Get the right experience
“The world from which non-executives have been drawn has tended to focus on people who are already on boards, particularly those in executive positions,” Dr Roger Barker, the head of corporate governance at the Institute of Directors, said.
To become a Non Executive Director, candidates need a good record and considerable experience as an executive, preferably in a similar line of business.
Undertake extensive research
If you don’t understand what’s happening within the business and its marketplace, you won’t be able to recognise when things need to change. A lot of financial institutions ran into problems because the people on their boards did not understand the business well enough to hold the directors to account. At the very least, you have to understand what could put the business at risk.
Most people who become non-executive directors do so through personal connections, so networking is important — or has been in the past, but this many change as too many non-executive director appointments are still made through the old boys’ network and nowadays Boards looking for independence and diversity are moving to more formal processes.
Non-executive directors need to be able to stand up and question the decisions of executives. This requires confidence in your understanding of the sector, willingness to question the prevailing wisdom and, sometimes, the ability to withstand pressure from people who want things to continue as they are.
You need courage to be able to stand up — and you need to be prepared to walk away. On boards, you get a high degree of ‘group think’. Non-execs have to be independent of that; you need to be able to build good relationships with executives and board members without ever becoming too close.
Don’t be too ambitious the first time around, and look for a company that deals with an area you’re familiar with.
Don’t take on too much at once: You cannot be effective if you are on too many boards.
NHS Foundation Trusts have boards of directors and are looking for people to fill those roles – these are sectors where there is a real shortage of people to get involved. However never underestimate the complexity of an NHS Foundation Trust, which are often £multi-million organisations which face complex strategic and financial issues on a daily basis.
Keep your distance
Non-executive directors are responsible for corporate governance and reviewing strategy, not hands-on management. Ask yourself if you understand the clear distinction between executive and non-executive roles.
Avoid telling management what to do – you don’t know enough [about the business] to do that. Your job is to challenge managers and get them to think.
Understand the risks
Non-executives have some quite onerous financial and legal duties. Make sure you understand what your obligations are and that you are willing to take them on.
Make sure that any board you join has directors’ and officers’ insurance. If you get sued, you have to be covered. Otherwise, you could be personally liable. Yet insurance won’t cover the damage to your reputation if you get things wrong. If your first appointment goes wrong, this could impact your chances of building a portfolio in the future.
Don’t say yes to just anything
First, ask if the company has a clear strategy, an understanding of the risks that it involves, and a Plan B to turn to if things go wrong. Be sure that you’re signing up to a business that knows what it’s doing and where it’s going.
Look at whether your skills will complement those of other people on the board and make sure that you’re happy that important executive positions are filled by the right people. He also suggests meeting other non-execs informally to make sure you have the right chemistry.
Source: The Times On-line, April 2010