NED Non-Executive Director the value of a NED

The value of a NED for a technology STARTUP

“The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.” So said Martin Luther King.

And he was right, as you'll undoubtedly discover if you start your own technology company.

There are so many issues that a startup needs to be acutely mindful of – such as funding, marketing, strategic placement and the not insignificant task of attracting and retaining customers. That even the most talented entrepreneurs can find the going tough.

So what's the answer? Push yourself hard and hope for the best? Perhaps, but why do that when there's a much better option open to you? Think about it. Suppose you could call for the cavalry? Suppose you could bring in an older, wiser, cooler head to help you navigate the uncertain waters of modern business?  Well, you can -  if you appoint a NED (Non-Executive Director) to the board.

A Non-Executive Director ('NED' for short)

Is a part-time appointee who sits on a company's board but isn't concerned with the day-to-day management of the company.  The best NEDs (the type you want) are highly experienced businesspeople who've been around the block a time or two. But are still sharp, vital and thoroughly attuned to the demands of modern business.

Although the province of the NED has traditionally been corporate governance and strategy, a NED can offer you a lot more than that.  So let's look at what a NED can bring to the party and why you should have one.

Wisdom

Every business will face challenges. That much is unavoidable. What matters is how your company anticipates, prepares for and handles those challenges. And in that context, there is no substitute for experience, for experience goes hand in hand with wisdom.  And that's where your NED comes in. They will use his or her hard-earned wisdom  -  let's face it, age isn't the only reason for your NED's grey hairs – to give you the right advice to enable those challenges to be successfully met.  You can't  develop wisdom overnight, but you can buy it.

Of course, wisdom is even better when accompanied by perspective.

Perspective

Remember the old idiom about not seeing the wood for the trees? Well, it's all too easy for that to apply to board members who are deeply involved in the day-to-day running of your company.  A NED, on the other hand, isn't involved in the everyday running of the company. Which means they can view any given situation on a wider canvas than most, if not all, of the other board members.

That distance enables a NED to adopt a more impersonal and objective attitude to challenging situations. Than those who may be more personally invested in the company.  But the benefits of perspective and objectivity don't stop there.   It's easy for board members who spend their time on the proverbial front line to form highly subjective opinions that can all too readily become entrenched and result in inter-board conflict. A NED, who is – and is seen to be - objective and impartial can act as a buffer between other members of the board and help to prevent differences of opinion from becoming wasteful and counter-productive conflicts.

So far, so good. And there's more. The utility of a NED doesn't just lie in what he knows, but also in who he knows.

Contacts

It takes time to cultivate and nurture business relationships, but it can be very difficult to find the time necessary to build relationships when other, more immediately pressing tasks demand your attention. You'll be glad to know, then, that this is another area where they can add value.

Making progress in business is all about opening doors, and the right NED can open doors that might otherwise be closed to you. An experienced NED will have an impressive network of contacts. If so, that means that you'll have access to ready-made contacts in areas such as marketing and funding. It may even be the case that they have contacts that can be used to help your company to connect with potential suppliers, distributors, and clients. That alone can be the difference between success and failure.

That said, an open door can still be slammed shut, especially if whoever's on the other side of that door doesn't like the cut of your jib. To make progress, you need to make the right impression. And that means you need something else that your NED can supply: credibility.

Credibility

Consider this: the importance of a NED to a startup isn't measured solely in what he brings, but also in what he is perceived by others to have brought.

Having a well-respected NED on board sends out some very important messages about your company.  And they're the right messages. Look at it from the point of view of an investor or lender. They're more likely to be impressed by your fledgling company's good judgement in having appointed a reputable NED than they would be if you hadn't done so. But that's only part of it: the fact that your company has been able to attract a well regarded NED can also generate a halo effect in the eyes of lenders, investors, potential business partners, and clients.

Remember: how a business is perceived by others may not be all, but it's barely a stone's throw away from it.

Deciding to appoint a NED to the board of your startup is an easy decision to make, but now you're wondering how to find the right NED. Well, wonder no longer.

Finding a NED

Before you go out and find a NED, take time to think about the qualities that you're looking for.

The ideal NED will have:

  • a good depth and breadth of corporate experience, preferably  in the technology sector;
  • a good reputation; and
  • previous involvement in new or young businesses.

Once you know what you're looking for, the likelihood is that you'll recruit your NED from within your own network, or on the recommendation of a trusted associate or through a specialist recruitment firm.

The key thing is to ensure that you find the right person for your company, and that means being totally dispassionate about the selection process. A candidate may be a great guy, but that's not what you're looking for. You're looking for someone who has the skills, experience, and knowledge to add value to your company. So do your homework and make sure that you verify the background and reputation of a potential NED before making a job offer. Get the right NED and reap the benefits.

What to pay

Good NEDs don't come cheap. At a minimum, a NED will expect to be paid upwards of £500 per day. However, bear in mind that your NED will probably only be working two or three days a month for your company.  Looked at in that way,  a NED is excellent value for money.

Managing a NED

Any relationship can only work if the parties to it understand what's expected of them. So make sure that the scope of your NED's role has been defined and agreed upon from the outset. Get it right at the beginning and the chances are that it'll stay that way.

Likewise, communication is vital. A NED's primary duty is to advise, so make sure that you give him the information he needs to do his job. If need be, have your NED sign a non-disclosure agreement. They won't be offended. In fact, he'll look positively on your professionalism.

What are you waiting for?  

Now you've seen what a NED can do for your company, you know what to do. So get to it.

Time waits for no-one and nothing, and it starts now.

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