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Why, when and how to hire a non-executive director

A seasoned veteran can be a big asset on the board of a growing business.

by Jack Torrance
Last Updated: 24 Feb 2016

In a business's early day, it's often up to the founders to do everything – from accounts to HR, sales and marketing. Roles become more specialised as the company grows and eventually there comes a point when you need to beef up the board as well.

Why to hire a NED

Entrepreneurs know their business, and their market, inside out; there's often nobody better equipped to handle the day-to-day management. But it can be difficult to step back and look at the bigger picture. A non-executive director (NED) can bring a fresh perspective and a less emotionally involved standpoint to the business, helping its leaders identify long-term threats and opportunities. 

'The check and balance a non-exec can bring to a business is hugely valuable, and can help prevent some of the mistakes that a lot of business leaders will undoubtedly make during their journey,' says George Heppenstall, a director at the executive search firm Directorbank. 'It's not a case of bringing in somebody to tell [entrepreneurs] how to run the business, because invariably they have done a very successful job of that already. But there are those out there who can spot the fine margins that can make an impact.'

'When I join a business it can change the whole dynamic,' adds Jo Haigh, an experienced non-exec and author of The Keys to the Boardroom: How to Get There and How to Stay There. 'It can professionalise the board, because if you've got a lot of execs who are running the business on a day-to-day then they can be very introspective. It can also bring good practice, because governance practice is something that very often execs don't have a lot of experience of.'

When to hire a NED

There's no absolute answer to this question. While having a professional board structure is a requirement for listed companies, there's theoretically no requirement for even very large private businesses to have any NEDs.

'It's not really the size of the company, it's when they feel they need something that they can't find within themselves,' says Haigh. 'That could be contacts, or it could be somebody that's going to challenge them, or it could be someone that they need to confide in or to be a mentor.'

'It depends on the stage and development of the business,' say Heppenstall. 'If it's out of the blocks and revenue-generating and profitable then obviously that's a good foundation and a good point at which to look at this. Any earlier and you might be struggling to get someone's engagement.'

A NED can also be a big asset if you're keen to get venture capital firms to open their wallets. 'If a business is looking for external investment, having somebody around the board table who has an appreciation for the business sector in which they are operating can be quite useful,' Heppenstall adds.

How to hire a NED

'There's lots and lots of ways,' to find the right person for your board, says Haigh – including headhunters, websites and the Institute of Directors, which can search its directory and provide you with a shortlist of candidates for £100 + VAT. 'I think the important thing is to spread the net as far as possible,' she adds. 'There's always a danger that you choose a non-exec because you've met them or they've been recommended, but you haven't looked far enough.'

Being a NED isn't a full-time position – you can normally expect them to commit to a couple of days per month. 'That, broadly speaking, gets you a monthly board meeting, plus another day for prep and other such commitments,' says Heppenstall. Haigh says she includes unlimited phonecalls and emails (within reason).

NEDs don't come cheap though. Heppenstall says a salaried non-exec can typically be on £20,000-£30,000 and Haigh says day rates can vary from £1,000-£3,000, sometimes higher. That being said, if they can help take your business to where you want it to be then it can be a price worth paying.

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