3 Pieces of Advice for New Non-Executive Directors
The desired attributes and expectations of a non-executive director (NED) are various, and can often depend on factors such as sector or size of business.
Anne Whitaker is an independent non-executive director at Hitachi Capital UK, where she is a member of both the Remuneration Committee and Nomination Committee, and chairs the Audit and Risk Committee. Below, Anne provides her top tips for non-executive directors.
No matter what the desired role that a NED is expected to provide, there are key attributes to consider, and measures individuals can take to make sure they positively support a business in their role.
Preparation is key
It can be daunting going to a first board meeting as a NED, but those that have taken the time to understand the subject matter of their new post can approach with confidence. Preparation will usually involve reading a very large bundle of papers, even if the weight of the bundle is slightly less obvious in electronic form.
NEDs can’t just rely on the board for business updates. Research is key for understanding any organisation and this factual knowledge is an important starting point that will allow a NED to bring an unbiased point of view to any discussion.
As well as reading papers and having discussions in the Board Room, it is vital to see the operations of a business first hand. Visits to locations other than head office and discussions with staff on the ground bring management information to life, helping individuals to see the impact of strategic decisions that the Board takes.
As well as reading papers and having discussions in the Board Room, it is vital to see the operations of a business first hand.
Other sources that might not be as obvious to consider – but can be equally as important to reference – are your peers. I always find inspiration from other non-executive directors; it’s helpful to understand what current issues they’re dealing with and how they approach them. For example, cyber security is something I’ve found a lot of companies are dealing with, so it’s useful to discuss this with others to understand different approaches to tackling it.
Ask the tricky questions
It is the role of the Board to agree the Company’s strategy and to oversee management’s execution of that strategy. This means that it is a key feature of the role of the NED to ask questions, which can often be challenging. These questions aren’t just asked for the sake of it, but to help the Board to see issues from all perspectives and make sure that the right choices are being made.
Perhaps we raise concerns about the business case for an acquisition, or that assumptions or forecasts are too optimistic. For example, last year Hitachi Capital UK were involved in the acquisition of specialist financing firm Franchise Finance. We had to examine every facet of the acquisition to ensure the organisational fit was right and suited to the long-term strategy of the business. By taking this approach, by scrutinising the decision, we were able to fully assess the opportunity and come to the conclusion that it would be good for business.
In order to ask tricky questions effectively, one capability, in particular, that isn’t talked about enough, is listening. By spending time listening to your executives, other stakeholders in the business, and wider industry stakeholders and experts, a NED can gather the information that can enable them to ask those tricky questions with much more purpose and relevance. By listening, we can challenge or clarify a concern, ask the right questions, and really get to the nub of an issue. Listening means you fully understand the perspective of executives, and can be a powerful tool as the leadership team will appreciate that you have taken time to truly understand the issue at hand.
In order to ask tricky questions effectively, one capability, in particular, that isn’t talked about enough, is listening.
The relationship between a NED and the Board must be one that is collaborative and constructive. We must be supportive and challenging, but the relationship should not be a battle between the two. Of course, executives will have their own view on the strategy for the company and how it should be executed, and ultimately that decision will be theirs. However, if we challenge these choices, we must do it from a factual and practical standpoint. If we have logical and clear reasons for challenging a decision, but an executive has demonstrable arguments for their proposed approach, then this is the process working.
These challenges will always run the risk of making executives feel defensive, so acknowledging that they are doing a good job, and highlighting points you agree on, can help to manage difficult conversations. It’s a skill that comes with experience and by developing your own style you can make sure that you work together in a constructive and authentic manner, advising rather than instructing.