5 REASONS NOT TO APPOINT A NON-EXEC

Founders or shareholders of companies with high growth potential, as well as businesses facing challenges, often seek to appoint a Non-Executive Director (NED) to assist with their next business phase.

The type and expertise of the NED you choose will depend on your specific needs and strategy. A good growth-focused NED may not be suitable for a turnaround scenario, and vice versa. Conversely, a skilled turnaround NED might lack extensive knowledge of governance and controls. You might just need a NED to stabilize the team, sharpen their focus, help create a compelling business plan, and so forth.

While appointing a NED is not a guaranteed path to success, they generally drive change and significantly increase shareholder value. But what exactly is a NED?

A non-executive director holds a part-time position on the company’s board of directors and shares collective responsibility for the business’s success.

They typically attend board meetings but can also undertake various tasks within the company, such as leading special projects, communicating with shareholders, and representing the business at external events.

Unlike executive directors, non-executive directors do not have operational responsibilities within the company and are not considered company employees.

It’s important to note that the Companies Act 2006 does not differentiate between executive and non-executive directors. As a result, both types are subject to the same duties, responsibilities, and potential liabilities.

So there are many reasons to appoint a NED to your business, but please STOP and think!!! Consider the following 3 reasons NOT to appoint a NED;

If you want a yes man – don’t do it!

A good NED will respectfully challenge and push you/ your team

    • Can independent facility discussions. Generate ideas, resolve conflict.
    • Bring an experienced calm approach to scaling a company and the NED will have walk the proven path previously.
    • Focus and calm the team down to ensure they perform.

If you don’t want to grow

A good NED will be your best business development head

    • Selling more via soft referrals as a trusted source of products and services to their own valued network. We know that referral based opportunities result in78% more successful sales outcomes than non-personal referrals.
    • Fund Raising- they will add credibility to your fund raising activities and often have core contacts which you can leverage.
    • If you wish to augment your organic sales and accelerate you growth, a good NED will allow you to proactively drive a Mergers and Acquisitions Strategy (M&A) in a controlled manner.

If you are a megalomanic and want to dictate everything

    • Engaging a NED you have to be open to listen, learn, adapt, evolve your behaviours and approach
    • You will have to learn to let go and little and work at a more holistic level, working on rather in the business.
    • You may have to retrain, learn new skills and be open to being respectfully challenged.
    • Appointing a NED will ultimately lead to the implementation strategic change in direction and or operating cadence- this is typically around growth, turnaround or consolidation.
    • Implement the right size and types of internal controls and target operation models.
    • Generate clear increased shareholder value.

Conclusion

A Non-Executive Director (NED) holds the same duties and responsibilities as an executive director, but due to the part-time nature of the role, a NED focuses on providing independent oversight. As a potential NED, you should perform thorough due diligence before joining a board to ensure it is the right fit for you. Once appointed, leverage your experience and expertise to contribute significantly to the business.

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