Serving as a non-executive director (“NED”) can be a rewarding complementary role for an executive, or a career in itself if you choose a portfolio approach. It can add variety to your work, enhance your network and status, develop your skills and more – not to mention the considerable benefits you can bring to the companies you work with.
There are numerous routes you can take towards becoming a NED. To provide guidance and best learnings about this career path, we’ve put together a series of interviews with expert NEDs.
In the second instalment of our Route to NED series, we spoke to Cheryl Jones, an experienced NED, Executive Director and business transformation leader, and she shared her advice for aspiring non-executives.
My first NED position developed from a long-standing business relationship. I was the Chief Executive Officer of an organisation and member of the Board of Directors of its Holding Company. Following a demerger and trade sale of my company, I remained on the Board of the Holding Company. I didn't feel like I was finished or ready to walk away. I was interested in the organisation and its management team, and I believed I could continue to bring value as a Non-Executive Director. I had more to offer, and I thought it would be a good experience, and you know what? It was.
I also found there were many secondary benefits from serving as a NED. For example, listening to Board members ask questions of the executive teams and observing how information was being interrupted provided me with firsthand knowledge of how to improve communications in other businesses. You know, the adage "lonely at the top" can be valid for the C suite from time to time. My experiences as a NED often provided fresh objectivity on issues relatable to my Executive roles and responsibilities.
Firstly, the NED has the same legal responsibilities as the Executive Director. Many organisations can provide interested individuals with a framework of NED responsibilities and relevant governing laws and requirements. To summarise, the NED is appointed to contribute to the organisation's strategic direction and monitor performance and plans to ensure the sustainability and profitability of the business.
Practically speaking though the title is "Non" Executive, it is not a secondary role; it is just a different role. Also, it is essential to the Board, management team, and its stakeholders that its NEDs provide a commitment of time over time. You should expect the NED agreement to include a minimum term of appointment.
Well, what are your interests and objectives? What's going to get you excited in terms of a stakeholder community? Okay, then what sets you apart, and how are you're going to differentiate yourself from everyone else trying to get a NED position? Do you have a particular area of expertise that a company requires at present? Once you've made sense of all that, take it seriously and hone your skills. If this is what you want to do, then set aside time to do it well and stay up to date with training, the market, and so on.
When you find the organisation that seems to be the right fit for both of you, conduct due diligence on the company. You want to understand the key stakeholders and the organisation's strategy and competitive position; to review financial and business plan information and competitive position; and any current challenges that the Board is facing.
Companies will expect their prospective Board members to conduct due diligence. Also, the due diligence process will provide the incoming NED with confidence and support Boardroom functioning through a common understanding of the organisation.
Though it is not a skill per se, it is significant to note that diversity brings strength to the Boardroom. Boardroom diversity includes varying skills and backgrounds. Diversity can support new avenues for problem-solving, healthier debate, and many other benefits.
Unconventional discussion can be uncomfortable, but respectful disruption of the status quo often allows innovative ideas and the power of the better question.
Given the ultimate responsibilities of the Board of Directors, being comfortable with the key financial documents and indicators is fundamentally essential. Enhancing these skills is very doable for those who wish to and is a necessary investment for those seeking NED positions. Some organisations provide online training, or identify someone in your network knowledgeable in this area and ask them for support working through the areas in which you want to become more proficient. It will pay you dividends in the future.
Though firms specialise in matching NED candidates to appointments, you will likely have to network. I suggest selective focus. Board memberships are competitive, and you can't just network like you would for an executive role. Find a mentor or someone with good connections. Someone more tenured or connected to a group outside your current contacts.
In the meantime, LinkedIn and other sites can be helpful. Watch what's happening with relevant companies and organisations. Follow along for pertinent information about board member resignations or the tenure of board members and act accordingly if an opportunity arises.
Here is a good place in our discussion to consider the cultural aspects of the organisation. Though integrity and character go hand in hand with the requirements of Board conduct, it is also important to determine if your views align with the business practices or culture of the organisation. Do you share the same values?
Also, when you have active board memberships, offers may begin to come to you. However, it is prudent to consider being selective. It's exciting to be a new NED, and sometimes this may lead to taking on more responsibilities than is advisable. Don't spread yourself too thin. You might think it's not a significant amount of time initially, but if a company experiences unexpected events – like a pandemic – more time will be required. You will have a fiduciary responsibility above all.
There is much pressure on boards from shareholders, regulators, stakeholders, and others. A well-qualified NED should be seen as one of the more valuable roles in the business community. As a NED, it is crucial to recognise your independence and maintain your objectivity. Invest the time to understand the role and the prospective organisation, and enjoy your new challenge.