Considering a potential future career as an NED? You’re not alone! Many executives start to think about a potential transition from executive roles into non-executive roles once they reach a certain point in their career.
With that in mind, we recently welcomed over seventy executives to an event run in partnership with PA Consulting on the topic of advancing your NED Profile. Hosted by Damian Walsh and John Ellis, partners in Savannah Group’s Board & CEO Practice and with guest panelists Sally Davies a Director at Arqiva and Stephen Whyte, Chairman at Genel Energy, we aimed to explore what the commitments are for becoming an NED, whether the NED path will be right for you, and how to secure that all-important first role.
The Current NED Landscape
Increased focus on gender diversity and the need to demonstrate that a fair and thorough process has been applied for a NED appointment has meant that while men still hold the majority of NED positions around the boardroom, it is thankfully no longer just a boys club.
Actions and events in the big listed companies tend to cascade down into the smaller businesses, and within the FTSE 100 and 250, there has been a particular push for greater gender diversity. For instance, in the second half of 2018 62% of all FTSE 100, NED appointments were women – a big step in the right direction.
However, if your ambitions are to sit on a board of big listed business there may not be as many open positions as you might think. There are 722 non-executive directors on FTSE 100 boards, yet of the 100 FTSE 100 NED appointments made in 2018, just 22 were of first time NEDs.
For a detailed breakdown of the FTSE 100 and 250 appointments in 2018, see our report and analysis.
Is A NED Position Right For You?
The idea of being paid to provide impartial advice to businesses for a couple of days a month is appealing to many executives, but often first-time NEDs underestimate what is really required of a NED. While a NED position can be intellectually challenging, stimulating and therefore rewarding, our speakers and panelists provide some points for consideration:
Firstly, don’t do it for the money! There are plenty of other more lucrative options for senior executives to leverage their expertise. Interestingly, NED roles at bigger businesses tend to pay similarly to smaller businesses so there is little to be gained monetarily from climbing the ladder.
- Time Commitment
Stephen notes that, for him, time commitment tends to come in waves with busy periods during Spring and the Autumn. He continues “it’s a skill to develop in terms of being able to work intensely for periods of time but then be willing to step back in quieter periods.”Sally (who sits on three boards) adds “I’m probably working the same amount of time as in my executive role, but seeing a company develop and to be a part of that is a privilege.”Sally continues “You can’t rely on Headhunters to accurately communicate what time commitment will be required. You will likely be sitting on a committee, so you should factor in some time for that. There will also likely be a number of conference calls, side calls and emails that need responding to so that a six-day a year commitment can soon start to develop into a lot more.”John Ellis adds: “In big listed companies board meetings are organised years in advance, but in smaller private companies, meetings can be organised at short notice. If something like a takeover or turnaround emerges you will be required at short notice which can be difficult to manage if you’re doing your NED role alongside a full-time executive role.”
Be honest about whether you think the role on offer is one you can genuinely add value to as it will be your reputation on-the-line. For example, a Kazakhstani business IPO’ing on the London stock exchange for £25b draws credibility from having visible and respected board members. You lend your reputation to the business, so if something negative were to happen, you can expect your reputation to be tarnished and future NED positions hard to secure as a result.
What Businesses Look For In A NED
Given that businesses are now expected to evidence that a fair and thorough process has been administered for an appointment, headhunters are typically involved in the hiring process. John Ellis explains “it pays to develop relationships with headhunters that either has a board practice or have industry practices within an industry where you have considerable experience.”
As a NED you are there to monitor and advise businesses and need to act as a fully impartial advisor. Therefore, the competencies that a headhunter looks for are typically different from an executive position. A generic skillset ensures the selected individual will be able to contribute to a broad range of conversations. These skills include:
- Financial acumen
- Commercial acumen
- Sufficient energy and bandwidth
- Knowledge of governance
John Ellis explains “There is then likely to be a specific skill that board is looking for, so this needs to be understood and your CV and covering note tailored for it. It’s also worth highlighting what your passions are, as individuals who are passionate about something that is relevant to the business stand a much stronger chance of adding value.”
Stephen says that when he is looking for a NED he avoids “big egos or people with a confrontational style.” He notes that “despite some successful executives having a confrontational style, that style typically doesn’t work well in a board environment.”
Fundamentally, most Chairs want people who are nice to be around who are able to be independent and who they can have a rich debate with.
Sally highlighted that while the number of roles on offer for female candidates is increasing, “for females, P&L experience is an absolute must.” It’s therefore critical to develop those skills within your executive career before you make the switch.
Securing your first NED position
One of the hardest parts of the non-exec journey is securing that first role. Damian Walsh suggests writing down all the people you know who currently sit on boards. Then compose a note for each one letting them know that you are looking for board roles in the future.
“Most of my roles come from my perceived expertise in understanding technology and digital” says Sally, “so as an individual, you want to think about your personal strengths and therefore what your brand should be at Non-Exec level.”
When a role comes to headhunters, there will often be one or two internal candidates that they would like to be considered, so networking and ensuring your name is on the chair’s list within your own business is always a good idea too.
Q: How Did You Get Started?
Sally: “I was working in Technology for BT in what was now their cloud business. A fund had come in and they were looking for someone with specific technical knowledge. It was felt that I had something tangible to offer and was extremely fortunate in having a super chairman who helped me find my feet and develop in the role.”
Stephen: “You come to a point in your executive career when you either have the choice to do more of what you are currently doing or to look for a different challenge. I was used to working in multibillion-dollar businesses. I got offered a role at an £80m AIM business and despite reservations that it would be too small, I had a lot of fun. Big companies have thousands of people so will listen to your advice, but smaller companies need your advice.”
“For my second appointment, I was a Chair and relatively young. They needed help and approached me to be a hands-on Chair. It suited me to be more involved with the business, so I agreed, and after steadying the ship and setting it back on the right course, I transitioned into a more advisory Chair role.”
The event was then opened up to questions from the floor.
Q: Is it worth using technology platforms like LinkedIn to raise your profile?
Stephen: “When I’m looking for a NED, often I’ll need someone with a specific skill set, like knowledge of derivatives.” He continues “I can’t remember off the top of my head everyone I know who might have that skill set, so I might use Linkedin to find a profile of someone similar to what I’m looking for and then challenge a search firm to go and find better.”
John Ellis: “Researchers in the headhunters will use LinkedIn as part of their process of mapping the market for target candidates, so yes, it is in your interest to have a relevant LinkedIn profile. That being said, make sure you control your reputation. Don’t over project yourself but make sure you are a findable.”
Q: Is a charity or start-up a good stepping stone to a bigger NED role?
Stephen: “Personally, I don’t think it helps much as it doesn’t demonstrate an understanding of governance or corporate typical NED experience.”
Sally: “Startups can be interesting as they can become AIM listed businesses, so as the business grows you may acquire more of the skills needed to be a NED at a bigger organisation.”
John: “We really want to know what your core skill set is and how can that translate onto a board. Advisors or trustee positions can be of interest, but they aren’t really going to be considered, similar with NED courses that some people take. It can be useful for your own education about governance and other board issues, but the chairman is looking for your customer, geographic or other expertise.” Stephen added, “you can probably get the extra training after you get your first NED role If it was needed.”
Q: What about people coming from non-typical NED backgrounds like IT/Technology?
John: “Digital and technology are on the agenda of a lot of boards, and in particular cybersecurity and the risks around it. Maybe not a big listed business, but smaller businesses would certainly be looking for that expertise.”
“Having said that, companies typically don’t pick people because of a super specialism – they can buy that advice in from a consultancy or similar. A board addresses a lot of things, and if you have a deep specialism in cybersecurity but not much else, then you perhaps won’t be able to contribute to other topics and issues as well as a more rounded individual. Ideally, you need both – a specialist area which is of interest to a board and the broader skill set that is needed as an NED.”
Q: How do you juggle the time commitment if you have a full-time executive role?
Stephen: “You have to be really good at planning time and it often requires working in the evening. You have to go to the board meetings, but there could be 6 a year. A little bit of committee work, but that can be done in evenings and weekends. CEOs and CFOs tend to be good at compartmentalising so can switch in and out as required. It’s hard to get your first NED role and the sacrifice will be on your time if you are successful.”
Sally: “You do need to work out how it could work but, in some instances, it fits quite well. I was leading a global business while sitting on another global board. I could schedule business meetings around board meetings in Asia, or America depending on where I would be at that time.”
John: “The Times 100 see an NED role as important to broaden an executives skillset, so Chairs of big companies will be encouraging the exec level members to find an NED position. This helps executives get good practice at switching their focus from one issue to the next and back.”
Q: What do you think total length of tenure should be as an NED and at what point do you need to be adding value?
Sally: “The first year is important of course but it is very much learning, but from year two you want to be adding value – particularly in smaller organisations.”
Stephen: “I’d hope that a new NED would be able to add value within 6 months and certainly within a year. If it takes longer than that, particularly in small businesses, that business might not still be around!”
“In terms of total tenure, nine years is the typical limit but in my experience six is the sweet spot. Companies don’t plan six to ten years ahead and replacement of individuals isn’t necessarily personal it can just be a mismatch to the requirements they have right now.”