Yesterday afternoon we were very pleased to sponsor and support the APSCo SME Forum. The audience engaged with the panel of speakers to create a highly informative forum on the topic “How an NED can help the growth of your business”.
Chaired by Liz Prince of Amiqus and Jon Cox of CCL Global, Stuart Hutchison spoke on behalf of UHY and was joined by Dave Pye, Co-Founder of NextGear Partners and Louis Cooper, CEO of NEDA.
The Q&A revolved around the following five questions areas and provided insight into how to work with a non-executive director to grow your business. Below is an overview of the forum with points made by the panel and the attendees.
What is an NED and who should you pick?
An NED is a non-executive director, who can join your board to help further your business. This is a different role to that of a ‘black book introducer’, a business coach, or a business advisor, although an NED can be used as well as and with any of the above.
When looking for an NED, working with someone you like is a strong place to start. Don’t be afraid to review with the KPIs specific to NEDs – Knowledge, Permanence, and Independence. At UHY we would always recommend independence at the forefront by ensuring that the NED is not a stakeholder in your business.
The group spoke in particular about the difficulties of having an NED placed within your business on an investor’s instruction. This can cause a conflict of interest, because as an NED the allegiance should be to the company, rather than to the investor who requested they join the board on their behalf.
The main questions you should ask yourself, as the business owner, are where are you going? And how are you getting there? These will allow you to decipher the kind of NED you would like to work with. Your NED does not have to be industry experts, and in fact by working with someone completely outside of your business model can sometimes bring fresh innovation to the table.
When do you need a NED?
When you are looking for the skills required to further your business, this is when an NED could come in, allowing you to add a professional advisor to your board.
‘You don’t know what you don’t know’: an NED doesn’t necessarily need to be there to grow your business, but an evolution of your business should be expected. The NED should bring knowledge, diversity, and most of will push you and hold you accountable.
At the point of exit planning, an NED is highly recommended in order to work with you to set the policies and procedures to get your business to the position you expect for sale. Of course, it is possible for to do this alone, but having another business advisor at your disposal will ensure you have a clear view of the future.
How much should you pay?
That is dependent upon how much of their time you expect to receive, and what they get from it. It may be purely a voluntary position, to develop their careers as well as you business.
You can negate issues with conflict of interest by ‘buying’ their independence with a set salary, rather than providing them with a stake in the future development of the business. It is also possible to make arrangements with an NED on a gratis basis until your business develops to the point where a payment is possible or for an interim period where both parties get used to one another.
Of course, this is for smaller businesses, but for FTSE 100 companies it is worth remembering that there is a reporting obligation for listed companies. Either way, contracts or documents should be drawn up to formalise the relationship, whether it is reported to HMRC or not.
Remember, it doesn’t have to be forever but where possible they can grow with you and the services offered may develop. Some people work with NEDs on a short term basis, gaining advice and expertise to ensure the continuation of a business rather than one that wants growth and potentially quicker results. It could also be that you would like to have specific knowledge (such as digital and/or marketing) or diversity in gender, age or experience. Each depends on the business set-up and aims.
What are the risks and responsibilities?
The NED is a director role, which comes with the liabilities as it does for any director. Insurance for the board should be in place (covering directors and officers) and the policy ought to be checked by all parties, including the NED.
The NED should act within the powers of a director, promoting the success of the company by acting with the appropriate professional skill and care. An NED cannot say “I didn’t know”, they must read everything sent to them and be involved. As mentioned above, there should be no benefits or conflicts of interest – including via other businesses they may work with/act for.
Ask anyone coming into your business, ‘what can you do for me today to get my business where I want to be tomorrow?’ Be careful of the ‘black book introducer’ as an NED. They make excellent sales and business development advisors but not as an NED.
How should a NED fit into a board structure?
As with all your directors (and yourself) you should ensure you understand their limitations, as well as their experience. Look to work with those who could bring the new to your table, and can complement the recruitment sector even if they are not experienced within in. Often those who are the most inspirational are those who wear their failures with a badge of pride; proof that they have navigated their way through different companies.
The ideal role for an NED is as a Chair. This is a key role to lead, direct and record. Minutes for all board meetings should be recorded properly, and your NED should encourage you to manage yourself personally and professionally. A good Chair can bring out the best in people and help the process of evolution.
If you would like to discuss attending future APSCo forums, the benefits of their membership, and/or how using an NED could work for you, please contact us on 0845 606 9632 or email firstname.lastname@example.org.