Non-Executive Directors: Opportunities and Challenges
17th October 2019
Non-Executive Directors (NEDs) are appointed to provide objective and strategic advice within a board. They can provide invaluable support to a family business journey, but their appointment should be carefully planned to avoid challenges further down the line. In this blog we'll explore some of the benefits of hiring a non-family NED and some challenges to be aware of.
What can non-family NEDs bring to a board?
Because they work part-time and are not involved in the day-to-day management of the business, NEDs have the opportunity to bring in a different perspective, challenge certain patterns of behaviour and encourage strategic thinking.
When owners are busy running the operational business, it is often challenging to look into in the rear-view mirror or far ahead. This is why NEDs can bring in considerable added value. They can look into what happens within and outside the business to act as a sounding board and offer strategic advice and support. Their main job is to listen; ask challenging questions; and provide fresh thinking to enable positive changes in the business.
Representing the interests of the company no matter what, NEDs act in its interest and, as a consequence, in the interest of shareholders. Their role has the opportunity to make the difference in challenging times.
Because they come in from outside, they also provide an added skills-set that the executive team might not have. Often, they come with a new range of contacts, which could benefit the company by providing new networks of useful people.
There are some challenges. It is often the case that, when they first hear about NEDs, owners feel threatened, especially if things have been running a certain way for a long time, or if there is no clarity as to what the NED is supposed to do.
Talking with other members of the family business and asking yourself if there are gaps you are trying to fill and what they are can help understanding whether looking outside the family business can help the business and how to go about it.
When deciding to select an NED, it is important to do it carefully. In a family business culture and values play a crucial part across the board, so the NED’s’ personality should be a good fit. Equally, NEDs should learn about the family business and understand it at a deep level to be able to work efficiently. This will help the family overcome doubts often associated with hiring externally, as well as ease the process of aligning family and non-family members.
In and by itself, this process can take time. It requires listening before NEDs can effectively start to contribute and asking the right questions.
Finally, really good NEDs can come from the most unexpected places. It is good practice to look beyond your usual channels when looking for the perfect fit.
Contact us to find out more about NEDs and how they can help your family business.