It often starts and ends with “strategy” when it comes to the role of a non-executive director when reviewing the composition of a Board of Directors. Over the last fifteen years in the Non-Exec space, the critical priority for boards has been aligning talent with the strategy of the company; get this wrong and it will not end well!
Nowadays, the most prevalent skill “gap” at board level is undoubtedly the gap around digital/technology. It is something that reverberates through most boardrooms but with particular importance in the SME space as these companies simply have not typically taken the helicopter view when it comes to long term business strategy. Of course, the same is true for many large organisations who have failed to modernise and as a result, have perished in the wake of global online tech companies like Amazon, Asos and the like.
For me, there are a series of pertinent questions that any non-executive director should be asking and the first is “What is the actual strategy?” As a board member it is important that the non-executive is constantly driving this topic and refocusing otherwise busy directors on the long term objectives and how the strategic plan is implemented.
Following the question of “strategy” any competent non-executive director should also be probing the board on where the gaps in skill exist in the business; the skills that will ultimately allow the core strategy to succeed.
“Diversity” is a word that is thrown around these days more often than most celebrities post to their Instagram but it doesn’t just boil down to ethnic and social diversity in a business, it goes to the heart of the genetic make up of any business in terms of skills, experiences and perspectives not only to enrich an organisation socially, but also to test the assumptions that a board of directors make in the confines of a somewhat removed board room. Do the strategic objectives marry up with the real world? A diverse workforce is often a great test of any businesses assumptions.
The biggest shift I have seen over the years has been the move away from ramming boards full of directors with ‘big company’ backgrounds; quite simply put, the big company director will likely have little or no understanding of new technology (obviously there are many exceptions to this rule!)
The last point leads us on to the lack of technological literacy and quite possibly “youth” from today’s boards. Good non-executive directors accept that the board room is not an “old boys’ club” and actively push for younger directors with a breath of skills (often in the digital and tech space). They understand and champion the promotion or external hiring of individuals with these skills and push them to ask the tough questions that many larger organisations simply do not have all the answers to! It is only by understanding the challenges that lay ahead that a board may appropriately calculate and manage risk.
Arguably, especially in the US, one of the most obvious developments has been the shift (often instigated by external, outside directors) to hiring non-Listed company directors to boards. However, where companies have not adopted this approach, there has been an increase in the rise of Advisory Boards – which are not as time consuming or have the same level of legal implication for their members.
A skill that is often overlooked, is the ability for a board to recognise succession planning as a core element of its remit. Whist not being on the agenda at every board meeting, it is relevant to most businesses and a non-executive should always have consideration of the formal succession plan of the businesses they advise. Whilst this is often well managed in Listed businesses, it is often not as well managed in smaller, privately owned companies.
A wise man once told me “hire fast, fire quicker!” and it has served me well across the multiple businesses that I have built and the ones I have advised in a non-executive capacity. Underperforming directors can destroy businesses and should be removed in as efficient manner as possible. Non-executives who fail to deal with this issue are quite simply ineffective.
Finally, and possibly the most important phrase in the non-executive director space for me personally has been “critical friend”. If a non-executive director is not willing to challenge the board and CEO then they are ineffective and should be removed. Likewise, if the CEO/Board do not accept a considered challenge to their assumptions then the question lies with them; do they want a non-executive director or a Yes Man? The two are mutually exclusive!