Top 10 questions to ask before becoming a NED (Part 1)

Embarking on the journey to becoming a Non-Executive Director (NED) can be an exciting career move, yet it should be approached with consideration and preparation. The role of a NED is complex, straddling the line between providing independent oversight and contributing strategic value.

In this article we will outline the top ten questions you should ask yourself, and the recruiters, before considering a NED position, empowering you with the knowledge to make informed decisions that align with your career goals and personal values.

1  What are the expectations of the role? 

NEDS play a pivotal role in the corporate governance of modern companies. They provide an independent perspective on the board, helping to ensure a balanced and well-rounded decision-making process. Here's an overview of their typical duties and responsibilities:

• Monitoring Executive Directors: NEDs have a key role in overseeing the performance of executive directors and the management team, ensuring they act in the best interest of stakeholders.

• Risk management: NEDs are involved in identifying key risks to the company and ensuring appropriate mitigation strategies are in place. They also have a role in overseeing the company's financial integrity.

• Corporate governance: They ensure that the company's governance procedures are robust and transparent, fostering a culture of accountability and ethical conduct.

• Stakeholder communication: NEDs often liaise with stakeholders, including shareholders, employees, and the wider community, acting as a conduit between them and the board.

• Committee involvement: Many NEDs serve on committees within the board, such as the audit, remuneration, or nomination committees. These committees handle specific areas of the company's operations, and NEDs bring their independence and oversight to these roles.

Remember, every NED role will look different depending on the organisation and its unique needs. Therefore, it's essential to understand the specific expectations and responsibilities associated with the role before you step into it.

2  How well do the company culture and values align with mine? 

As a Non-Executive Director you will be able to influence strategic decisions, guide the executive team, and interact with multiple stakeholders. Therefore, it is crucial that your personal values align with the culture and values of the company you are joining. This alignment fosters mutual respect and understanding, which is essential for effective collaboration and decision-making. It also helps ensure that the strategies and policies you endorse as a NED are consistent with the company's ethos. Furthermore, alignment with the company's culture contributes to your job satisfaction and engagement, which can significantly impact your performance and effectiveness as a NED.

TIPS ON HOW TO RESEARCH AND UNDERSTAND A COMPANY’S CULTURE:

• Company website and reports: Start by exploring the company's website, particularly sections like "About Us," "Our Mission," or "Our Values." Annual reports, CSR reports, and other public documents can also provide insights into the company's culture and values.

• Social media and blogs: These platforms often offer a more informal look into the company's culture. Look at the kind of content they post, how they interact with followers, and the themes they focus on.

• News and media coverage: Search for recent news articles, interviews, and press releases about the company. They can give you an idea of the company's reputation and how it responds to certain situations.

• Employee reviews: Websites like Glassdoor can provide candid insights from current and former employees about the company's culture.

• Ask questions: During the interview process, don't be afraid to ask direct questions about the company culture, values, and how they handle specific scenarios. 

• Observe interactions: Pay attention to how members of the organisation interact with each other during your visits. This can give you a sense of the general work environment and relationships within the team.

Remember, understanding a company's culture isn't just about knowing what's written on their website. It's about digging deeper to understand how those values are lived out day-to-day within the organisation.

3  How much time am I expected to invest in the role? 

 The time commitment for a Non-Executive Director (NED) role can vary widely based on the organisation’s specific needs. Generally, NEDs are expected to commit a significant portion of their time towards understanding the business, contributing to board meetings, serving on committees, and staying updated with industry trends.

According to the UK's Institute of Directors, NEDs typically spend around 30 days per year on a role, including preparation and meeting time. However, this is an average figure, and the actual time commitment can be higher or lower depending on several factors.

FACTORS THAT MAY INFLUENCE COMMITMENT:

• Size and complexity of the organisation: Larger, more complex organisations may require more time from their NEDs due to the volume and intricacy of the issues they deal with.

• Number of board and committee meetings: The frequency and duration of these meetings will directly impact your time commitment. Some boards meet monthly, while others meet quarterly. Also, if you serve on more than one committee, you'll need to account for those meetings as well.

• Company's life cycle stage and situation: If the company is going through a period of change or crisis, such as a merger, acquisition, or major strategic shift, it may demand more of your time.

• Preparation and follow-up work: This includes reading board packs, financial statements, strategic plans, and other relevant documents before meetings. It also involves any follow-up actions assigned to you during the meetings.

• Level of stakeholder engagement: Depending on the role, you might need to invest time in interacting with stakeholders, such as shareholders, employees, regulators, or the community.

As you consider a NED role, it's important to discuss the expected time commitment upfront and assess whether it fits with your other commitments and lifestyle. Remember, quality of contribution often matters more than quantity of time, so ensure you can devote enough time to make a meaningful impact.

4  What is the financial status of the organisation? 

Understanding the financial status of a company is crucial for several reasons:

• Performance evaluation: Financial statements provide a comprehensive view of a company's performance over a specific period. They reveal key metrics such as revenue, profit, operational costs, and cash flow, which are essential for assessing how well a company is doing.

• Risk assessment: By evaluating a company's financial health, you can identify potential risks and vulnerabilities. For instance, high levels of debt, low liquidity, or declining revenues could signal financial instability.

• Strategic decision making: Financial understanding aids in making informed business decisions. It helps evaluate the potential financial impact of different strategic choices and ensures decisions align with the company's financial objectives.

• Investor confidence: Investors and stakeholders rely on accurate financial information to make decisions. A clear understanding of a company's financial status can foster investor confidence and potentially attract more investment.

• Compliance and accountability: Regular scrutiny of financial statements ensures compliance with financial regulations and standards. It also promotes accountability as it keeps the management team answerable for their financial decisions.

• Future planning: Historical financial data serves as a basis for forecasting future performance and planning accordingly. It helps in setting realistic budgets and financial targets.

As a Non-Executive Director, your understanding of the company's financial status will contribute to strategic discussions, risk management, and overall governance, thereby playing a significant role in the company's success.

5  Who are the other board members?

Knowing who the current board members are when applying for a Non-Executive Director (NED) position is crucial for several reasons.

• Understand the board's composition: Understanding the board's composition gives you insight into the skills, experience, and expertise already present. This can help you identify where you may add value and fill potential gaps in the board's collective knowledge. For instance, if the board lacks someone with a strong background in technology and you possess that, it could be an advantage.

• Evaluate compatibility: Board work involves a lot of collaboration and decision-making. Knowing the other members can help you assess whether your working style, values, and personality will be compatible with the existing group dynamics. A harmonious board typically leads to more productive and effective decision-making.

• Assess diversity: Diversity on a board, in terms of gender, race, age, professional background, and perspectives, contributes to robust discussions and better decisions. By knowing who's already on the board, you can evaluate the level of diversity and consider how you might contribute to it.

• Assess the board's leadership: The current members can give you an idea about the leadership style of the board. For example, understanding the background of the Chairperson can provide insights into their leadership approach, which can significantly influence the board's functioning.

• Identify potential conflicts: Lastly, knowing the current board members can help you identify any potential conflicts of interest that might exist, enabling you to address them proactively.

In conclusion, knowing who's already on the board is a critical step in preparing for a NED role. It helps you understand the board's dynamics, assess how you can contribute, and evaluate whether the role would be a good fit for you.

So that's five of the ten top questions to ask to help you assess how suitable a NED role is for you. Another five to follow next week. 

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SOURCES

The Benefits Of Sitting On A Company's Board - Forbes

The 4 unexpected benefits of being on a board - Future Directors

Managing the Relationship With Your Fellow Trustees - BoardEffect

What Is the Importance of a Company's Financial Statements?