The benefits of hiring executives into their first NED roles

Some years ago I sat down with the CEO and Chairman of a fast-growing PLC (a global manufacturing business, with a world-leading niche product) to talk about a non-executive role. After listening to them for two hours, I had one of those “Oh my gosh, of course!” moments.

I would love to say it was my natural entrepreneurial creativity, but no. In fact it came from a business leader thinking ahead and applying the principles of ‘executive into board’ recruitment to non-executive director (NED) recruitment i.e. define the strategy, look ahead, identify the skills gaps and plan around this.

We worked on and agreed the search priorities, creating a wish-list of skills and experience that would be needed to support the board over the next five years – a journey that would see the business triple in size. At the time the list included global multi-site reorganisation, re-listing, specific market knowledge (life sciences, aerospace and defence) and someone to act as a mentor and coach to the busiest executives.

We decided to keep the experience as current as possible and ended up approaching board executives (CEO, CFOs and VP HRs) to test the concept of hiring executives into their first NED role. We hired four new NEDs and  the board changed dramatically, helping to facilitate the next stage in the company’s growth. The new recruits brought fresh momentum, new leadership skills and accurate insight as to what the future might hold and how best to get there.

 

The need to adapt in turbulent and changing times

Now in 2020 I am delighted to see that hiring executives into their first NED role is far more widespread, particularly with mid-sized or fast-moving businesses and PLCs. This is excellent news, except that it means our Edward Drummond boast of innovating in this area has now lost its lustre.

But then came Covid-19, the lockdowns and the current economic maelstrom. Everything has changed and we are busy again, finding and hiring NEDs.  What was needed eight months ago, in terms of strategic experience and know-how, already appears to be out of date.

Some companies have been lucky. They offer the right product or service for the current circumstances. Some companies may need to tighten their lifebelts to survive. But others are growing. And hiring. They are thinking creatively, adapting quickly, calling on relevant experience and introducing exciting new strategies.

It has brought back memories of my eureka moment all those years ago because forward-looking businesses are asking for the same kind of help from us now.

So, what is the best NED hiring strategy, not for last February, but right NOW? Where are the gaps in our clients’ businesses?  What do they need in today’s weird normal?

 

The need for specific expertise and experience

We believe AIM-listed companies should be looking for candidates who can respond fast to change, with smart, relevant ideas. People who have been through turbulent economic times before (although probably not a pandemic!) and have experience of putting survival strategies in place. Who will help your business not only to outlast COVID-19 and Brexit, but take advantage of new situations to thrive and grow. Who can help you reach where you want to be in 3-5 years’ time.

This is where we have been busy: finding candidates with specific strategic expertise and introducing them to boards that need them, so organisations can be confident that they are doing everything they can at a senior level to survive but more than this – to thrive.

 

What do non-executive directors bring to the boardroom table?

As company directors, NEDs are usually expected to contribute to:

  • Entrepreneurial leadership
  • Agreeing the company’s values, standards and strategic aims
  • Ensuring the business understands and meets its obligations to shareholders.

Because NEDs are independent, they have the freedom to comment when they believe board members are acting inappropriately or endangering the company’s success. On the other hand, their independence allows them to provide confidential support for you and other senior management, listening to your concerns and offering unbiased advice.

Appointing NEDs will strengthen your board by providing outside experience, objective judgement and independent views. The right people will fill gaps in your current board’s experience, knowledge and balance. They may also have more specific responsibilities, such as:

  • Strategy: challenging or helping to develop strategic proposals
  • Performance: monitoring and reporting on management’s success in meeting agreed objectives
  • Risk: scrutinising the integrity of financial information and checking that robust, defensible financial controls and risk management systems are in place
  • People: particularly in appointing, removing or helping to set appropriate remuneration levels for executive directors
  • Diversity: NEDs can add diversity and inclusivity to your board or help your business appeal to different cultures.
  • Governance – Good corporate governance is critical, particularly within AIM-listed businesses, which by nature tend to be fast growing and constantly changing.

 

It’s also good practice and meets the recommendations of the UK Corporate Governance Code which states:

“The board should include a balance of executive and non-executive directors (and in particular independent non-executive directors) such that no individual or small group of individuals can dominate the board’s decision taking.”

It continues:

“…at least half the board, excluding the chairman, should comprise non-executive directors determined by the board to be independent. A smaller company should have at least two independent non-executive directors.”

A smaller company is one that is below the FTSE 350 throughout the year immediately before the reporting year. So there is a clear requirement for these companies to have at least two (preferably more) independent non-executive directors.

 

Choosing the right NEDs for your business

At Edward Drummond & Co, we find and recruit exceptional NED leaders for our mid-sized, fast moving companies and PLCs. Our clients are focused on a strategic plan and recognise the need to hire NEDs who will contribute significantly to the success of their companies. They are often looking for NEDs with particular strengths or expertise in specific markets or sectors, acquisitions, growth or business reorganisation.

We take the time to really understand your business, your strategies and your culture, so we can help you identify the ways in which NEDs can bring added value to your board. We then use our networks and contacts, supported by our robust and uncompromising research, to find the right candidates to help your business grow and thrive.

If you’d like to discuss any aspect of hiring non-executive directors at this unprecedented time, please contact me, Neill Fry on 07920 055451 to discuss how best to move your search forward.