Finding Suitable NEDs for Your Startup or Scale-up

As a founder of a young, fast-growing business, you’re going to face a multitude of challenges. You need to be across all of them. Whether they regard strategy, finance, operations or anything else besides, and these challenges aren’t something to be fearful of. They need to be relished and risen to.

That doesn’t mean, however, that you should be resistant to asking for help. Sometimes the best way to meet a challenge is to find someone to lean on. Someone who can bring skills and the knowhow you don’t have to the table. You may not realise it, but there are many different ways you can do this. 

Coaches, Mentors, Advisors and NEDs; Understanding Your Options

There are a few different ways you can go when you’re looking for help taking your business to the next level. You might choose to add a new executive to your board. Someone who can take up a specific role like that of a CEO or MD or COO on either a full or part-time basis.

Another option is to seek somewhat less formal help. You could reach out to a business coach or mentor. These people are less about having hands-on involvement in your business. Instead, they offer help and guidance on an advisory basis. Their remit is as much to support your personal growth as a business owner, as it is to help your firm progress.

One further option is to appoint a Non-Executive Director (NED). A NED is an individual who sits on your Board but is not a member of your executive team. They’re there to help with policymaking, planning and strategic direction and can provide great value to a startup or scale-up.   

The Value Added by NEDs

NEDs are able to provide companies with invaluable assistance. They can help established firms to broaden their knowledge base. It’s startups and scale-ups, though, for whom they’re often vital. They provide a wide array of value, both by assisting the business directly and by helping existing decision-makers perform better. The elements they bring to the table include the following:

• Knowledge and Experience – NEDs can often be former or current r holders of C-level roles. They’re uniquely placed to offer stewardship and guidance to younger companies. They have all the experience and prior knowledge which an enthusiastic, but inexperienced, startup board may lack.
• Perspective and Accountability – When you’re wrapped up in the day-to-day of running your firm, it’s tough to see the bigger picture. NEDs can help mitigate that problem. They arrive at your company with an outside perspective. They’re also not bogged down with the duties of your other Board members and executives. They can pinpoint new strategies and options, as well as ensuring your current Board is accountable.
• Networking and Connections – The best NEDs will have many years in business behind them. They will have accrued an extensive list of contacts. They bring those with them when they come on board with your startup or scale-up, meaning, your company will have access to a whole host of professionals and firms, many of which you may never have managed to reach on your own. 

Where to Find NEDs

Before you start your search, make sure you know exactly what you want from a NED. Think about the challenges your firm is facing and what qualities are needed to meet them.

A good place to start is by looking at the current skill sets delivered by your board. What bases do your current executives have covered, and where are they lacking? For instance, you may not have a board member with digital expertise. In that case, a technologically minded NED would be a great choice.

Once you know what you want from a NED, you can start reaching out to find the right person. It makes sense to start with your current network. If you don’t know anyone suitable, you can look further afield. Some companies, such as BoardroomAdvisors.co.uk, intouchnetworks.com and nedworks.net, specialise in providing NEDs and other advisors to startups and scale-ups. 

Choosing the Right NED for You

The main thing to remember when looking for NEDs is that you have to find the right person for your business. You need to look at both what a candidate delivers on paper and how you can work with them in person.

To begin, make sure any candidate delivers the practical capabilities your firm needs. Ensure they have the skills and knowhow to meet your company’s individual challenges. Check that they fill the aforementioned gaps in your current board’s skillset.

Then, it’s about checking that the candidate is the right fit for your startup. First and foremost, are they somebody whom you can work closely with. The best founder-NED relationships involve lots of frank communication. As well as working with you, a NED must become an effective member of your board. That’s just as important for a Non-Executive Director as for any other board member. You need to judge the kind of chemistry a candidate has with your existing executives. Will they work well with, and get the best out of your existing Board members?

Paying and Managing NEDs

Once you’ve found the right NED for your startup, you need to bring them on board. This starts with reaching an agreement about your ongoing relationship. Any agreement (standard employment contract) should be put down in writing to avoid any future confusion. It should also set out the exact terms and nature of your proposed working relationship.

Make sure that the NED understands just what you expect of them. They need to understand the challenges you want them to help your business to meet. You should also set down any time frames which you expect those challenges to be resolved within. 

That’s alongside more practical details, such as how much you will pay them. Remuneration for NEDs is a very individual subject. How much you pay a Non-Executive Director will depend on just what you’re asking of them. Often, they will work with your company one or two days per month and can be paid at a daily rate. This can vary from £500-£1500/day depending on the size of the company and experience of the NED.

Agreeing and setting down the exact scope of your relationship is also key to managing NEDs. If you get everything agreed at the outset, it avoids the chance of issues arising down the road. The other key to good management of a NED relationship is communication. Make sure you’re in constant contact with your NEDs and that they know they can come to you whenever they need to.     

Evaluating Your Working Relationship With a NED

All business relationships need a degree of oversight. As your relationship with a NED develops, you need to ensure it’s delivering the value you hoped. If you’ve not worked with NEDs before it can be tough to know how to evaluate their impact. The following are a few things to keep an eye out for:

• Are they fully engaged? – A good NED will look to really get to grips with your business. It’s the only way that they can understand and help solve the company’s unique issues. Check that your NED has developed relationships with the rest of the board. Ensure they’ve got a good understanding of your firm’s operations and structure.
• Do they influence your board in a positive way? – The role of a NED is not a hands-on one. They shouldn’t be interfering with day-to-day operations. What they should be doing is assisting and improving planning and policymaking. Check that your NED is playing a full part in Board-level discussions of this type. Judge whether the part they’re playing is improving decision making.
• Is there any disruption or friction? – All professionals should find a way to work together. If you’ve chosen the wrong NED, however, there may be signs of underlying friction. Do existing Board members feel that your NED is undermining them? Do they feel that they’re a passenger on your board, who isn’t contributing enough? 

Making the NED Relationship Work for You

Appointing NEDs to your startup or scale-up Board is a great way to get a leg up on the competition. It can help you bring on board the skills and experience you need to take your company to the next level. It’s not a decision to be taken lightly, however. There are a number of ways that a relationship with a NED can sour, particularly if a NED has large corporate credentials but little experience of early-stage businesses.

Some less experienced NEDs might rely on just one method of propelling a startup or scale-up forward. They may have seen their strategy work once and decided to stick with it. So, given the individuality and fluidity of business, they might not be a good fit for many early-stage companies. 

Take time to truly understand what you want from a NED. Keep that in mind whilst assessing candidates (as well as thinking of their chemistry with existing board members). Ensure everyone involved understands their duties and responsibilities. Do all that, and you’ll have a NED relationship that can work wonders for your startup or scale-up.