What makes a good NED? (And how to spot a bad one!)
When hiring a NED, there are many considerations, many pitfalls and many organisations that do not make the right choices.
Often this is because the non-executive board is not leading the search. If the CEO is taking charge, they can heavily influence the results, particularly if they have connections with the executive search firm.
In my opinion, this can be dangerous. When executives choose their own non-executives, they look for certain qualities - and not necessarily the right ones. In this scenario, the organisation will end up with a very different NED than if a private equity firm led the way.
Good non-exec boards are very discerning in their choice of members. So, what qualities should they be looking for in a NED? How can they recognise the best in class, and how do they steer clear of disaster?
Not directive, but direct
Left to their own devices, executives may well choose NEDs they have a personal connection to, or those that will support their vision without friction.
However, friction is exactly what a NED should provide! When the relationship between the executive and non-executive board is too comfortable, the uncomfortable issues can go unaddressed.
That is not to say a NED should be coming into butt heads with the executive board. You don’t want a former CEO who is so used to being in charge that they try to take control away from the C-Suite. It’s important that they remain reflective and not directive – but they do need to be direct. Otherwise, the difficult issues will go untouched, swept under the rug or deferred until it is too late.
A Specialist for the organisation's stage
I can recall searching for a NED for a digital real estate climate management organisation that was growing incredibly fast. The NED that was stepping down had been very digitally focused, and (s)he had helped the company immensely in their tenure. Finding a replacement for that NED, though, was not a case of finding a replica.
So, I told the company I could bring a few candidates from different systems: those with digital experience, those from real estate or building management firms, and one candidate who had CHRO experience in a global digital company.
The organisation I was searching for chose the latter option. Crucially, this candidate did not only have experience of recruitment in digital, she also had a track record of retaining those they recruited. She would bring invaluable experience to the organisation as it was going through a huge recruitment drive. As a former coach to a CEO, she also had the reflective skills necessary to firmly guide the board in this, without trying to take charge.
The qualities you need, not the ones you want
The former CHRO was from a different world, and had a different perspective to the board, but she was exactly the right fit for the organisation. The right fit, however, did not mean a cosy fit.
There was a board in a different organisation that tried to get rid of a board with whom they clashed too many times. In this instance, the private equity board jumped in. They told the executives firmly: it doesn’t matter if you don’t get on with them; we think they have the capabilities you need.
At the end of the day, you don’t need to like all your non-executive members. As long as they have competence, experience and can be critical, you have what you need.
A professional with an outside view
On this point, I would suggest that you actively avoid choosing NED’s you have a personal connection to. Yes, it can be tempting to honor a former mentor by offering them a seat on your non-executive board, but theymight not bring enough of an outside view.
For the same reason, while CEO’s can make effective NEDs ‘The difference between an exec and non exec role, it is advisable for them to transition to a different company rather than continue to oversee the legacy they have built. They are simply unlikely to be critical enough of the systems they have so recently been a part of.
Sometimes it is a balance. Experience of an organisation and an understanding of its history can be helpful. That said, the world is changing so fast these days. There’s usually more value in a NED who is able to adapt fast, than in a NED who prefers to uphold elements of the past.
With family-owned businesses this can be a delicate matter. It is understandable that they want to maintain their legacy, and as a result they can be influenced by emotion more than other organisations.
Nevertheless, I would still recommend they prioritize the professional aspect when selecting people for a supervisory board.
The legacy can actually endure for longer if a family hands the reins over to professional executives and non-executives. They bring the logistical expertise needed, along with a more objective view of good governance. If you take a look at the landscape of family offices, you will see that those who bring in these outside voices are the ones that last.
To learn more about searching for a NED candidates, see my thoughts on how candidates and companies can find the right fit.
Whether you need to find high calibre candidates in a very discreet manner, or you’re considering transitioning to a NED role, get in touch with me to start bringing your way forward into focus.