Marian Evans, Managing Director at Elevate BC Ltd.
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I am often asked about the best pathway to becoming a non-executive director (NED). The challenge is that understanding the nuances of exemplary NED behavior remains elusive until one gains firsthand experience within a boardroom setting.
Add to this the fact that many individuals await endorsement before going for executive and non-executive leadership roles. The truth is, however, that irrespective of career stage, each professional possesses unique contributions to offer. There are key attributes and potential pitfalls I’ve observed at the board level, both as a member but also as a C-suite advisor and career coach. I want to share a pragmatic checklist, if you will.
The Attributes Of A Great Non-Executive Director
A great non-executive director brings a wealth of expertise, independence and strategic insight to a board. Their role is crucial for the governance, oversight and strategic direction of an organization.
1. Independence And Objectivity
NEDs provide an independent perspective, free from the day-to-day operations of the company. This independence is crucial for unbiased decision-making and for constructively challenging executive directors. A fresh perspective that challenges the status quo.
2. Strategic Insight
A great NED possesses strong strategic thinking skills, helping the board to see the bigger picture and focus on long-term objectives rather than short-term gains. Some of the best contributions I have seen come from the big-picture thinkers and visionaries who encourage the board to raise their sights.
3. Industry Knowledge
While independence is key, having an understanding and passion for the industry allows NEDs to provide relevant insights and guidance. Ideally, they will bring with them foresight into industry trends, potential disruptions and opportunities, aiding in strategic planning.
4. Financial Acumen
Proficiency in financial matters is essential for NEDs. They need to understand financial statements, assess the company's financial health and ensure robust financial controls. This expertise supports their role in evaluating financial risks and opportunities.
5. Governance Expertise
A strong grasp of corporate governance principles ensures that NEDs can uphold and promote high standards of accountability, transparency and ethical behavior within the board and the wider organization.
6. Effective Communication
Great NEDs are excellent communicators. They can articulate their views clearly and persuasively, listen actively to others and foster open and constructive dialogue within the boardroom.
7. Interpersonal Skills
NEDs need to build strong working relationships with fellow board members and senior management. They should be approachable, collaborative and capable of influencing and guiding others without overstepping their non-executive role.
8. Risk Management Expertise
Understanding and assessing risk is a critical part of a NED's role. They should be adept at identifying potential risks, evaluating their implications and ensuring that appropriate risk management strategies are in place.
9. Commitment And Engagement
I've found that a great NED is committed to their role, dedicating the necessary time and effort to understand the business, attend meetings and engage with relevant stakeholders. Their active participation and genuine interest in the company's success are vital.
10. Ethical Integrity
Upholding the highest standards of integrity and ethical behavior is non-negotiable for a NED. They should model ethical behavior, promote a culture of integrity within the board and ensure that the company's actions align with its values and ethical standards.
Pitfalls To Avoid As A Non-Executive Director
The effectiveness of NEDs can be significantly hampered by certain behaviors and character shortcomings.
1. Groupthink And Lack Of Independence
A NED should avoid conforming to the consensus or majority opinion without critical analysis. Groupthink can stifle innovation and critical thinking, leading to poor decision-making.
2. Dominating Discussions
While active participation is important, a NED should not dominate board discussions or overshadow other members. A great chair can help with this, but ultimately a NED should have enough self-awareness to know when they are overstepping the mark.
3. Conflicts Of Interest
It's extremely important to disclose any personal or financial interests that could affect an NED's impartiality. NEDs must avoid any conflicts of interest and ensure transparency to maintain trust and integrity.
4. Neglecting Preparation And Engagement
Turning up to meetings unprepared or failing to engage fully with the company’s activities and strategy can hinder board effectiveness. NEDs should dedicate adequate time to their role. It sounds simple, but you can spot an ill-prepared NED a mile off.
5. Resisting Change And Innovation
A NED who is resistant to change, new ideas or innovative approaches can stifle progress and adaptability. Boards need members who are open to exploring new opportunities. Being change-ready is fundamental to organizational resilience.
6. Micromanaging
I suggest NEDs avoid getting involved in the day-to-day management of the company. Their role is to provide oversight and strategic guidance, not to interfere with operational matters, which is the responsibility of the executive team. One of my favorite sayings is that NEDs should be "noses in and hands out."
7. Poor Communication Skills
Ineffective communication, whether through unclear articulation of ideas or failure to listen actively, can lead to misunderstandings and a lack of cohesion within the board.
8. Lack Of Accountability
A NED who avoids taking responsibility for decisions or fails to hold others accountable undermines the board’s governance role. Accountability is critical for maintaining high standards of performance and ethics.
9. Inflexibility
Being inflexible or unwilling to adapt to new information or changing circumstances can hinder the board’s ability to respond effectively to challenges.
10. Self-Serving Behavior
Prioritizing personal interests over the company’s well-being is a no-no. NEDs must act in the best interest of the organization, avoiding any behavior that could be perceived as self-serving.
The role of a non-executive director is multifaceted and demands a balance of independence, expertise and interpersonal skills. By considering these ten key attributes and common pitfalls, you will (hopefully) see that many are hinged on "doing the right thing" and acting with integrity. These are as critical in the boardroom as expertise and are essential if you are looking to contribute to the effective governance and strategic direction of any organization.
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