Julie Irving, Partner of NxD-global shares her top reasons why SMEs should include a non-executive director in their business development plans.
All corporate entities, no matter what size or status, stand to benefit from the experience that good non-executive directors can bring to their business. In a small or medium sized enterprise, these benefits are often realised more quickly than in a larger organisation. Yet very few small business owners consider non-executive directorships as a feasible option for fast tracking their business growth.
1. A fresh pair of independent eyes
A non-executive director on the board of a smaller company can make a huge impact by bringing an independent view to the business. A new, experienced, “fresh pair of eyes” paves the way for improvements in performance. The ability to challenge others on the board and contribute a fresh perspective is invaluable to a small business. It is of little use telling boards only what they want to hear; rather it is constructive criticism that usually provides the most valuable opportunities for real improvement.
2. The right strategic blueprint
It can be argued that there is no better time for a company to start working with a non-executive director than in their start-up phase. Having an experienced and objective non-executive on the board can help ensure that the business strategy is sound from the outset. This negates the reality faced by many businesses, of going down the wrong strategic path and investing time and money in having to deal with the fall-out from ineffectual strategic direction. A non-executive director can make valuable contributions in determining corporate strategy, providing guidance on achieving strategic goals and allocating corporate resources to support strategic plans.
3. A marriage of flexibility and expertise
Careful matching of a non-executive director to the needs of a company ensures that the non-executive has the right skills and experience to bring tangible benefits to the business. A non-executive director can bring specialist skills during times of change such as geographic expansion, company sale, acquisition, succession planning or change in ownership, flotation or raising funds. If priorities change, the non-executive director can also be changed to reflect the required skill set and experience. For instance, a company could start with someone to advise on strategy when setting up in this region; when that has been concluded, they may then want an expert on financing instead.
4. Improving board performance
In the smaller company scenario, a non-executive director works closely with individual directors to help them identify their strengths and weaknesses. Bringing an independent and experienced perspective to help set board members’ key performance indicators and objectives considerably enhances the company’s chances of success. When it comes to deciding salaries, benefits and bonuses, the independent perspective of a non-executive is crucial.
5. Affordable and experienced specialists
Many smaller companies are often reluctant to pursue the idea of a non-executive director because of pre-conceived notions about the cost. In reality, non-executive directors are a fraction of the cost of a full time director and offer flexibility in terms of timing. For example, a board may decide they only need the non-executive director at quarterly meetings rather than monthly, which would decrease the non-executive’s fee. Considering the specialist expertise and strategic skills that a good non-executive brings, they are a viable and cost effective option for SMEs.
It’s not that one size fits all, but all industries and all sizes of business can benefit. Obviously the type of talent that a very small business would require could be specific and different, and the assistance may be of a different frequency.
6. Better corporate governance
With policy changes being implemented which will make it easier for SMEs to be listed on the stock exchange, there is going to be a wave of companies brushing up on their corporate governance. Studies have revealed how a large percentage of businesses change and improve upon this when they go in for IPOs. Every business has the fundamentals of corporate governance because people want to do it right, they want to grow their business. Sometimes all they need is somebody to assist them – someone independent, if possible, who can look at their business in a different way.
The world has had to relook at how things are done, including business in general, and it’s not just this region – even the more mature markets have had to review, change and implement procedures and it’s a matter of time before it sweeps through the world.
Julie Karen Irving is one of the founding partners of NxD-global and is responsible for the overall strategic direction and management of the company. Julie established NxD-global with her business partner John Martin St Valery in January 2011 to provide the Middle East with a business matchmaking service dedicated to non-executive directorships.
Julie has nine years experience living and working in the Middle East. Following a main board level directorship with Airtours International, Julie relocated to Dubai in 2002 as Managing Director of an airline supply company. After successfully completing the re-engineering of the Middle East operation, Julie formed her own consultancy focusing on small to medium business enterprises in the Middle East.
In 2006 Julie joined the Links Group as Chief Operating Officer, having previously been an independent advisor to the board consulting on strategic planning. She continues to advise a number of group companies at board level on a retained basis, specialising in strategy review and implementation. Julie’s earlier career includes senior roles at Trans European Airways, Airtours International and Tass ME (Part of the Duni Group). She is also a long-term member of the Institute of Directors (IOD) UK. For more information visit www.nxd-global.com.