Ten tips to help you decide if a non-executive director role is right for you.
As portfolio careers increase in popularity, more and more people are interested in becoming a non‑executive director (NED). It’s a crowded market where supply heavily outweighs demand, despite the regulation and governance codes surrounding NED positions and the responsibilities for those in listed companies.
NEDs also have a place in family‑owned companies, those backed by private equity and companies seeking growth and development, as well as in social organisations, charities, trade associations and government bodies. Different contexts will require different types of NEDs.
Here are ten tips to help you determine if a NED role is really for you:
1. Make sure you really want to do it
People often want to be a NED without fully understanding what it really involves, so it is important to appreciate what being a NED means and what you will be taking on. It's also not the most lucrative of roles – many consultants and advisors are paid more without the same level of responsibility and liability (see below) and you may be better suited to these.
2. Why do you want it and what can you bring?
The NED role can cover a wide spectrum. You might be an ‘independent friend’, or a strategist, or a monitor, or all of these things on different days of the month. As with applying for any job, think about what makes you right for a particular role at a particular organisation.
3. Due diligence is essential
The company will do due diligence on you before it makes an appointment, but you must do your own due diligence as well. Make sure you understand the business, the dynamics between owners and executives, and the people with whom you will be working. Ask around and talk to people who know about the company; customers, suppliers and brokers for example. Unless the other people on the board share the same level of integrity as you, the boardroom could be an uncomfortable place.
One practical step you can take is to ask to attend a Board meeting as an observer before you sign up, so you can see the Board in action and decide whether you want to work with the people in the room (and vice versa of course!).
And due diligence doesn’t end when you are appointed – it is ongoing.
4. Your induction and development
On joining the organisation ask about the proposed induction programme. It should be comprehensive, giving you a clear understanding of the mission and values of the organisation, as well as its strategy and operations. There should also be ongoing professional development for you in your role as a director.
5. Don’t see it as a retirement role – it isn’t
Indeed, if you mention the word “retirement” you’re probably dead in the water as far as any NED role is concerned. It is no longer seen as a cosy position to take on while you indulge in some post-executive leisure activities. Indeed, the age at which NEDs are recruited at has been coming down – it is not uncommon to find NEDs is their 30’s even on plc boards.
Being a NED is too important a role to be seen as a retirement activity, so if you are going down the portfolio route make sure you see it as a natural progression from your executive career.
6. Getting your first NED role is the biggest challenge
There are far more candidates wanting to be NEDs than there are roles. So you need to be ruthless in pursuing your ambition to secure a place on the board. Getting your first NED position is always the biggest challenge: once you have one role you will be seen as a safer option to appoint to other boards.
Networking -or ‘NEDworking’ - is key. Attend NED events and courses; mix with other NEDs and get yourself a mentor who is already a NED who can help you and act as a critical friend in pursuing your ambition. Perhaps most importantly, get a good head-hunter to champion your cause. While this can be easier said than done, most roles now go via the executive search community and without their support you will find it more challenging to secure a role. Effective networking and using a mentor may help open doors to the head-hunters.
7. A NED role requires a different mindset
Being an executive is all about “doing” and implementation – it is largely an operational role. Being an effective NED means holding management accountable - providing constructive challenge and support. You will coach, mentor, advise and influence but it is up to others to execute what has been agreed. This isn’t always an easy transition to make (indeed it can be uncomfortable) – and some NEDs never really make it which means they are not very effective non-executives. If you want to be primarily an executive best to focus your career here.
8. Don’t overboard!
If you are lucky enough to develop a NED career, don’t take on too many roles – or “overboard”. If the letter of appointment says the role is expected to take 30 days a year, that is when everything is “business as usual”. If you have a crisis or any type of merger/ acquisition activity then you can double or treble the time commitment. If you take on too many NED roles and they all have issues you won’t have capacity to undertake the work effectively. And if you are an executive elsewhere, a crisis at the company where you are a NED will have to be your priority as it is personal liability (see below). So you need a supportive employer where you are working as an executive. Certain sectors – notably financial services – limit the number of roles you can take.
If you are going down the portfolio route, four roles is probably the maximum you should take on.
9. You can delegate everything, except responsibility
It’s true! As a NED you will have the same legal liability as an executive director but you will know much less about the business. You will need to understand the risk, your legal and other responsibilities, and regularly refresh your knowledge.
10. You’ll need independent judgement, integrity and courage
If you are going to be any use as a NED you must bring an independent perspective and judgement to your role. This means constructively challenging executives until you are satisfied that they have reassured you about an issue, and if not you should be worried! Most boards have integrity, but courage is a less common feature. As one of the codes once said ‘being on a board is not necessarily a comfortable place, and nor should it be’.
Be prepared to be in a minority of one – you need to be brave to be a NED.
Non-Executive Director Programme
If you want a greater appreciation of what the role entails, the Cranfield Non-Executive Director Programme offers current and aspiring NEDs the opportunity to learn what’s involved and build their NED network.
To find out more download the brochure here:
