Managing non-executive directors
When to get one and how to avoid problems
Can problems arise?
It is very important to draw firm ground rules as a strong-minded non executive could take over if allowed – particularly if they are very experienced and you are just starting out. And it probably won’t be intentional which makes controlling it all the more important.
Choose someone you think will fit in well – as you would someone to work in a small team in the office. You won’t be seeing them everyday but they will be taking part in important decisions that effect everyone day to day, which amounts to the same thing.
Make it clear in the contract the number of days they will be expected to attend but also stipulate a maximum number of days. It is unlikely someone with other interests will want to spend all their time with you – but you want to guard against a fatal attraction situation where they can’t stay away.
Remember that this is a contract like any other. If you clearly lay down your expectations and they lay down theirs there’s no reason why you anything should go wrong. And most importantly, with a pre determined period of notice, either one of you can walk away. If you don’t like them, terminate the contract – odds on they will be quick to do the same.
When should you employ a non-exec?
There is no set time when you should employ a non exec. But equally it is all too easy to go along and assume you are managing very well without one. It’s a good idea to have your board and sytems in place – if only so they have some board meetings to attend.
You might take someone on when you are looking at a change in direction. This might be in terms of expansion or if you are trying to appeal to a different market. In this case you will have a clear idea of the objectives but could have run out of the knowledge and the contacts to achieve them.
A common barrier to this can be the expense, though. But as illustrated, this is only a part time position and needn’t actually cost you that much. And when you combine the salary with a stake in the business, you may not actually have to expend that much anyway.
And while it can happen, you would be unlucky in your choice of non exec if the value they added to company in terms of experience wasn’t worth the cost. Gift horses and mouths come into mind.