How to secure your first NED role
Andrew Bulloss of Odgers Berndtson provides some valuable advice to execs looking to secure their first non-executive director position.
In conjunction with the Odgers chair and non-executive director (NED) practice, our gaming practice recently hosted a lunch for aspirational non-executive directors to connect with and learn from established board non-executives.
The lunch gave these established NEDs a chance to share their wisdom, life lessons – and pet peeves – from their experience in the boardroom, but also to advise on how an executive can best present their skills to secure their first NED position.
Given NED roles are increasingly interesting to many of our executive candidate community, I thought it would be interesting for others to hear some of these views and insights.
From personal experience, executives no longer see a ‘portfolio’ career as the end of their executive life and a pre-cursor to retirement, and are keen to secure NED roles earlier on to develop skills and experience which support and enhance their ongoing executive roles.
Securing the first NED role
Breaking through into the non-exec world and achieving the first post can be tricky. The Catch-22 scenario comes into play – can't get a job without the experience but can't get the necessary experience without the job.
A number of our guests at the lunch highlighted this problem; despite numerous years in the boardroom as an executive, having no prior NED experience was an ongoing barrier to entry.
The challenge was convincing the board that they were able to make the necessary transition from executive to non-executive by taking a step back from the coal face, a critical behavioural step that we know from experience that not everyone is capable of making.
Many of the more recent NED appointments we have overseen have required a balance of appropriate skills rather than pure ‘governance’.
Strategic skills, in particular, are now in demand, rather than risk and regulatory skills, which tended to be the principal determinant after the financial crisis. With this in mind, it was deemed good practice for execs to develop a skills-based profile rather than a chronological CV.
Being able to highlight their two or three core personal strengths or skills which would add most value to a board, hopefully demonstrated across a range of roles in an executive career, was seen as a good way to start.
The group also considered what type of organisation might be a good place to embark on a NED career. Aiming high for a plc NED role may be the aspiration, but valuable and often more interesting experience could be gained from advisory work with start-ups or pro-bono board roles in public, not-for-profit or third sector organisations.
Private equity firms, which focus on value creation, can also provide valuable experience of commercially driven decision-making in a less exposed private environment.
The challenge for new NEDs
From complex international mergers and the flotation of a high-profile business, to the commercialisation of a new technology, a cohesive board of talented and experienced directors is perhaps the greatest asset an executive team can have at their disposal to help them seize business opportunities and effectively manage risk.
However, the essential dilemma facing new NEDs is that they only spend a limited time with the company and yet they are, from day one, as accountable as anyone on the executive team should anything go awry.
So how can a new NED cope? The average NED may only spend 18 to 20 days per year working with the company, and if they are also executive directors on another board, the rules stipulate this must be with a non-competing business.
So, rather uncomfortably, they are at arms-length yet potentially exposed. This independence also makes it difficult for them to pick up nuances within the business.
Pearls of wisdom
However, based on ideas generated from our lunch guests, there are a number of practical steps which new NEDs can take to maximise their effectiveness.
• Pick a company where you trust the integrity of its chair and CEO
Assessing whether the company and board members are right for the NED is important, and jumping at the first opportunity to get ‘on the ladder’ could be a mistake.
A good chair will set a clear agenda, ensure everyone has a voice and give the appropriate time to discussion on the underlying drivers of the business. Interestingly, due diligence on the chair was an area that is often overlooked. Not all impressive individuals make impressive chairs!
It is equally important to understand the dynamics and expectations of the board before stepping into a NED role. Is the responsibility of the NED to just read and comment on board papers or are they expected to be mentors? This will depend largely on how the chair sets the framework and tone.
As well as assessing board chemistry, appraising an organisation’s desire to change is critical.
Finally, the risks to NEDs are lower if they know how to identify well-governed companies. Instinct matters here. When considering whether or not to accept an NED post, it is essential to ensure that the board is a collective body, jointly responsible for decisions and its actions.
Well-governed companies will provide a proper induction. A new NED should not be shy to ask for a full introduction programme. Individual annual appraisals by the chair are also useful in giving guidance on what is expected of NEDs and making objectives clear.
• Commit the time
NEDs must leave themselves adequate time to read through board papers. If these are unclear or appear incomplete, it is essential to seek additional information. The best NEDs understand that the right to information is an essential part of detecting problems, and must ensure this is in place.
Once on the board, a new NED should also be accessible for the serving execs and get to know key people at board level and below. They should also be prepared to dig behind the data where appropriate, and be prepared to sound the alarm if the board fails to work as a group.
One battle-hardened NED at our lunch said that an independent director of a listed company should set aside at least two days a month, slightly more than the anecdotal average. The exact amount of time involved is not as important as the principle that your commitment must truly match the role.
• Be prepared to challenge and ask the basic questions
NEDs can be at their most effective, help generate value and uncover issues before they become problems by standing back from the coalface and being prepared to ask the basic questions.
If NEDs can help ensure that a company is well governed by challenging weakness in a positive manner without appearing to threaten or undermine the executives, then the risk of failing to detect potential disasters should diminish.
• Build relationships with the executive
One of the areas where NEDs can add significant value is the time they spend outside the boardroom in an informal mentor capacity with senior execs within the business. NEDs of couse have obligations to shareholders, but spending time with the management (if this ‘freedom to roam’ is allowed) was seen by experienced NEDs at our lunch as highly worthwhile.
This is especially relevant in the relationship between start-ups and their board advisors, although, the management of start-ups prefer their board advisers to be more hands-on in structuring and governing the business than the advisers perhaps would like!
• Take a long-term view
Serving CEOs can be attracted to NEDs who bring a long-term view and can help the board and business identify the ‘bumps in the road’, anticipating when a problem was likely to arise and being able to work through solutions.
However, many board room ‘fall-outs’ occur when NEDs find it hard to take a backseat role. After all, a NED is not responsible for leading the business, that’s the CEO’s job.
What is evident is that a good board member knows when to sit back and listen. They’ll offer advice on an area of expertise from their career, but they won’t feel the need to get too involved.
• Fresh perspective
Typically, a board’s inexperience in truly understanding the importance of digital disruption is an ongoing issue. “It would be helpful if the board members knew how to use a smartphone”, was one reflection from our lunch! Individuals who can bring insight into “the future consumer” are also highly valued.
Equally, having a token ‘radical’ on the board was not seen by the group as a suitable solution. If the culture of the business doesn’t embrace change then why would one person on the board make a difference?
That being said, NEDs and the board should not be consumed by what the management team are doing to counter digital disruption; rather they should be focused on critically assessing the management team’s ability to find solutions.
A board’s role should be to recognise the warning signs and then appraise the capability of the CEO and executive team to develop a strategy that suits.
This area largely falls under ‘risk management’, and while the subject matter may be dry, it should be the number one item on any board agenda regardless.
Conclusion
Think carefully before you join a board. Above all, remember that individuals of integrity and commitment are essential to corporate well-being. If you have any reservations about the board you are looking to join, trust these instincts.
Andrew Bulloss is partner and head of the betting and gaming practice at executive search firm Odgers Berndtson.