Becoming a non-executive director is a major opportunity for professional and personal development. It’s a position that allows senior professionals to broaden their skills and experience by tackling various challenges, such as providing and supporting leadership, sharing experiences, and helping to facilitate an environment where the board of directors can succeed in their decision-making. NEDs play an influential role in how businesses develop as they bring an unbiased outsider’s perspective to the organisation.
Bringing in a NED can add new and fresh insights to the leadership team and promote cognitive diversity – which has been defined as the inclusion of people with different ways of thinking and solving problems. Today, NEDs face far greater challenges in the 21st century, with the rise of technological, economic and social change. So, how can NEDs be successful and get the most out of and contribute in a boardroom environment in the modern era?
Understand the business and compliance
NEDs must understand the business of the company and the sector before they accept a position. The value of hiring NEDs is that these professionals can act as a centre of influence to make sure that companies are making the right decisions with external groups. This means it’s all the more important that NEDs stay up-to-date with the changes in their respective industry, as well as being aware of their duties and responsibilities. In the finance and insurance sectors, NEDs have further obligations to ensure they’re meeting regulations, particularly in firms that are regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
Under the previous regime, NEDs were merely required to secure approval from the regulator. Since 2019 and the introduction of the Senior Managers and Certification Regime, all NEDs are now treated as Senior Managers and are subject to conduct rules, such as acting with integrity, due care and treating all customers fairly. As a result, NEDs must be ready for the extra responsibility and ensure they meet the objectives set by the FCA.
Know how to share the right insights
If businesses want to remain relevant in the 21st century, they will need to change how they operate by building an agile organisation that champions diversity. Fundamental change and improvement to businesses must start at the board level, and the role of a NED requires the ability to provide specialist advice to help overcome business challenges. One of these challenges is the ability to think critically, which can be difficult if a company’s board always share the same opinion. Groupthink – first coined in 1972 by social psychologist Irving Janis – is the idea that people agree with the most popular opinion, in favour of their own personal beliefs, something of which can spread around an organisation. That’s why NEDs can play a key role in breaking these barriers as they bring a fresh perspective and commercial or other experience, but it’s important these professionals know how to provide their expertise in the right way.
Diversity and breadth of experience can contribute to more productive board meetings and lead to better decision-making. In today’s world of work, one of the main risks to a business’ longevity is that it won’t remain innovative and agile over the long term, especially with the rise of digital technology. NEDs have a crucial role to play in helping companies build a more inclusive and diverse environment, which includes encouraging the boardroom to increase its number of underrepresented groups and be more broadly representative of society. To succeed as a NED today, professionals need to understand not only how diversity contributes to the success of an organisation, but why it matters. In a 2020 article, McKinsey found that diversity and inclusion accounted for one-third of comments made by professionals in the technology, healthcare and finance industries. So, it’s a major issue for many people and firms and NEDs have a responsibility to initiate action and provide insights to help.
Furthermore, NEDs must understand when to support and challenge management, and they need to be focused on the organisation’s goals. It’s no longer enough for a NED to operate in the background. Today, NEDs must be meeting people on the frontline and be responsive to changes while continually asking the executive board strong questions, to help the company deliver its strategy. The idea of a NED simply attending meetings and asserting control has become outdated. Now, NEDs are expected to be more collaborative, with well-developed interpersonal skills and an acute awareness of the right time to influence and share their insights.
Provide independent oversight
The best NEDs serve as independent advisors, remaining detached but fully aware of the objective, and can articulate and communicate their thoughts when problems occur. Crucially, NEDs must understand their duty is to provide guidance and to focus on board matters, and avoid straying into the day-to-day running of the business. NEDs, therefore, must be responsible for the ‘big picture’ and help companies connect with useful people and organisation externally. NEDs are key in the process of putting together a strong board for a business – and while independent, these professionals must complement and aid the team.
It’s not the role of the NED to make the decisions but to maintain a level of distance to offer impartial advice. With the boards of today being more heavily involved in strategic planning and assessment, NEDs must be able to navigate this intersection more effectively to succeed. The career of a NED can be highly fulfilling for the right professional, as they will be having a major impact on the organisation – and networking is often regarded as one of the best ways to secure a NED role. It’s also worth noting that NED roles at smaller companies pay the least, but according to research by the Financial Times, the average fees for NEDs have increased by 41 per cent over the past decade.
How Hanover can help your business
Above all, NEDs need to be forward-thinking with a strong knowledge of the business and how changing customer needs impact the organisation. As executive search specialists, Hanover’s team have an excellent track record of recruiting the top NEDs into businesses in various sectors, including finance and insurance companies. We’ve built great relationships with board-level talent and are dedicated to providing your business with the skills and expertise it needs to keep moving forward. Get in touch with Clinton Poore today if you would like to know more about senior-level positions or alternatively contact our wider team to start a conversation.
