May 312013

Hospitals want non-executive directors from the private sector to inject some commercial medicine

Hannah Prevett Sunday Times 26 May 2013

non-executive directorNicola Horlick took a board role at an NHS trust because of help given to her child (Dwayne Senior). It’s no secret that the boards of NHS trusts have struggled in the past to attract the best non-executive directors. Poor remuneration, compared with the private sector, has been one factor cited, as has an assumption that candidates need public sector experience. However, there are now signs that attitudes are changing, with the health service needing commercial nous to keep the wheels turning at a time of budget cuts.

“Some non-executives have gone in from the financial sector and tried to add value based on their commercial experience, particularly if they have experience in terms of transformative change, reducing the cost base — all relevant to the NHS now,” said Roger Russell, director at Green Park, the interim and executive search firm.

Nicola Horlick, chairwoman of Rockpool Investments and senior independent director at Hampshire Hospitals NHS Foundation Trust, said people can forget that trusts are businesses — and need to be managed as such.

“They are extremely large businesses,” she said. “We have about £300m of turnover. That’s a very sizeable company.

“Obviously, the margins are pretty small compared with a private sector enterprise and it’s bizarre pricing as you are not in a free market. But it is a company and should be run as a company. It has assets, it has a balance sheet, it has a profit and loss account. Therefore, it’s very sensible to have some proper business people there who actually understand what’s going on.”

Linda Nash, the outgoing chairwoman of Somerset Partnership NHS Trust, said the introduction of councils of governors in the NHS has led to a greater opportunity for non-executive directors to be recruited from the private sector. These councils, she pointed out, “represent the public, the community and the patients”. With the change in the accountability structure, “there is a requirement for non-execs to be from lots of different disciplines and generally not so focused on their community, but a lot more commercial”.

It hasn’t been easy to recruit top talent to NHS boards, according to Nash. This is partly down to geography because non-executive directors on trust boards tend to be drawn from the local area, she said. There are also big disparities in pay. “Non-execs in private industry will, on average, be earning £20,000 to £30,000 for their contribution, whereas in the NHS it’s probably about £12,000 on average,” she said.

However, non-executive directors who join the NHS aren’t motivated by money anyway, she added. “People who want to get involved want to do so not because of the remuneration, not because of what they might financially get out of it . . . It’s about making a difference and being invested in something that is incredibly important to the British people.”

Indeed, Horlick became involved after her daughter, Georgie, developed an incurable illness, which meant she had to spend a lot of time in hospitals. “Ultimately, she died, but that was no one’s fault. Everyone did absolutely everything they could to save her.

“I was really, really grateful for everything the NHS did for me and my family and for Georgie, so that’s why I wanted to get involved.”

No stranger to the media glare herself as a high-profile fund manager in the City, Horlick conceded that a certain amount of public scrutiny comes with an appointment to an NHS board.

“It’s a hugely responsible position to be in, and it’s also a bit scary because things can go wrong in hospitals,” she said. “All directors dread waking up and finding they are in a Mid-Staffs situation. But it would be wrong to use that as an excuse for not doing it.”

Russell agrees that the attention from the media can be daunting — especially for those who are not used to being in the media spotlight. “Some non-executive directors from the private sector would not have been exposed to that kind of scrutiny,” he said.

Getting the right mix of non- executive directors from public and private sector backgrounds pays dividends, said Horlick. The board of Hampshire Hospitals now strikes a good balance, she added, as all the non-executives are from UK plc, and the executives provide the public sector insight.

There is also a gender balance. “Four key people on the board are women — the chief executive, chairwoman, senior independent director and the chief operations officer,” Horlick said.

“It’s actually a really good mix and is more balanced, both in terms of gender and in terms of experience from the public and private sectors, than most boards in the NHS would be,” she said.

“But that mix is proving to be rather a good one. I think we have exceptional board meetings and have made some pretty good decisions.”

She added, however: “We have some huge challenges ahead of us, because the whole of the NHS does. This is a period of time where money is tight generally and demand is growing.

“It’s a really interesting time to be on a board [of an NHS foundation trust].”

May 142013

New duties make the classroom a better place to learn than the boardroom

Hannah Prevett Sunday Times Published: 12 May 2013

Nick BaldwinNick Baldwin: ‘You’re responsible individually as a director’ (Adrian Sherratt )

The received wisdom is that new directors learn on the job. If they are not equipped with the necessary skills when they accept their first board appointment, they will need to be quick on the uptake.

Not any more: the tidal wave of new governance requirements means it is not good enough to acquire expertise over time. And, as a result, many prospective boardroom stars are seeking training to help them do the job they’re paid to do from day one.

When Alan Kay learnt he was to join the executive board of Costain in 2003, he immediately began considering how to prepare for his new role at the engineering and construction group.

“A lot of people haven’t really thought about how to prepare for a board role. [They think] it’s something that happens naturally: you get on the board and then you think, I’m going to learn on the job,” said Kay, who is Costain’s technical and operations director. “But once you’re appointed, becoming competent and learning as you go takes several months, which is not ideal.”

He researched training options for new board members and came across the Institute of Directors’ accredited programmes, including the certificate and diploma in company direction.

The IoD fills 6,000 places on such courses annually with representatives of both large and small organisations — not all of them young guns, as Roger Barker, head of corporate governance at the IoD, explained.

“The directors of large organisations were reluctant to undertake any form of formalised director training. These were typically seasoned former executives, with extensive experience of serving on boards as chief executives or chief financial officers. It has been difficult to persuade such individuals that director training is relevant to them,” said Barker.

“However, the purpose of director training is not to duplicate the operational knowledge and experience of this type of board member. Rather, it is to give directors a distinctive governance perspective on their boardroom role, which emphasises their unique responsibilities and accountability to shareholders and other relevant stakeholders.”

The importance of understanding legal duties cannot be overestimated — for directors of businesses of all sizes, said Peter Holmes, managing director of Anchor Magnets, a Sheffield manufacturer.

“You can see the people on a course who don’t understand their responsibilities,” said Holmes, who has completed the certificate, diploma and chartered director stages of the IoD training.

“When you do the director and the law module, their faces just drop because they didn’t actually realise their fiduciary duties towards the long-term wellbeing of the organisation.”

Barker’s point about training helping veteran members of staff to distinguish between their executive and non-executive responsibilities is an important one, said Kay. “One of the first things you appreciate when you go through board training is that as a director you have basically got two hats: in the main, you have an executive role and you have also got your role as a director of the business.

“Sometimes you’ve got to take off your executive hat and act as a director in the best interests of the company, as opposed to batting for your own score.”

Kay admitted that this transition from being a manager to having a dual role is the most difficult adjustment to make. “You are no longer responsible for just part of the business — you also have an overarching responsibility as a director of the business. Most people, unless they have been through the kind of training offered by the IoD, do not understand that.”

Nick Beech, head of the Centre for Director Education at Leeds Metropolitan University, said training helps directors to handle the often tricky dynamics of the boardroom.

“You’ve got people who are effectively god-like figures within the organisation and if nobody’s checking them, or if other board members don’t know what the procedures or protocols are supposed to be, it’s quite easy to undermine the board. And if you undermine the board, you undermine the company,” he said.

Training also presents opportunities for entrepreneurs whose businesses are struggling to grow beyond a certain point, said Beech. “We find that a lot of people who’ve started a business may find that their organisation has run beyond them.

“You’re doing £6m a year and you don’t know how to move it to £10m because you’re still a manager and haven’t made that mental change to understanding what a director should be doing.”

For larger organisations, the greatest value of boardroom education may come from training up those who have not yet reached director level, said Kay.

“My company is starting to focus on the next layer down. We have had a number of people go through this process now and we have got more in progress. It’s tomorrow’s board,” he said.

“You have to do the chartered director qualification once you’re on the board and you’ve got some experience, but the certificate and the diploma should be done beforehand. That is the right timing.”

Flying high without a corporate safety net

Nick Baldwin had a wealth of board experience when he embarked on a portfolio non-exec career, having been chief executive of the FTSE 100 company Powergen when it was sold to Eon.

Yet there was still a big adjustment to make when he realised he no longer had  the safety net of working for a large organisation.

“Being on the board of a FTSE company, you’ve got a company secretary, you’ve got lawyers, you’ve got finance directors — all of whom keep you decent, legal and honest, so you don’t tend to worry too much because someone’s going to tell you what to do,” said Baldwin, now chairman of the Office for Nuclear Regulation.

“What you find when you’re not surrounded by the corporate machine is you don’t know what you’re meant to do very well. You’re responsible individually as a director and you need to have a good understanding of what your role and legal responsibilities are.”

Baldwin said receiving advice on winding down a company had proved invaluable as he was on the board of the Forensic Science Service when it was closed after running up big losses. “It stood me in good stead when the advisers came in. Instead of them telling me everything that was going to happen, I knew just how to interrogate them,” he said.

May 142013

The Berks, Bucks and Oxon Chartered Director Group are hosting a breakfast meeting on 'collaborative working' on Wednesday 12 June at the Hotel du Vin, Henley 07:30 to 09:30

Hotel du VinThe topic of our next breakfast networking meeting, which will be led by David Doughty, who has had a portfolio career for a number of years, will explore the possibilities and opportunities for Chartered Directors to work together collaboratively to provide short or long-term support to businesses of all sizes and in all sectors on a full or part-time basis in areas such as Executive Mentoring, Interim Management, Non-Executive Directorships, Business Planning & Development, Finance, Mergers and Acquisitions.

As David notes: "As a Chartered Director you have the all-round skills, knowledge and understanding required to provide strategic leadership to organisations in the private, public or voluntary sectors.

By obtaining the Chartered Director professional qualification you have demonstrated that you have the expertise and integrity needed to meet the challenges faced by businesses today and that you have a dramatic and positive effect on the success of the organisations with which you are engaged.

There are currently nearly 1,100 Chartered Directors, which represents a significant body of board-level expertise. Many of them are engaged as full-time executives but there are a growing number of Chartered Directors with portfolio careers, successfully operating as Chairs, Non-Executives, Consultants, Mentors or Coaches."

Format: Presentation and discussion over breakfast

Attendees: Chartered Directors only

Cost: £20.00 - price includes full English cooked breakfast.

Confirm Attendance

If you wish to attend please will you confirm your attendance by e-mail as these events are popular and places are limited.

Kind Regards
Neil Britten C Dir
07808 936884

Future dates – Note extra meeting date in conjunction with London C Dir network

Jun 27th Breakfast IoD, Pall Mall
Meeting with Ian Dormer, Chairman IoD

About the Berks, Bucks and Oxon Chartered Director Group
This locally organised group was formed by a few Chartered Directors in Berkshire, Buckinghamshire and Oxfordshire with the aim of meeting informally on a regular basis. The meetings usually take place over breakfast or dinner in a private room or hosted at the business premises of a member of the group. Its aim is to provide an opportunity for Chartered Directors to meet one another, make use of the considerable pool of talent within the network and at the same time seek to raise the profile of Chartered Director. A strong part of each meeting is CPD with each having a speaker who is an expert in their field.

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