Effective Non-Executive Directors

There are a lot of books to read and classes to take for being a good Non-Executive Director (NED) across most any company and industry. It’s impossible to write one small blog about the ‘best’ things to do, but here are some essentials to being different and hopefully a great value-add NED. This is a continuation from the last post on startups and board basics.

You may have been appointed as a NED because of a family business, you volunteered for a non-profit organization or you are an investor in the company. Additionally, you may have built a career around this and sit on 8 boards at once for an occupation. Whatever the case, there are good traits, habits, and characteristics that separate the good from the best.

A baseline is important to establish. You’re there to support the company, performance of the management team and all that comes alongside the development of strategy, financial controls (cash flow, cash flow, cash flow), management development, succession plans, and to simply supervise conduct – ensuring that the risks are properly managed. The most important word in the last sentence is ‘support’ – that’s because you’re not there to manage the company, but support. Approaching this with a mindset that you’re there to be open and be a trusted sounding board is important. With this, the depth of your relationships is important while on the board.

It is your role and a good habit to openly challenge, question, offer and decide while being a NED. It is your role to be an outside mind. After all, you’re independent. You’re removed from the day-to-day operations and this is a valuable viewpoint to utilize. With this you must understand the environment (markets) that the company operates in, the issues it faces and will face, as well as understand the mechanics of that particular business. Coupling all of that together, you need to (1) understand how business is run, (2) what levers you can pull, and (3) what realistic solutions could look like for the challenges facing the company.

Make it a habit to;

  1. Establish a cadence with the Chairman and don’t pass on the opportunity to create a deep relationship with them as well.
  2. Ensure that you keep your independence.
  3. Don’t go ‘native’ with the company.
  4. Don’t create conflicts of interest.
  5. And don’t be shy; a great NED should have superb interpersonal skills. 
  6. Over-prepare for your meetings. It’s important to over-prepare for your board meetings. Prepare before, listen and act during, and follow-up after the meetings.
  7. Listen when you’re in the meetings. Let your executives speak.

Lastly, there has been a lot of work done over the past years on EQ (emotional quotient) or the conflict resolution tests (TKI). A high EQ will pay dividends and should be a standard when a NED. This is because there are always divisions that exist at a company, ‘elephants in the room’ and topics that should only be broached at certain times. Additionally, having a high EQ coupled with maturity will help create a comfortable debate for all. Similarly, it is important to understand how you handle and work with conflict. Having your board take an EQ test, as well as the TKI test will give everyone including the Chair a deeper understanding of your decision-making processes and therefore be better tailored to handle situations.

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