A helping hand when needed in business world
Cornwall Chamber of Commerce chief executive Kim Conchie outlines why NEDs (non-executive directors) are good for SMEs (small and medium-sized businesses)
THESE are extraordinarily difficult times for our small and medium-sized Enterprises (SMEs), with many considering reducing winter hours, making redundancies, slowing investment and, in some cases, closing for good. They need all the help they can get. Appointing a non-executive director with wider experience could be part of the solution.
Back in the day, when I owned and ran Brass Tacks Publishing, there was a good joke with which I teased my nonexecs. What’s the difference between a supermarket trolley and a non-executive director? A supermarket trolley has a mind of its own, but you can get more food and drink into a non-executive director (NED).
But, hey ho, that was before the Cadbury Report on Corporate Governance, before the glare of social media and before the world had heard of CSR, ESG and SDGs. Nowadays, I’m a huge advocate of SMEs using and benefiting from a NED or two.
At a very fundamental level, a NED brings discipline to your business. It’s very easy in busy SME-land to skip board meetings, to tell yourself you haven’t time to produce management accounts. But if a NED is turning up next Tuesday at 4pm (even on Zoom) for the scheduled board meeting, you need to make sure you’ve produced and understood the man acs, done what you said you were going to do in last month’s minutes and prepared some idea of plans for the coming months.
Beyond this, you choose a NED for a variety of reasons to suit your business and leadership style. You want somebody different from you but who understands your business’s objectives and vision, who will support you and challenge you boldly when needed, who will add a dimension to the board skill-set and communicate clearly and empathetically – because they’re not in situ all the time.
You should select somebody with experience, who can cut to solutions and explain why they got to that call, who has case experience to mentor the board to make right decisions and who has good judgement themselves. If you’re thinking of appointing somebody you don’t know well – and even if you do – Google them, take references, search LinkedIn, ask around, trust your inner voice – does the chemistry work?
This research will also tell you how well connected they are. You really need somebody whose milieu adds something to your own, who can introduce mentors to you and to fellow directors, who has some sway in other circles and is likeable. There’s no point him/her knowing people if they all hate him. Connections can come in many shapes and sizes – in your industry, in finance, local authority, MPs, export markets, the media or simply the landlady down the pub where you hold post-board meeting strategy sessions.
Commitment. The difference between appointing someone as a director rather than mentor is that they are legally bound to trade solvently, ensure governance and act at all times in the best interests of the company. Once you and they have made this commitment, there’s a certain additional level of ongoing engagement. Once on board, if they want to pull out, you must take a long hard look at whether it’s them, you or the business that’s at fault. Continuity in NED appointees is desirable as long as they’re committed to your cause and adding value.
And they can be remarkably good value. One of Brass Tacks’s NEDs, we didn’t pay at all. He moved in media circles and wanted the engagement with a thriving SME in the sector as experience but gave us a useful breadth of contacts. Others we paid between £500-£1,000 per month and we made them work for their fee. On each board agenda was a section on NED actions. We made sure their connections and skills were maxed.
Finally, and conversely, instead of you paying them, do they have financial resources to aid your growth? Many angel investors like the greater layer of understanding that a NEDship can give them. Somebody who has sold their business or retired might crave a return to active duty that a NED role can give them. And their contacts who, hopefully, like them, trust them and recognise their experience, may back a venture in which they are involved. More broadly, does your NED know where the grants, businessfriendly loans and payment holidays are to help you grow or, often in current times, survive?
So these days NEDs can be a force for good. Pick yours carefully and work with their skills and connections to give your business an added dimension. Only if they start dithering on every decision apart from the wine list, do you need to start worrying.