In this week’s interview, Michael Wilton-Cox provides some invaluable advice for being an effective Non-Executive Director and helps distinguish between roles for private, public and charitable boards.
Michael is an experienced board director and has held executive, non-executive, chairman and business advisor roles for the last 26 years. He has private and public sector board experience in small, medium and large complex organisations in a wide range of industries. He has also held Independent Trustee positions on a couple of charities, one of which was Deputy Chair at Cambridgeshire Consultancy in Counselling.
He was a Non-Executive Director of an NHS Primary Care Trust for many years, and has been active in private healthcare sector as Non-Executive Director focusing on Governance and Risk Management. His “day job” is as Interim Turnaround Manager for numerous organisations.
What are the key skills for Non-Executive Directors?
A good head for business is important – if you have run a business at board level you probably have a start – and being willing and able to ask awkward questions and insist on getting the right answers is important. “Shrinking violets” and those who want to sit quietly and agree with everything the Chairman says are not likely to do the best for the company.
Many companies seek particular experience in one area of business. Most people are not “generalists” – unless they have been an MD or CEO for some time – so look for businesses that need your specific skills and experience. However, being able to understand broader business operations is crucial, when on the board you cannot allow others to make decisions that you do not have some understanding of.
You need to be able to get on with people at all levels. You will have to work with various people in an organisation and ask questions, show that you are open and willing to listen and learn (they know more about the operation of the business than you do, especially initially).
Not taking set-backs personally is also important. You are unlikely to be able to get every proposal you may make through to fulfilment and it is not you personally that is being rejected! Be willing to accept that other views are important and may be better in the long run for the business than yours.
What are the key factors which affect the effectiveness of boards?
The mix of skills across the board. Every board director – Executive and Non-Executive – should have specific skills which add to the overall skill set on the board. I have seen boards of, for example, technology companies, filled with Executive and Non-Executive Directors with a lot of technical expertise but with no board member having any business or marketing expertise. A balanced board skill set is essential for proper effectiveness.
The way board members “gel” with each other. It is not necessary to be “bosom buddies” with the other directors, but serious personality clashes get in the way of effective decision-making. Egos and “posturing” also impede effectiveness. Just make an effort to get along with each other.
The experienced NED’s have a role in mentoring less experienced, and particularly novice, directors, whether Executive or Non-Executive. Everyone has to learn at the start of a board director career and an experienced “guide” or mentor will make this learning process quicker and easier. New board directors should be sent on an established and well-recognised directorship course if they haven’t already attended one.
The availability and validity of full business and operational (including financial) information in a timely and routine manner is crucial for decision-making. Also, companies should expect all NED’s to actively “walk the floor” occasionally and learn about the operation and business, talk to the people in the business at all levels. NED’s should also be expected to take part in (and chair where appropriate) board sub-committees.
Finally (last but certainly not least), good chairmanship. The Chair role is crucial to an effective board, and the Chairman should be an experienced Non-Executive who is skilled at that job.
All NED’s have very distinct and well-publicised duties and responsibilities laid down by Companies House and the government. However, there are some responsibilities relative to each of these types of boards.
Those on Public Sector boards (i.e. government “quangos” and boards set up to support government departments and functions) will need to be aware of specific constraints imposed by any regulator or the Department they are working for, e.g. in health or broadcasting to mention just two. There may also be specific reporting requirements. For example when I was a NED on a NHS Trust board, the Department of Health required very onerous and voluminous reports to be agreed by the board and sent each month.
On private sector boards, the requirements will probably be set out by the shareholders, whether they are just the founders, a single owner, or a wider body of shareholders. It is important that all NED’s joining such a board, whether a plc or a private limited company, make sure they understand the ownership of the company, who the “key players” are in the shareholders, and what they expect and require of the board.
NED’s of charitable organisations, as well as the normal NED duties, will have to acquaint themselves with the specific requirements and regulations of the Charities Commission, the body which oversees all charities and which has the power to close down or take away the charitable status of the organisation if the rules are breached. These boards also often have to spend a great deal of time dealing with fundraising issues, sponsorship etc.
What are your top 3 pieces of advice for new NED’s?
Get to know and understand the business and its operations. At board level you need to be fully aware of what the company does, how it does it and who its customers are. You will be making serious decisions affecting many people inside and outside the organisation, so understand the business and its business environment.
Get to know your fellow board-members. Understand what motivates them and what their skills are. Be part of this top team and make sure that you listen to and respect others’ views and involvement, take part in all discussions and have a clear view of what you would like to get for each issue.
Make sure you have a proper letter of appointment or contract with the business for your Non-Executive position, outlining your particular brief and duties, your financial arrangements with the company (remuneration, expenses allowed etc.), your term of office and what performance reviews you will have.
© Michael Wilton-Cox 2015
Spurred on by Michael’s advice, which sector and boards would most benefit from your expertise?