Geert Struyven, Corporate Finance partner at national audit, tax and advisory firm Crowe Clark Whitehill, met a number of non-executive directors (NEDs) and other Kent business leaders at his Tunbridge Wells office to discuss the issue.
“We are increasingly seeing companies, especially those adopting a growth agenda, looking to tap into the expertise of NEDs as a way of implementing change,” said Geert Struyven.
“Unfortunately too few businesses understand what a NED can bring to their business, with many still seeing it as an old boys’ network, with the chairman appointing a mate who he meets regularly on the golf course. Thankfully that method of selection is largely a thing of the past.”
Understanding the role of the NED
Understanding the role of the NED is crucial to a successful appointment. Tristan Price, Group Finance Director at M.P.Evans Group PLC, the AIM-listed international agricultural commodities company which employs three NEDs, believes the NEDS’ role is to test and challenge the conclusions of the executive team. He said: “Ultimately it’s about providing impartial and relevant expertise to the board, and supporting the executive team by deploying their skills.”
With more than ten years public and private sector NED experience, Ashley West of Berrie Radcliffe Ltd, believes he’s always focussed on growth and developing the businesses he’s worked with. He commented: “The role varies depending upon the size of the business but it’s always about growth. For small businesses it’s often helping develop a successful exit. For larger companies it’s giving guidance on strategic management and providing good governance.”
Mike Miller, a NED at health and safety consultants PHSC Plc, added: “Businesses need to consider alternative ways of doing things. The executives are often engrossed in the minutiae of running the business and find themselves too close to the situation.”
How a NED can contribute to business success
As a buyer of NED services, Tristan Price believes that it’s difficult to think of a business that could not potentially benefit from a NED. He continued: “In order for a NED to make their mark the business needs to be open to fresh ideas and new ways of doing things, which as we know is not always the case.”
The group felt that NEDS are essential where there is a separation of ownership and control, for example where the interests of the shareholders need to be protected. However, Jonathan Neal of NED Solutions Ltd, advises caution on appointing a NED, pointing out: “If a company already has a board with the required blend of experience and skills it should not increase its size just for the sake of it.”
Mike Geerts, Chairman of Vertex Law, who has experience as a NED in SMEs, further education and the NHS suggests recommendations are valuable, as is business experience, and a competitive interview is essential.
He added: “I believe a NED’s success depends on them being able to challenge the board constructively, and be happy to be challenged themselves to back up their position in terms of evidence.”
Many SMEs find appointing a NED daunting. The group agreed that it is vital to identify the main areas where help is needed, especially any weaknesses of the owners and managers. Companies should consult with their accountants, and, if they are commercially minded, the company lawyers.
When it comes to getting the most from an investment in a NED, Mike Miller believes the most effective way is by being open. He said: “Transparency and democracy in boardroom debate is crucial. Making the appointment a success will not just be down to the NED, but also how the management engage with them and the recognition that not everyone has all the answers.”
To maximise the value a NED can provide, they need to have a thorough understanding of the business. A comprehensive induction, including historical information, a briefing on current strategy and importantly site visits to expose them to life on the ‘front line’ will help the new appointment get a firm grasp on the business’ needs and future direction.
Crowe Clark Whitehill’s Geert Struyven points out: “Getting the best value from a NED requires an open-minded, transparent and flexible approach to putting their ideas and advice into practice in order to grow a business. My experience working with organisations of all shapes and sizes has shown that most businesses would benefit from a strategically appointed NED.”