RUSSELL DALGLEISH offers some advice on choosing a non-executive director
In my experience a well-run board, staffed with executive and non-executive directors, is the optimal way to grow a business. There are several reasons to appoint NEDs, including governance, strategy, fund raising, and so on, but more importantly at the SME level it is to secure access to their expertise and networks
There are many misconceptions as to the role of an NED and that a formal structure is only appropriate for larger companies, rather than the SMEs that make up 90% of the companies in the UK. My experience is that if a board is built in the correct way it can be one of the key value creators in any business, and strong NEDs are critical to this.
To construct a winning board there are several points to consider.
1. Agree if accelerated growth is right for you.
If your goal is to grow your business and do this quickly, I believe having a board comprising experienced individuals who have travelled this path before, who possess the skills you prize, is a vital asset to have by your side. Each day the company grows you will face new challenges and a good support team who can help you overcome these is critical.
2. Identify what additional skills and experience the board needs
The best investment in your time is to identify who you need for your board, ie. what skills/experience do you lack in house. This can be a tough task as it requires us to be honest as to what skills we lack and what we require to succeed.
3. Finding the “right” individuals to join your board
Once you have the “people spec” agreed for the individuals you want, then that’s when your search begins. My suggestion is to first reach out to your network and look for recommendations – and only start to look further afield if this does not deliver what you want. I answer such calls on an almost daily basis.
4. Renumeration for non-exec directors
I am regularly asked how much to pay NEDs and the answer is always the same, it depends on the situation. The key, however, is to spend time getting to know the individuals and ensure their values match you own and that they want to roll up their sleeves and help you achieve your ambition. Once you have the right person the remuneration package will become self-evident.
5. Clarifying the roles & responsibilities of NEDs
Service contracts should be put in place with NEDs clarifying what they will deliver for you and how the engagement can be terminated if required. To get the most from an NED it is critical that you measure their performance as you would any supplier or member of staff in the business. And here I mean agree KPIs, not simply “turn up at a board meeting once a month”. And remember a NED should only hold a place on your board while their talents are consistently adding value to the business.
6. “Sweat” your NED
I have a high expectation of NEDs. I look for them not to simply “pass an eye over the monthly board pack”; I look for them to open doors using their network and to promote my business at every opportunity. I am also very clear about this before appointing someone, thus ensuring there are no misconceptions on either side.
Today it is critical that every effort is made to ensure the board reflects the diversity of the market served. It is interesting to note that SMEs seem to be much better at this than corporates, but we are all on a journey here. Remember don’t hire a clone of yourself.
But what does this approach look like in reality? Well I sit on several boards and I see the benefit of the “right” approach and I’ve also recently built an organisation which has benefited from a strong board.
At SBN we have appointed three board members based over the last six months on the need we have for more expertise to help us deliver our vision.
Christine Esson and I followed the path outlined here to arrive at:
It is critical that there is someone sitting at the board table who can help build and interpret all the financial indicators for the business and to highlight where we have varied from forecast. They are also critical when building out the business plan and when approaching organisations such as banks, Investors etc. They should also come with a strong financial sector network which can be leveraged when required.
2. Technical Expertise
SBN is structured as a company limited by guarantee, ie. there are no shares held by individuals and the company is structured as a non-profit. In the UK we recognised that the best structure was that of a social enterprise, hence we felt it critical to appoint an individual with the necessary experience in this sector to guide us. We were delighted when Karen Leigh Anderson of Cambridge Judge Business School agreed to join us.
3. Expertise in target market
Over the last year we have expanded heavily into the US, hence it is only appropriate that the President of SBN USA, Ian Houston should hold a board position with us. Thus, we ensure that any decision taken will consider the needs of this key geography.
We are very fortunate to have Helen Naidoo as our board secretary who ensures all documentation is correct and that we are all well prepared for each meeting. A priceless resource and one we are fortunate to have access to.
The board is by no means complete. We are actively looking to appoint additional members in the areas of philanthropic giving and technology, but these appoints will be made but only after we have identified the “right” individual. The search continues.
Russell Dalgleish is co-founder and chairman of Scottish Business Network