MT Expert - People: Why NEDs are good for business

A board of non-executive directors needn't be only the preserve of big businesses, says Lesley Stephenson.

by Lesley Stephenson
Last Updated: 27 May 2011

When the news broke earlier this month that Tesco had poached Barclays' deputy chairman Sir Richard Broadbent, outgoing Tesco chairman David Reid said Sir Richard’s 'wide expertise, board experience and personal qualities' were the key things he would bring to the table.

That 'broad experience' includes a spell at the helm of Schroders' European corporate finance business, as well as a stint as executive chairman of Her Majesty's Customs and Excise. But if you’re not the world’s third largest retailer, how do you go about finding a non-executive director (NED) who will help you grow your business? 

A good NED should 'fill in the gaps', so the recruitment process starts with identifying any potential weaknesses in the skillsets on the board. Any SME, especially a fast-growing one, will need different things as it grows, but won’t be able to afford them all at the same time. Having carefully-picked NEDs on the board is a way of staffing-up without stretching resources too far. Many NEDs will work for share options (some might even pay you by putting in equity), and restricting their workload to a couple of days a month will mean you get a high-level team member at great value for money.

While an SME may only need its NEDs for one or two days a month, this may need to be increased if the company is going through a process such as an acquisition where the experience and support of the NED can be very important .

The number of NEDS will depend on the size of the company and its needs, but it’s usually advisable to have more than one. A "'one voice' will need to make a lot of noise to avoid getting drowned out, but if it’s too loud, it may ostracise the rest of the board.

In fact, getting the chemistry right is one of the most important stages in the NED recruitment process. NEDs are a company's 'critical friends'. They have to be allowed to challenge the board, but the board has to trust them to do so in a constructive way.

The best way to find your NEDs is by old fashioned word-of-mouth. Make sure contacts and partners know you’re looking, scour the business pages, keep an eye out at business events, and network mercilessly. Don’t forget that as well as for their knowledge, you recruit NEDs for their contact book, so good ones will be "visible".

Think big and set your sights high. NEDs might be extremely successful people, but they might also have reached the point where they don’t want to work full-time. They might get a buzz from working with entrepreneurs, or they just might want to 'give something back'.

Looking for NEDs shows competitors, clients and investors you are serious about taking your business to the next level, so investing in the right NED is one of the best business decisions an SME can make.

By Lesley Stephenson, publisher of the Financial Times’ Non-Executive Club, which offers support, information and networking opportunities to boardroom members.

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