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  • Ian Baker

What is a Non-Executive Director and how can they help your business?


Non-Executive Directors or NED’s is a term used frequently and certainly far more than 20-30 years ago – so what is an NED?

An NED is a member of a company’s board of directors who is separate from the day-to-day management team and the non-executive director is not typically involved with operations, but is more focused on policy-making, monitoring and advising. I recently heard the phrase "nose in, fingers out", which I think offers an interesting summary of the role, but over-simplifies, what has become a more integral part of how a company effectively manages its performance. It is important to note, that although a non-executive director is not an employee, there is no legal distinction between non-executive and executive directors. The Companies Act 2006 defines a director as any person occupying the position of director, no matter how the role is referred to. Therefore, non-executive directors have the same legal duties, responsibilities and potential liabilities as their executive counterparts. A non-executive director hopefully brings a wealth of knowledge and experience (either from your industry or as an Executive Director) from an accomplished career, to provide independent oversight and constructive challenge.

How might a NED help you?

START-UPS - If a business is just starting out it could be growing rapidly or facing challenges unfamiliar to the current owners or employees. An NED is likely to have encountered similar situations within their business career or could introduce the business to someone in their wider network who has. An NED might also bring a specific knowledge on the sector or connections within the industry that can also add value to the overall business. IMPARTIAL ADVICE - A non-executive has the added benefit of being able to provide an independent view of the business which is separate from day-to-day operations. This impartiality can be of particular benefit when the executive team cannot agree amongst themselves, or are in agreement but want to check with someone more detached before embarking on a course of action. A skilled NED will help the Chair of the meeting to bring consensus, or may work outside of the meetings to help bring the team together to a decision. FINANCIAL ADVICE - Many businesses value non-executive directors for their financial expertise. A non-executive director with the right qualifications and experience can help a company tackle challenges of which the company directors have little knowledge, such as raising investment or dealing with debt. COACHING – A business owner or board might also look to employ an NED to help coach and mentor the team; having an independent person to deliver a structured framework of coaching on areas such as leadership or governance can be of significant long term value.

How to find the right NED for your business?

Typically, non-executive directors may be in place for many years, so it is important that when recruiting an NED, you fully understand what expertise you need (remembering that they aren’t employed to do, but to observe and advise). As an NED will be an integral part of the business, you should also take time to look for individuals that have the personality traits you need and that they share the same values. Many business owners will typically look to search for their NED’s via their network – referrals and recommendations are a fantastic way to find the right person. Whether choosing via a network or a recruitment service, remember to undertake rigorous due diligence and a structured interview process to identify the right NED for your business. If you are looking for a Non-Executive Director or a coach to help work with you and your board, then please contact me directly at ian@ianbakerconsultancy.com.

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