5 Important Guidelines for a Newly Minted Non Exec and a Refresher Course for Seasoned NEDs
The most important aspect of being a non-executive director is the fact that you have something to bring to the table, such as a specialized talent that the organization needs. Some work for five or six organizations at once providing them with needed insight to the industry at large without being “bogged down” by a single organization’s issues. Because of this, some non-executive directors can sit on the boards of several companies and help organizations see the bigger picture for those organizations. There are important guidelines that every NED should follow. These are:
Communication: What to communicate and what needs to be kept secret
For an NED, there is a bit of a “juggling act” between what needs to remain “in-house” with the organization you are working with and what can be made public. Your specialized knowledge of the specific industry is why most organizations hire non-execs, but you need to be careful about sharing specific company information that needs to remain confidential. For example: Trade secrets and financial information. NEDs help connect organizations and companies with other organizations and companies with useful information and support.
Strategy: A Sounding Board for what is coming next
A good non-executive director will be able to help the executive board decide what direction they want their organization to go in the future. Having the ability to brainstorm ideas and the knowledge of what is currently happening in the industry and/or organization improves the organization’s ability to meet and exceed needs. An NED can provide an outsider’s view of the strategic plans and offer objective criticism when needed. They can also be a good sounding board for executive directors as they decide how to address various issues within the organization.
Performance Monitoring: Being the eyes and ears of the organization
Due to the fact that NEDs are not directly involved in the day-to-day operations, they have the ability to spot issues that can’t really be seen by those that are directly involved in the organization. Non-executive directors usually have extensive experience in the industry which allows them to effectively monitor performance factors such as how the company is performing its objectives compared to other companies. NEDs can also understand and monitor executive performance to make intelligent decisions in regards to remuneration, appointment and/or removal of executive directors. A non-exec can’t get too involved in one company’s issues that they lose sight of the bigger picture. Companies and organizations depend on NEDs to give them a clear and objective view of the company’s status and help them make intelligent decisions to grow the company and/or organization.
Risk Taking: Making the tough decisions
NEDs are often asked to analyze financial statements for risk factors. All non-execs should have a good understanding of what risk factors the industry they’re working for is facing. This means they need to make sure the financial information they receive is correct, and the financial controls are set and stable. Having good reliable financial information can only help the NED form business analysis of how much risk the company should make. A NED’s objective view of financial matters provides a good understanding for the company/organization to make intelligent decisions in operation goals.
Objectivity: The Key to bringing it altogether
It can’t be stressed enough that an NED needs to have an objective role in the organization and/or company. A good non-executive director will help executives connect with executives on other boards to come to an understanding of how they can work together and utilize common resources. Non-execs that can separate themselves from a company’s internal issues and help them solve them are “golden” in the eyes of executive directors.
So how do you pick up these skills? Some are inborn and naturally come. Some you need to work at with due diligence. You definitely need to practice listening skills as it is ultimately what will make or break you. It won’t be easy to be objective about something you care about, so you will need to practice this as well. You will find however if you practice these skills that you will go far. What would you add to this list?