With more than 25 years’ experience building successful boards and recruiting executive and non-executive directors for SMEs and charities, Peter has shared his advice for businesses looking to turbocharge their growth with the support of an advisory board or non-executive director. 

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Top tips:

• Understand the role of an non-executive director. Is now the right time for you to appoint a non-executive director or advisory board?
   
• Identify the qualities and characteristics you should be looking for in a non-executive director.
   
• Know the difference between small advisory boards and non-executive directors, and which one is right for your business.
   
• Find out where to get help and support to build a small advisory boards or recruit non executive directors.

Read the article in full below… 

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Non-executive directors and board advisors

On the whole, most entrepreneurs or business owners haven’t done it before - they’re learning as they go. And that’s not easy; there are all sorts of risks and opportunities that crop up along the way. They need to be able to navigate those challenges and focus on the job in hand. It’s not uncommon to see entrepreneurs get distracted or lose purpose. That’s where non-executive directors and/or board advisors can really add value.

How non-executive directors help business growth

By challenging and scrutinising business owners and executive teams, non-executive directors are able to support and guide entrepreneurs. You don’t know what you don’t know after all. That independent oversight from the management of the company allows non-executive directors to monitor and evaluate activity within the business.  

When you’re looking to introduce a non-executive director into the business, it’s not just about saying ‘I need a non-executive director’ and appointing someone you know. It’s about realising that a non-executive director is a strategic asset and therefore working out what type of non-executive director you need is critical. What’s your three-year strategy? What are the knowledge gaps you have now that you need to address for the future? Appointing non-executive directors isn’t about addressing the business as it is now - it’s about what it will look like to two-three years time.

It’s also a very good thing for entrepreneurs to establish a good degree of governance as early as possible – and that’s what having a non-executive director or advisory board effectively does. It sets up an informal governance structure. Non-executive directors – often shortened to NEDs – are individuals that provide business owners, entrepreneurs, and executive directors with independent oversight and constructive challenge. Acting completely independently from the company’s executive team, non-executive directors are able to bring specialist expertise and valuable insights.

What makes a good non-executive director

There’s a popular misconception that just because someone had a successful career as a director, that makes them a good candidate to become a non-executive director. There’s a completely different set of skills and different set of behaviours you need to display in the boardroom when you are acting as a non-executive director.

Some of the qualities and characteristics you should be looking for from a non-executive director include strategic thinking and critical evaluation – can they get to the source of a problem fast and provide clear next steps. Do they have governance knowledge and experience? Do they fully understand the legal and regulatory frameworks companies operate to? They should also be very independent minded and have the ability to represent the company when required.

And, do they have the drive and commitment to be an effective non-executive director. It can be a challenging role, especially when you’re working through a difficult issue or problem, and they need to be able to really get under the skin of the business and understand it inside out.

Whilst some non-executive directors have completed specific training or earned qualifications to better equip them for the role, many successful NEDs develop their skills as a school governor, through a voluntary trustee role with a charity/not-for-profit, via a mentor, or by joining an initiative such as the Experience Bank NED Peer Group programme.

Payment for non-executive directors

Rates of pay for non-executive directors vary from sector, company size, and the amount of time they are needed to spend supporting the company. Research by the Institute of Directors found most non-executive directors supporting UK SMEs were paid around £38,000-£40,000 per annum, although this can vary widely depending on the stage the business is at in its commercialisation and growth journey. In the North East, a general rule of thumb is a day rate of between £1000 and £1750.

Small advisory boards Vs non-executive directors

Acting like a normal board, small advisory boards are often established in early, pre-revenue businesses, but they also exist in a lot of private companies too.  

Providing access to industry experts without the formality and legal responsibilities of appointing to the board of directors or hiring an executive officer, advisory boards are flexible and informal, providing non-binding strategic advice.

They tend to meet with the business owner/entrepreneur around once a month to keep them on track and help them get over any barriers they might be facing.

For really early stage businesses, the founding entrepreneur often needs hand holding when an advisory board is introduced. It’s about helping them to manage the advisory board and assemble a board that is effective.

We find many entrepreneurs credit their ongoing success to having an advisory board, especially in the early days. As many go on to commercialise, they might invite board advisers to formally join the business as non-executive directors too. 

Accessing help and support to build advisory boards or appoint non-executive directors

There are lots of different places businesses can go for advice on creating a small advisory board, or appointing a non-executive director. The Institute of Directors has lots of free information and resources on its website, and there are lots of local resources too, including the North East Growth Hub and The Experience Bank Group.

It’s important to remember that finding the right non-executive director isn’t about being brilliant friends; it’s about getting the business chemistry right.

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For more support and guidance on the successful running of your business, visit the Leadership Toolkit on the North East Growth Hub.