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What is the Role of an NED?

Boardroom table for NED Blog July 2014

You’ve decided that the next step in your career is to become a non-executive director (NED). With the right experience and credentials, you might well be ready to take on the role, on paper, at least. but how do you get started? Here are some key steps in your journey towards becoming an NED.

Defining the Role of the Non-Executive Director:

Strategy: Non-executive directors should constructively challenge and contribute to the development of strategy.

Performance: Non-executive directors should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance.

Risk: Non-executive directors should satisfy themselves that financial information is accurate and that financial controls and systems of risk management are robust and defensible.

People: Non-executive directors are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing, and where necessary removing, senior management and in succession planning.
© The Higgs Report

The picture of an NED painted by the table above is of an outsider to a company with specific qualities and expertise. Indeed, NEDs are often referred to as executive management’s ‘critical friend’: uninvolved in the day-to-day of the business, they are able to look at strategy and executive performance with a more objective and critical ‘eye’ than an inside director. This is why many NEDs will hold several directorships with different companies as part of a portfolio career – they are able to bring their varied experiences to other companies and provide outsider expertise.

Building the Right Profile: Whether you want to get on board with a ‘blue chip’ company or a bright new start-up, you’re going to need long-term executive experience, preferably in a number of sectors. What companies are looking for in NEDs are experienced all-rounders with industry-specific skills. You will need to prove your adaptability as well as your independent experience. Companies will not hire you if you have limited experience at an executive level so gaining an NED role is unlikely to be achieved overnight.

An excellent way of building the right profile for becoming an NED is to take a non-remunerated NED role whilst continuing your executive work. A good example of this would be becoming a school governor, who has roughly the same role as a NED – particularly in academy schools. Other examples include becoming a trustee on an NHS board or a charity. What you really need to do is demonstrate your versatile profile, particularly as part of a portfolio career, and get that first NED position even if it is not remunerated. Varied experience is the only way of achieving that.

Getting the Right Contacts: Networking is vital to gaining an NED opportunity, as many companies will go directly to head-hunters to look for NEDs. Ideally, you should build a balanced network of executive and non-executive contacts in your industry, particularly with an eye on head-hunters as the ‘holy grail’ of contacts. Try networking with experienced NEDs who can give you the advice and connections necessary to bring you closer to becoming a NED.

Changing Lifestyle: As you build your portfolio career, you’ll quickly realise some drastic lifestyle changes might be in order. You might be balancing NED-ships in several different sectors, perhaps even whilst continuing executive work in your main industry. You have to be prepared to reshuffle the way you organise your working week and in order to keep each plate spinning, so to speak. The NED role might only call for two days work a month on paper, but be prepared to be flexible as that can change quickly. You need to dedicate time not just to get the job done, but to get it done well.

Choosing Sectors: Once you’ve taken on a few NED roles, you’ll begin to have more flexibility and choice with future roles. You can start looking at directorships in new sectors, ones that don’t necessarily match up directly with your industry background or experience but have strong parallels. This is a big step in building a successful portfolio career as it will help you continue to be that ‘critical friend’ and independent director.

Your Value as a NED: Bernard Buckley, an executive coach, who ran the event, Achieving Your Next NED Role – Are You Ready? for our Fellows, said: “NEDs bring independent, objective perspectives to the business, identify new opportunities, share ideas and may even draw attention to issues that may not be self-evident to people immersed in the daily business. In addition, they may introduce to the company new key contacts and networks of people who can help to drive the business forward. In return the NED has an excellent opportunity to work with and learn from experienced board directors in complementary or different fields to their full time job. This helps personal and professional development and adds value to their employer who gets the benefit of their new experience and skills.”

The Path to Becoming an NED: Securing a NED position requires full commitment. All good career progression takes preparation, drive, tenacity and a positive attitude to secure a position. Becoming a NED is no different.

Helpful Information Sources
The Non-Executive Directors Association: Dedicated to meeting the training and personal development needs of NEDs.

Financial Times Non Executive Directors Club: A growing community of non-executive directors. Whether you are looking for your first non-executive job or already have a portfolio of non-executive roles, the Club is the number one destination for networking, resources and the latest vacancies.

Institute of Directors and Chartered Institute of Personnel Development: These organisations provide information and advice on becoming an NED.