How to … help first-time non-executive directors be a success in their new role
Taking a seat in the boardroom as a first-time NED can be a daunting experience but there are some simple steps that can help ensure new NEDs make a positive impact.
Pressure on corporate boards to diversify board composition means more opportunities for first-time non-executive directors at major organisations. But while many new NEDs will have considerable experience as an executive, the role of the independent non-exec requires a specific approach. It is a challenging position, with even seasoned NEDs continually updating their skills to meet the evolving demands of the modern board, such as adjusting to the pandemic related move to a hybrid physical/ virtual board meeting arrangement adopted by many organisations.
Consequently, my extensive track-record working with boards suggests that regardless of the extent of previous executive experience, there are a number of insights a coach or mentor can share with a first-time NED to help make their appointment a success.
Leaving the boss behind:
One common challenge for first-time NEDs, particularly where they are senior executives in their day job, is remembering that their role as an NED is to guide, challenge constructively and support. On the flipside, this means that it is not their role to sort out the operational challenges they see in front of them, provide answers to the executive directors on the board, or take direct responsibility. That is the job of the executive directors.
First-time NEDs who are current CEOs often find this difficult initially because they are conditioned to find solutions quickly and take action. Thus there is a need for self-awareness, working out where the line is drawn between executives and non-executives and not crossing that boundary.
Avoiding unnecessary takeaways:
On a related topic, first-time NEDs should not be leaving their first board meeting burdened with a long list of actions for which they have assumed operational responsibility. To make a positive impact they will have been well prepared, made their contributions accordingly, and will check that the minutes are correct when they are circulated. But barring an existential crisis they will not have a great deal to do (other than relationship-building and remaining informed about the business – see below) until it is time to read the papers and prepare for the next meeting. This is a point often missed by first-time NEDs, especially those that are natural doers.
First-time NEDs need to be aware that the pandemic-induced shift to virtual board meetings has both accentuated and complicated several aspects of board meetings. A good example is the increased time pressure. Board members do not want to spend hours staring at a screen – it is unhealthy and not conducive to optimal outcomes. As a result virtual board meetings have become more focused and time efficient, with tight agendas and quick decision-making.
First-time NEDs should make contributions that are considered – when they have something relevant to add to the discussion. A common mistake is to feel pressured into proving you worth, feeling the need to demonstrate expertise and experience regardless of the relevance of a particular contribution. This is not the way to add value. If there is nothing relevant to add to a discussion there is no shame in remaining silent – quite the opposite, in fact.
The effective functioning of a board is heavily reliant on the trust borne out of the relationship between the board members. However, the pandemic has had a negative impact on the ability of first-time NEDs to build these relationships. Virtual board meetings have put paid to the traditional pre-meeting dinner, for example. Similarly, there is less scope for participating in a structured induction. Instead there is a much greater onus on first-time NEDs to take a proactive approach to building relationships with executive directors, such as the CEO and CFO, as well as their fellow NEDs.
In-depth understanding of the business:
The importance of having a strong grasp of what the business does, where and how it operates, the business model and the challenges and opportunities the business is facing (including the impact of the pandemic), cannot be overstated. Senior executives on the board will lose respect very quickly for any NED who hasn’t prepared adequately, hasn’t read the board papers thoroughly or hasn’t taken the time to get up to speed with the business.
Pre-pandemic NEDs would be expected, over time, to visit major international operations, plants and facilities, spend time with divisional leaders and local management and so gain an insight into the culture of the business outside the head office. COVID has made this more difficult. Nevertheless NEDs should be encouraged to get to grips with the organisation’s operations and strategy as best they can through online interaction and information gathering (and in-person where possible).
Constructive (not destructive) challenging:
While the NED’s role may be to challenge management, there is a ‘right’ way to go about this vital function. The overarching objective of the NED is to be independent, but that doesn’t mean relentlessly questioning the executive in an aggressive and negative manner. The aim is to provide supportive and constructive challenge. It is worth noting that this will be far more effective once a first-time NED has established a relationship and mutual respect with the executive they are challenging. This links back to relationship-building and understanding the business.
Alongside the formal internal and external board evaluations, first-time NEDs should be encouraged to proactively and regularly seek feedback on their performance. Not just from the Chair, who is essentially the board coach for first-time NEDs, but also from the other NEDs, particularly the senior independent director. They might ask if they have strayed into executive territory, or overstepped the mark in their challenging, for example.
Being proactive and open about their desire to receive feedback helps to create a culture within which feedback can be offered and accepted freely and constructively. This enables the independent NEDs to improve their performance and the board to function better as a team.
Keeping up to speed on the key issues:
Kingsley Gate, in partnership with Allen & Overy, Deloitte and Bank of America, recently hosted a two-day workshop to help prepare Plc executives for their first non-executive role. And in every session over the two days, environmental, social, and governance (ESG) criteria came up in the discussions. Whether it’s legal or governance responsibilities or the question of how you reward management in relation to performance, ESG criteria need to be taken into consideration. Clearly then, this is one of the areas that prospective NEDs need to keep up to speed on – and it is not the only such example.