The role of a Non-Executive Director

When it comes to ensuring sustainable growth, appointing a Non-Executive Director (NED) is a vital step. A NED is an individual brought in to provide guidance and advice to the board and senior management to help them achieve their strategic goals. Based on their experience, they are able to provide unique perspectives, offer independent oversight and present constructive challenges to the board.

Guiding the path to growth

The success of a business heavily relies on its ability to support a defined commercial vision through strategic decisions backed up by effective financial controls including governance. NEDs bring experience from managing their own companies and serving as NEDs in many rapidly expanding businesses.

With their background and expertise in business management, NEDs go beyond corporate governance. They actively mentor executives, providing valuable support and guidance throughout the complexities of corporate development while aiding in short to medium-term growth.

The role of a NED

Regardless of size, every business should consider appointing a NED, particularly those focused on growth. Experienced NEDs bring a wealth of knowledge and expertise and provide guidance in the following key areas;

• Planning: Assist in developing a clear vision and purpose for the business.
• Practical operational insights: Offer perspectives on key issues and help oversee decision-making.
• Investor relations: Enhance the credibility of businesses, making them attractive to investors.
• Networking and talent acquisition: Assist in recruiting individuals for the organisation.
• Problem-solving: Support management in resolving issues especially those related to financial matters.
• Expert commercial advice: Smaller companies benefit from their advice, while larger enterprises seek an impartial sounding board.
• Objectivity and fresh perspectives: NEDs are not tied by relationships allowing them to bring new ideas and challenge prevailing mindsets.
• Critical friend: A NED embodies the “voice of the business” and is unafraid to question decisions and provide honest feedback.

The business need for a NED

Appointing a NED can bring benefits to any business, whether it’s a startup, an established small or medium-sized enterprise (SME) or a multinational corporation. Often, directors and senior managers and executives can become overly focused on day-to-day operations rather than nurturing growth opportunities. This is commonly known as “Working In” instead of “Working On.” NEDs act as impartial advisers who redirect attention towards growth and development strategic initiatives while steering clear of internal politics and conflicts.

Essential traits of a NED

To have a meaningful impact, a NED should possess the following essential traits;

• Commercial awareness: Understands commercial challenges.
• Experience: Demonstrates a professional journey.
• Impartiality: Provides unbiased advice.
• Challenging nature: Capable of questioning decisions to drive improvement.
• Financial acumen: Enhances performance through expertise.
• Emotional intelligence: Handles issues with tact and understanding.
• Gravitas: Inspires trust through concise communication.
• Strong personality: Actively engages with the business.
• Integrity: Expresses opinions honestly and confidently.
• Ability to connect: Ability to build connections with individuals at all levels within the organisation.

Although NEDs may not have the same degree of ongoing involvement in business operations as Executive Directors, both roles share legal duties, responsibilities and potential liabilities.

Three benefits of hiring a NED

1. Commercial experience and knowledge

NEDs often work with several businesses or have experience running their own business, which means they can share with you the knowledge they’ve gained, including operational knowledge on running a business and related industry insights. This is particularly useful if there is a sector that your business wishes to break into.

NEDS will also guide you through any challenges and encourage you to capitalise on opportunities, as well as helping the business stay focussed towards the aspirations set down by the CEO and the senior executive management team.

2. Independent

NEDs are completely independent of your business. They do not have to live with the business and therefore have no personal vested interest or relationships, which may in any way impair their high degree of objectivity. They will look at the bigger picture and provide a fresh perspective to you and your team. For example, in a time of crisis, such as during the coronavirus, they will help alleviate stress and focus the business on areas that it can control and influence.

In addition to being able to provide an objective view, a NED will support the business with its strategic vision and challenge the senior executive management team where appropriate.

3. Holds the management team accountable

Many CEOs and senior leadership teams are busy in the day-to-day running of the business, which means they often fail to action initiatives decided at board meetings. NEDs keep the senior team transparent and accountable, ensuring progress is continually being made and decisions are followed through.

Many of the partners at GE that act as a NED or in a management support capacity, will also prepare the minutes of the board meeting. These minutes are normally circulated within 72 hours of the meeting and have an in-built action plan. This means initials for each attending board member are included within the minutes giving focus to each board member to act accordingly on the actions from the previous board meeting.

Often NEDS will also help the business to set up and monitor KPIs so that the performance of the business is continually monitored, and appropriate actions taken.

Driving growth through NEDs

For businesses focused on growth, NEDs bring a combination of business expertise and impartial judgment. They help navigate the complexities of decision-making and identify potential risks and opportunities to achieve sustainable development.

At Gerald Edelman, we specialise in guiding businesses  that seek to enhance their board by adding a Non-Executive Director. Our partners bring a wealth of first-hand experience in the NED role across various industries, such as business services, digital technology, hospitality, media, professional services and retail.

Feel free to contact us at hello@geraldedelman.com to schedule a consultation with one of our advisors and learn more about appointing a Non-Executive Director without obligation.