Crash Course: Appointing non-executives

Crash Course: Appointing non-executives - Your monthly board meetings are in danger of becoming bored meetings. The trouble is, it's the same group of your fellow directors you see every day, and you all know what each other thinks. You know where you wan

Last Updated: 31 Aug 2010

Your monthly board meetings are in danger of becoming bored meetings. The trouble is, it's the same group of your fellow directors you see every day, and you all know what each other thinks. You know where you want to go next, but none of you has done it before. Maybe it's time to think about bringing in some non-execs.

IT'S NEVER TOO EARLY. Most businesses think of appointing non-executives when they are preparing to make a step change, says David Harvey, head of the small business unit at the Association of Chartered Certified Accountants. 'It's worth having a sounding board, somebody who can counsel you, right from the outset, whether or not you formalise that with the role of non-executive director,' he says.

WRITE A JOB SPEC. Look at the company's three- to five-year plan and the skills that will be required. Survey your existing board and personnel, and work out where the gaps in knowledge and experience are. But don't try to fill an executive role with a non-executive; a non-exec with operational responsibilities defeats the purpose. Ideally, you want somebody who has already experienced the type of developments you have planned.

DON'T DIAL FRIENDS AND FAMILY. 'You wouldn't appoint executive directors from the few people you know, so why appoint non-execs in that way?' asks Peter Waine, co-founder of search consultants Hanson Green. If you choose a personal acquaintance, the danger is that they will feel beholden to the person who introduced them and will be unwilling to stand up to them.

SEEK HELP. Search consultants will approach the task professionally, but the drawback is that fees may be daunting for small businesses: from pounds 4,000-pounds 5,000 at the bottom end of the scale to pounds 25,000-pounds 30,000 at the top end. Fortunately, there are alternatives. Many Business Links and even banks can help find suitable non-executive directors. Hanson Green runs a special service in which big companies offer personnel to small businesses to help develop their experience. The service costs pounds 1,000 to the small company, refundable if they make an appointment.

LOOK FOR THE RIGHT STUFF. 'You want somebody with strategic vision, who has the ability to see the big picture,' says Julia Budd, managing director of non-executive search consultants Pro Ned. 'The ability to question and challenge in a constructive manner is also extremely desirable,' she adds. Non-execs require team skills and integrity; they are legally responsible for the business like the other directors.

AVOID TROPHY HUNTING. Hiring Sir Bufton Tufton may have cut some ice once, but it's unlikely to impress the City these days. Attracting an executive who is truly sought-after to your board may raise interest in the company, but you should only do so if they fill the job spec in every other respect.

TEST THE CHEMISTRY. The ticks might be in the right boxes, but will you get on? To find out, try working through a problem together or even going out to dinner.

PAY THE GOING RATE. Estimates vary, but pounds 15,000-pounds 20,000 is typical for a non-exec at a small company, working 12-15 days a year. 'If you pay more, you may be compromising their independence,' warns Waine, 'because it is not so easy for them to walk away.'

ONE'S LONELY, THREE'S A CROWD. The Cadbury committee recommended a quota of three non-execs. That might seem indulgent for a small company, but a solo non-exec may find themselves in an invidious position. Two non-executive directors plus chairman is considered an ideal solution.

DO SAY: 'We're thinking of an IPO next spring, prior to launching across Europe later in the year. Have you any suggestions on how we should structure the offering?'

DON'T SAY: 'Chap I know at the golf club, retired now, used to be something big at Acme. He'd like a little number like this.'

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