to be highly sought after and prized.
Besides, who on earth wants to be surrounded by mediocrity?
I hope to see you soon.
Matthew
https://twitter.com/criticaleyeuk 
