Many large companies and organisations have non-executive directors on their boards. These are people who are on the board of directors but not on the company’s executive team. What’s not as well-known is that small to medium-size businesses can also utilise non-executive directors (NEDs).
In this article, we’ll explore some key benefits to having the guidance of a NED and some tips on making the most of their services.
Functions and Responsibilities of a NED
The specific role played by a NED will vary from one organisation to another. The following are some tasks and responsibilities they often fulfil.
- Mediate on issues and disagreements that occur on a board or between the board and other stakeholders.
- Promotes the reputation of the company. They may engage in public relations and media outreach.
- Keeps other members of the board accountable.
- Helps to plan policies and long-term goals of the company.
The Prevalence of NEDs
While the general public may not be familiar with NEDs, they actually have a large influence on many companies. The Guardian reports that as many as 6,000 NEDs are active in the UK’s top 1,000 firms. However, they are also active in many smaller companies.
Advantages of a NED
Non-Executive directors, also known as outside directors and independent directors, play a unique role in any organisation. As they aren’t part of the executive team, they are less involved in the day-to-day workings of the company.
Why would a business consider taking on a NED? Here are some of the key benefits.
- Objective and independent. A NED is less caught up in the daily actions of the business and is able to look at the big picture. Furthermore, someone in this role is not directly involved with other shareholders and is less likely to be influenced by them. The 2020 Non-Executive Directors Survey found that 92% of respondents either strongly agree or tend to agree that NEDs are sufficiently independent to provide a critical voice in running a company.
- Chosen for their broad experience and abilities. While executives may be directly invested in a company and have experience relevant to the industry, a NED is likely to bring wider knowledge. They may also have important connections with the media and other industry leaders.
How a NED Can Help a Small to Medium-Size Business
If you own a small or mid-size business, you may wonder why you should think about taking on a NED. There are several reasons that this is worth considering.
Accelerate Your Growth
- A NED can bring valuable experience and connections to your business. They can help you network, provide helpful advice, and make your company more attractive to potential investors. If you have a growth mindset, a NED can help you meet your goals faster.
- Help you plan a viable strategy. Strategic planning is essential for growth. It can help to have someone with industry experience to guide you.
- Identify risks and opportunities. A NED can identify growth opportunities, such as entering a new market, opening more branches, or introducing new services. They can also keep you aware of risks such as competitors and changing marketing conditions.
- Manage your resources. Smaller businesses need to be careful about spending money and other resources. A NED can help you plan a budget, so you don’t overspend on payroll, advertising, equipment, and other expenses.
Valuable for Start-ups
A NED can be a valuable asset for a start-up business.
- Planning strategy. A new business often needs guidance in areas such as market research, marketing, and financial planning. An experienced NED can help them make a strong start.
- Gaining publicity. A NED with a background in marketing or public relations can provide a start-up with essential publicity and media coverage.
- Attracting investors. A NED may have connections that can help you attract investors. Potential investors are more likely to be interested if someone they know and respect is involved.
Tim Hatari helps businesses improve performance, creating strategic development plans and establishing structure via the 5PX Executive Business Coaching System. As CEO and Founder at TMD Coaching, he oversees the vision setting process with clients, leading on sales acquisition, the drive for operational excellence and market leading innovation. For Tim, helping others is the most rewarding part of the role. Follow or connect with Tim on Linkedin - www.linkedin.com/in/timhatariView All Articles