Reprinted from October 2013: Director Magazine
Non-executive directors - Partners for the future
Words Alison Coleman
Non-executive directors are critical friends of senior management, advising and challenging the board in equal measure. But increasingly they’re also seen as business leaders. Our experts offer advice on capturing one of these prized positions.
Often described as the best-kept secret of a successful company, a non-executive director (NED) can contribute a wealth of skills, knowledge and experience to a business.
However, competition for these sought-after boardroom positions is fierce, and in this fast-moving world aspiring NEDs should look at business education, training and development to enhance their abilities and boost their prospects of being appointed.
While there is no such thing as a one-size-fits-all approach to business education for NEDs, there are several programmes and courses offered by business schools and professional bodies that combine academic theory with applied learning and which can be valuable to candidates.
The IoD runs a wide range of professional development programmes for directors. For business adviser John Barnes, a NED with more than 25 years’ experience at board level within private limited and public limited companies, it was the process of achieving Chartered Director status that played the most valuable role in becoming a non-executive director.
“In 2002, I embarked upon the IoD Diploma in Company Direction with the ultimate goal of becoming a Chartered Director,” he says.
“I had, at this stage in my career, been full time at board level in both PLC and private limited company organisations for almost 20 years, which I’d achieved with no formal director training; all my knowledge was experienced based. It was time to establish if I had been doing the right thing for the past 20 years.”
Barnes completed his studies and diploma examination in 2004, achieving his ultimate goal of Chartered Director the following year. “The course gives you the confidence to dare to be vulnerable in a confidential environment with a view to learning without fear of criticism.”
So what’s the best training route for directors who want to become a NED? Read on to find out what our business education experts advise…
One of the challenges for NEDs can be establishing a suitable level of governance that meets a minimum standard but also that businesses feel is appropriate for them to implement on a day-to-day, or month-to-month, basis.
“My view is that good governance means good business and the Diploma in Company Direction experience certainly helps me establish a minimum standard dependent upon business size and complexity,” adds Barnes.
David Buckle, the IoD’s business development director, says: “Chartered Directors have demonstrated to the IoD, by way of study, examination and experience, that they have the expertise and integrity to meet the challenges of business. That doesn’t automatically guarantee them access to the boardroom, but it does confer huge benefits in terms of an in-depth knowledge and understanding of the director’s role and a demonstration of a level of competence that is measurable.”
There are programmes aimed at preparing candidates for non-exec roles in the SME sector, including Lancaster University Management School’s GOLD programme, specifically designed to help executives become NEDs through simulation of assuming the role in someone else’s business and duplicating the process in their own.
Head of leadership and management programmes Ian Gordon says: “NEDs come in all shapes and sizes as do SMEs; there isn’t any one size fits all. That said, NEDs can be broadly segmented in two ways; the NED who is a ‘name’, who can open doors, has a great network and has previously enjoyed a senior position in the very industry the SME is seeking to improve their lot with, and the NED who may not necessarily be a ‘name’ but has a broad range of experience in running a business, especially one that is significantly larger than the SME".
“This person may be more of a generalist and may not have worked in the industry the SME is involved with. However, they may have operated for the last few years above the glass ceiling and have the benefit of having lived through the confusing range of new experiences that any SME will go through on its growth journey.”
Gordon adds: “The GOLD programme allows the SME to experience what life would be like if they did have a NED by creating a network of like-minded SMEs who share the experience of what life would be like in their company if they had a NED. The simulation is about creating an environment to imagine what their company would look like if it was larger. It allows the SME to experience the sort of structures and systems that would be in place if it had a NED and gives aspirational NEDs real-life experience of what it is they would do.”
Masters of the boardroom?
Other relevant programmes include MBAs, still considered the gold standard of business management qualifications. However, opinions are divided on their value in becoming a NED.
Elaine Ferneley, director of MBA and MPA Programmes at Manchester Business School, insists that they are highly respected for a reason.
“They demonstrate to boards that the candidate has all the necessary skills and experience to take a board position, and offer a breadth of experience as well as the opportunity to specialise,” she says.
“Of course, not all MBAs are the same, and different courses concentrate on different aspects of business education. We have a diverse cohort, which is looking to develop a wide range of existing skill sets and learn new ones. They do this through studying at our international centres, undertaking live business projects and networking with colleagues and alumni. All of these factors develop the skills required for a NED position.”
However, Colin Carnall, director of executive education at Cass Business School, which runs a one-day masterclass for prospective NEDs, Your Key to Success in the Boardroom (in partnership with PwC), insists that there is no basis for thinking that an MBA is a route to becoming a NED.
He says: “It is more about your experience and track record, and, crucially, your understanding of the role of the board, the role of the NED with the board, your legal responsibilities, reputation risk, etc – all aspects of corporate governance. An MBA gives you a good understanding of business, but there are only two or three business schools running programmes that relate specifically to the responsibilities of joining a board that are context specific.”
Julian Rawel, director of executive education at Bradford University School of Management, argues that diploma programmes and workshops that focus on the necessary legal and governance issues are good for those with solid qualified management experience who just need to learn the NED ropes, and that an MBA offers something different.
He says: “An MBA is for managers who have risen in terms of specialisation, as an operations director, for example, or through great entrepreneurial skills. To get into the NED zone, these managers need to widen the way they look at the business world and the skills they can apply. It’s not just being more strategic but also having the confidence to discuss issues out of their comfort zone as a NED who claims to know little about marketing or finance won’t last long or get the position in the first place.”
As Dr Claire Moxham, director of studies for the online MBA programme at the University of Liverpool Management School, points out, one of the key roles of non-execs is to challenge and advise today’s senior leaders, so anything that teaches aspiring candidates to think critically about the role management plays in an organisation is invaluable.
She says: “The MBA remains the higher level qualification of choice for those seeking to become non-executive directors, because it helps equip students with this analytical requirement. Our online MBA programme has seen a continued year-on-year increase in enrolments since its launch 13 years ago. The subject-specific knowledge gleaned over the course of the online programme, combined with the development of interpersonal skills, provides a solid foundation from which to challenge strategy, performance, risk and people management; essential aspects of the role of a non-executive director".
“Historically, the MBA was viewed as a way of increasing salaries. What is now being seen is a greater appreciation for the networking doors such a programme can open. Add to this, the truly global networking springboard offered by the online MBA’s international mix of students and the benefits are clear.”
An Executive MBA from Henley School of Management has certainly been instrumental in Sally Lockyer’s success as a NED. Before doing the MBA in 2011, she had a non-executive role on the board of the Tennis Industry Association, which represents 70 diverse companies within the £1.3bn tennis industry and works collaboratively with British Tennis to drive economic vitality in the sport.
She says: “My aim was to develop a portfolio of NED roles and this was one of the driving forces for undertaking the MBA. I secured my second NED role at Triathlon England, a national governing body, in January and I am currently undergoing the interview process for a potential third NED position".
“The MBA has been invaluable in developing my NED career. The learning journey has changed the way I think
and operate in the boardroom. I have a new cross-functional skill set, tools and language. Attaining this level of knowledge and expertise gives you the ability and confidence to challenge and lead change. I believe the MBA is the minimum standard for all NEDs. The leadership, strategy and international business, and corporate governance
and finance modules were particularly beneficial, while Henley’s in-depth reflective pathway helped me fully understand my personal and leadership impact. As such, I am a significantly more effective and influential NED.”
Traditionally, the assumption has always been that running a business or organisation is simply based on quantitative data and information. But this view has been challenged in the last two decades and it is now accepted that being effective also requires NEDs to appreciate the strategic importance of people in creating value – an element that may be highly qualitative, suggests Dr Steven McCabe, director of research degree programmes at Birmingham City Business School.
He says: “Those who have successfully completed our postgraduate courses are aware that the most crucial element in their personal development is in attaining confidence to work with ideas and to use the collective wisdom of those around them, both in academic study and practice. Collaborative learning is a key ingredient of enabling students to utilise the wide array of tools and techniques that will allow them to become more effective and creative thinkers, problem-solvers and strategic managers for the future.”
Business adviser Rob Brown also questions the value of qualifications taken out of context with other factors, including personal qualities. He says: “From my experience, academic credentials and professional qualifications such as MBAs are desirable but not essential in recruiting good NEDs. What’s really more important are track record and experience, plus a number of intangible assets such as sphere of influence, credibility, profile and reputation".
“There is no one factor that decides whether a NED is right for a particular role or company. Not one MBA, accolade, or achievement, and certainly not one little black book, but a complete package of a relevant and solid track record, a high-level network that can be leveraged and a powerful reputation is the dream NED ticket.”
In assessing the value of training and education involved in becoming a non-executive director, it is worth considering the various government reports and recommendations that have emerged since the globally influential Cadbury report in 1992 about the role of NEDs and corporate governance.
The Higgs review in 2003 broadly defined five questions that NEDs should be asking:
- Is there a robust strategy for the development of the business?
- Has the company appropriate resource in place to meet its strategy?
- Are operations in line with strategy?
- Does the company appear to be in financial control?
- Is there appropriate governance in the business?
The NED achieves this through being a confidential sounding board to the directors, bringing an independent and broad view to the board, helping the executive to achieve its business plans in whatever form is relevant and being a critical friend. It is vital that programmes and courses match these strategic challenges posed by the government with the qualities needed to execute them.
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