Gaining a true understanding of how an organisation functions can be a tricky undertaking for a non-executive director. They can’t allow themselves to get so close to the day-to-day operations that they undermine the authority of executives and the value of their own independence, but they do need to know that conversations in the boardroom line up with reality.
Striking the right balance takes good people skills and experience. Matthew Lester, NED and Chair of the Audit & Risk Committee at Capita, as well as a Criticaleye Board Mentor, describes the role of the NED as that of ‘the critical friend’, supporting the executive team in driving business performance, while also safeguarding the interests of key stakeholders.
“NEDs are meant to be the people that have real reputational skin in the game, thinking about the business from a different perspective,” he says.
Here, Criticaleye speaks to experienced NEDs and other leaders to understand what they can do to get close to an organisation, but still maintain that all important independence.
Make Time to Understand the Business Early On
A well-thought out induction programme ought to enable a NED to speak to different stakeholders. Vanda Murray, Chair at Marshalls and a Criticaleye Board Mentor, finds that the briefing from an HRD is enormously helpful while researching a new role. “They will know all the corporate history; they will know every individual; and the strengths of the team,” she says.
Likewise, Lewis Doyle, NED at Sussex Partnership, agrees that an HRD can be particularly useful for connecting you to the business more widely. When discussing a previous position, he recalls asking an HRD to introduce him to a dozen people "that were not on the Board and who influence the Chief Executive”, to build out his understanding and knowledge.
Matthew notes that NEDs should study the performance information that’s available. “I’m a big fan of using the company’s own resources to teach you about what you need to know. I usually go primarily to the company’s own technical accounting people… and the auditors are a natural source for education,” he comments.
On a similar note, Lewis recommends double checking what other stakeholders, such as regulators, are saying about the organisation. “Whilst you might not like it, it will almost certainly give you a greater flavour for the business and it will probably be fair,” he states.
There is also the instantly-accessible world of Facebook, Twitter and myriad blogs to explore upfront. “Social media allows you to see what your customers think of you and what people are saying. It’s how it is and it’s unedited; you don’t have control over it,” he adds.
Get Under the Skin
Don’t think that excursions into the wider organisation will stop after your induction programme. They should be ongoing throughout your tenure as an independent director. Matthew says going to “visit other operational sites and business units, and meeting and spending time with operational management and staff”, has been of great value in his career.
A similar point is made by Vanda. “One of the things we do at Marshalls is have a standing item on the agenda, which is feedback from the Board members on any visits they have done to any of our sites. It’s not a one-off process, because really, if you’re only going to Board meetings, you’re not really getting underneath the skin of the business.
“It’s a good way of getting a view on how issues that you’re dealing with at Board level are being understood, applied and dealt with through the organisation.”
Connect with the Customer
Understanding the business doesn’t just mean talking to staff on the frontline and managers. It requires talking to customers and other stakeholders too, such as suppliers.
“It really helps you to understand how your business is performing, what good looks like and how you should improve,” says Vanda.
In a NED role at another company, the FTSE 100-listed concern Bunzl, she says that there were trips to meet customers in different countries. “We’ve talked through how the business performs, what their plans might be, and how we might support them in their objectives. It’s been very rewarding.”
Trips which stimulate new ideas and refresh the Board’s thinking about strategy can also be valuable. Laurence Vallaeys, Director at Warren Partners, comments: “I’ve come across a Chair who would organise an annual trip for NEDs to go to Silicon Valley and find out what’s new and coming out of the US, to stay abreast of innovation and new market shifts.”
Be Transparent About Doing Your Homework
When seeking to gain input and information from outside of the Boardroom, you should be mindful of the CEO and executive team. You don’t want to be accused of crossing a line by interfering in operations.
Nick Thomas, Relationship Manager at Criticaleye, advises: “It is important not to simply be spoon-fed information by executives. Explain that you want to get an objective view of the business through your own observations and research, but always be upfront about anything you discover and keep the execs involved in your learnings.”
Laurence says: “Not all CEOs welcome NEDs spending time in the business. Some feel like the NEDs are going behind their backs.
“If this becomes an issue, it would probably be wise for NEDs to raise it with the Board, and the Chair in particular.”
Ideally, NEDs should ascertain the Chief Exec’s position on this as part of their due diligence – and before accepting a role. Laurence explains: “I think NEDs should check how comfortable the CEO will be in allowing NEDs to spend time in the business. If the CEO is uncomfortable, then this would definitely raise alarm bells and would merit exploring further.”