It might not be the sexiest sounding role, but non-executive directors are worth their weight in gold, according to consultancies that have them.
But what do these low-profile and highly influential people do, and when do you need to bring one on board?
Non-executive directors act as independent advisors to a company and sit on its board on a permanent basis. They are not employees and work part-time, often holding a non-executive or full-time position elsewhere.
And as “the best investment a company can make”, they are woefully lacking in the design industry, says Ian Cochrane, chairman of strategic management consultant Ticegroup.
There is no hard data available to back up Cochrane’s claim. However, “everyone accepts an independent voice on the board as extremely important for small businesses”, says Institute of Directors corporate governance executive Mark Watson. Watson is acting as a consultant to the Treasury, which is conducting an in-depth report on the financial aspects of the small- to medium-sized business sector.
Companies bring in non-executive directors to advise on a range of management-related issues, says Kim Crawford, managing director of recruitment consultant Periscope. She has noticed an increase in demand for non-executive directors of late. Some may put in as much as one week a month for the company, while others may spend just a few hours.
Typical non-executive functions include advising the board on investment initiatives, personnel policies, new appointments, legal issues, presentations to clients, staff training and even the consultancy’s creative output.
No single non-executive will advise on all these issues, but will typically be brought in to help with a particular aspect. This is why companies often opt to have more than one non-executive director on their board.
Crawford says there are no rules which govern when a non-executive director should be brought in.
However, she says they generally come in to help a consultancy make the transition from a small company – of about ten people which turns over around 1m – to a medium-sized one.
But whatever their role, a non-executive director is there to support the group’s directors. And that might be at any stage of a consultancy’s life.
“A good non-executive director will provide a detached, independent and objective viewpoint and can see things that the directors, who are wrapped up in the company, often cannot,” says Tayburn Group chief executive Erick Davidson, who holds non-executive positions with other companies outside the design sector.
Davidson advocates bringing in a non-executive director when a company is born and everything is new to the management.
The Tayburn Group has 70 staff and a turnover of 5.5m last year. It currently has two non-executive directors, with different skills and fulfilling different roles. David Erdal is a former chief executive of a paper company and acts as Tayburn’s chairman – which can be an executive or a non-executive role. Davidson met him through the Young President’s Organisation and says his main strength lies in people management.
Meanwhile, Tayburn’s other non-executive director, Bob Hodgson, comes from a printing business. This has given him significant exposure to the design industry and a particular expertise in annual reports – one of the group’s core disciplines. He and Davidson had worked together before the appointment.
Davidson’s non-executive recruitment methods are fairly typical. However, if you do not already know a suitable candidate, you could approach a head hunter or recruitment consultant.
Crawford says payment to non-executive directors can take a number of forms. They are most commonly paid a monthly salary, but can also be paid at an hourly rate or be given a stake in the company.
Davidson says his two non-executive directors each devote one to two days a month to the consultancy and are paid in the region of 5000-10 000 a year.
Neither has equity in the group.
Meanwhile, The Attik is looking for a group non-executive director to help manage the group’s international development.
The Attik’s UK non-executive director, David Addenbrook, came in three years ago to help grow the group from 25 staff to its present level of 110. Addenbrook is a retired steel industry executive and now works as a management consultant, when not at The Attik. The consultancy also has non-executive directors in its US and Australian offices.
“[Addenbrook] has been invaluable. Designers are fairly crap at business and it’s good to have someone who is detached from the industry viewing our work purely in product terms. The fact that he doesn’t have strong opinions about design is a tremendous bonus,” says Tim Watson, London managing director for The Attik.
Addenbrook puts between 16 and 30 hours a month in at The Attik and is paid at an hourly rate, says Watson. He has no equity in the company.
But what are the disadvantages of employing a non-executive director?
“If a non-executive director is not suitable for the job, they could cost the company a lot of money by giving the wrong advice and rubbing people up the wrong way,” says Cochrane.
He says that technically non-executive directors do not hold much power in privately-owned consultancies. However, they are more powerful in public companies where they often have the shareholders’ ear.
Either way, they tend to wield a lot of influence and it is important to take time in choosing the right candidate and to give them the opportunity to make the most of the role (see table).
Expression Marketing & Design non-executive director Simon Harris says there is a danger of growing stale in the role.
“It’s important to keep doing other [business-related] things outside the group and to bring that experience back into the mix. Unlike company executives, we have the advantage of being able to talk to all sorts of people in all sorts of businesses,” says Harris.
In other words, a good non-executive director is an invaluable asset to a company until he or she becomes stale. With the conduct Harris proposes, that could take years.
Choosing the right candidate
1.Do they have a real interest in the design industry and in your business?
2. Do they bring something extra to your operation?
3. Can they devote the necessary time to the task?
4. Will they stand up to the board and speak their mind?
Making the most of your non-executives
1. Invest sufficient time and money in them to ensure they understand your business and the design industry.
2. Listen to what they say.
3. Be open to them – there should be no secrets.
4. Encourage them to get involved in all aspects of the business – they should be available to everyone in the consultancy.
5. Give them incentives, as you would to any employee – perhaps through share options or cash bonuses.