So, you want to become a Non Executive Director? (NED) Here are my top 7 tips on how to go get started.
Many banking and finance professionals often want to develop a portfolio as they progress within their career. Often, professionals who take a step towards being a NED see it as a natural progression in developing their experience and growing their network of contacts. However, what many executives fail to realise is that the role of a NED has crucial implications when things go wrong. You should only consider this career path if you are happy and motivated to bear the risks that come with the job.
The role of a NED is to provide expert, impartial advice to an organisation’s board or chairman. The role is heavily involved with shaping strategy, policies, people development and identifying risks but most importantly a NED is accountable for the organisations performance to stakeholders/shareholders .
Consider the following before you think about embarking on this career path:
1. What do you have to offer?
If you are passionate about helping businesses develop and feel like you have substantial expertise to offer, then building a NED portfolio can be very rewarding - according to the Institute of Directors, If you advise a small or unquoted company you can make between £15,000 and £20,000 a year, and over £40k a year for big listed companies. Initially, carry out an audit of your experiences where you have demonstrated excellent results, be it financial or in leading change/teams. Additionally, some companies prefer that candidates have a chartered status. This is a very prestigious qualification and can help you stand out from the crowd.
If money is your motivating factor the role of the NED should not be something you should consider. Contrastingly, the best NEDs have an unparalleled dedication to the businesses progression. Yes, the rewards can be substantial but this shouldn’t be the reason you consider such roles.
2. Strength of character to challenge the board
The role of a NED can be lonely at times, you are expected to challenge the board on their strategic direction and policies, the role of the NED needs to demonstrate strength in character and fearlessness when challenging the decisions made by the leadership teams within the organisation. Consequently, it requires someone with exceptional communication skills and moral upstanding.
3. Are you a natural strategic thinker?
NEDs need to be able to provide expert advice on the direction that companies should take. You need to be comfortable and have experience of strategic thinking and innovation. Proven experience of setting and executing strategy will be required to succeed.
4. Understand the key responsibilities and risk
NEDs carry a huge amount of financial risk, legal and compliance duties. Research is key when understanding what the responsibilities are and it is essential that you are 100% convinced that you want to take these on. Ensuring the company has the appropriate insurance policies in place is imperative. Furthermore, you need to invest the time to understand your business and the different personalities that sit on the board.
5. Be financially literate
A NED needs to possess a strong understanding of complex financial functions and be able to read accounts and spot anomalies, as well as challenge and advise on financial performance and planning. While you don’t need to be a qualified accountant, it does help if you have a strong background in dealing with finance.
If becoming a NED is a long term goal of yours and you are currently in an executive leadership position, then it is worthwhile for you to undertake time and training in your professional development. Executive MBA courses are a good to consider, check out the Exec MBA courses on the Financial Times MBA pages.
7. Decide on the type of board you want to work for.
SMEs (Small to Medium sized enterprises) or big firms. The portfolio that you build early on will impact on your future prospects, so make sure you have researched the current market and explored a number of possibilities.
For further information on careers as a NED , I recommend reading the following books:
- Portfolio Life: The New Path to Work, Purpose, and Passion After 50 1 by David D. Corbett, Richard Higgins
- The Independent Director: The Non-Executive Director's Guide to Effective Board Presence. G. Brown.
A career as a Non-Executive Director can be very rewarding but you must only consider this career path if you are willing to take the legal risks associated with the role, most importantly, do it for the right reasons and be genuinely interested in taking the time to understand your organisation.