What Makes a Good Non-Executive Director (NED)?

14 January 2020

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As the world as we know it is a complex one which keeps changing and evolving and therefore, so must organisations.  The challenges and demands that they face have to reflect those that are experienced day to day by management and employees.  Boards have to be aware of changes to the environment they therefore need to be looking to balance as well as update their experiences and skills to reflect these changes.  Representation of NEDs (and of the board in general) should encompass the traditional eg finance but must also embrace the different demands of today such as in risk, cyber security or in other technology in their many guises.

 

What is the purpose of a NED?

Before we can go on to talk about what makes a good NED, it is probably worth reminding ourselves of the role of a NED and why they are a valuable resource to the board.  In short it is to provide an unbiased review and oversight, as well as constructive challenge to the executives on behalf of stakeholders.  They are there to bring value to the stakeholders.  Together, they and the executives directors (both of whom have the same legal responsibilities) should be a high-performing team.

 

The board should be diverse in every way (see previous blog) and have varied contributors as mentioned above, at different times depending on the circumstances.  Even skills like having an excellent network and some charisma will contribute to the success of that board, and therefore the organisation.

 

A report published by Korn Ferry[1] talks about some core characteristics.  In summary, I list them below.

 

  • Independence, courage & integrity – this individual must be non-partisan and rigorous in approach and analysis, focusing on the long-term health and benefit of the organisation, as opposed to short-term and potentially, ‘fashionable’, morally unsound and risky decision-making
  • Challenging but supportive – as experts in their field and/or through their experience, NEDs will have strong views and these should be used to constructively challenge the board and their decisions, in a productive and supportive way, without descending into unhelpful conflict
  • Thoughtful communication – the NED should ideally have the art of being able to articulate and persuade but not dominate and impose, in short, someone who is emotionally intelligent
  • Breadth of experience – through skills, careers and situational experiences (eg growth vs recovery, or geographically and culturally), and political and commercial awareness

 

Some of the other characteristics mentioned in the report include:

  • an extensive grasp of the business, general commercial & industry awareness; and has had a successful career and who brings gravitas to the board
  • time commitment
  • feedback

 

And the report notes the following characteristics are becoming more necessary in contemporary times.  These include:

  • identifying and managing risk – operational, financial, reputational – to expect the unexpected
  • finance – not just literacy but a true understanding of how it supports and sustains the organisation
  • technology – the impact on the organisation and its stakeholders

 

What don’t we want to see?

  • individuals who don’t understand their roles and responsibilities and the boundaries around those
  • inflated egos
  • combative types
  • unprepared, uncommitted and unfocused individuals

 

 

As you will see, not an easy task becoming a NED, let alone doing the job of one.  And yet, the role and right person is vitally important for the long-term health, success and sustainability of the organisation.

 

This article forms part of the board fundamentals series.

 

 

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[1] What Makes an Exceptional Independent Non Executive Director, Korn Ferry