A Guide to taking on a Non-Exec eBook

e-book
A Guide to Taking on a Non-Exec for
Small Businesses
This short e-book is designed to be an easy to read, practical guide for small businesses
considering getting external help to achieve their business objectives or aspirations.

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Contact: stephenbarter@nxd.co Telephone: 08450 038213 www.nxd.co
Disclaimer:
All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical,
including photocopying, recording or by any information storage and retrieval system, without written permission from the author,
except for the inclusion of brief quotations in a review.
First Edition 2012. Copyright NXD Services 2012. Contact the author: stephenbarter@nxd.co
Book design and production by Lean productions. www.leanproductions.co.uk
Contents
 Introduction...................................................................................... 3
 Part 1 - Why do I need external help?...............................................4
 Part 2 - How can I possibly afford a non-executive director or board
advisor?………………………………………………………………….5
 Part 3 - How do I go about finding the right non-exec for my
business?........................................................................................8
 Part 4 – What role can I expect my non-exec to play?....................11
 Part 5 – What benefits can I expect from a non-exec?……………..12
 Part 6 – Conclusion and Summay…………………………………….14
 ABOUT THE AUTHOR………………………………………………….15

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Introduction
This short e-book is designed to be an easy to read, practical guide for small businesses considering getting external help
to achieve their business objectives or aspirations.
Already you will be saying to yourself, why has he referred to getting external help rather than taking on a Non-Executive
Director?
The answer is simple, most small businesses that are considering obtaining external help don’t even think about that help
coming in the form of a Non-Executive Director because most small businesses view Non-Executive Directors as
expensive luxuries for the Corporate world and not relevant or affordable to themselves.
For the eagle-eyed among you there is another question, why have I referred in the title of this book to Non-Executive
rather than Non-Executive Director?
Again the answer is simple, it is because the formal appointment to the Board or otherwise isn’t the crucial factor, the
crucial factor is the role that is to be played which can equally well be played by a Non-Executive Director or a Non-
Executive Advisor – hereafter referred to as a non-exec.
The challenge is therefore clear, by the end of this book I need you – the small business leader – to view a non-exec as
potentially relevant and affordable to you; I need you to know how to go about finding the right one for you; and I need you
to understand the role he or she will play and the type of benefits you can expect he or she to deliver.
A Guide to Taking on a
Non-Exec for Small
Businesses

A GUIDE TO TAKING ON NON-EXECS FOR SMALL BUSINESSES 4
Part 1 - Why do I need external help?
I guess before we look at what a non-exec can do for a
business, we first need to consider the issue of whether
small businesses (hereafter referred to as SMEs) are
generally open to taking on external help and what might
cause them to be interested.
It almost goes without saying that most SMEs are
resistant to spending money on anything other than
essential materials and services – and quite rightly so. So
when is external help ‘an essential service’ and when it is,
what form should it take?
Businesses are comprised of direct costs such as raw
materials, labour relating to the production process,
machinery and transport; and indirect or overhead costs
such as management, advertising and property. Typically
SMEs view direct costs as essential and indirect costs as
unessential. So use of a transport sub-contractor or an
external maintenance contractor is ‘essential’ whilst use of
an external business advisor or taking out an advert is
‘unessential’.
The view of what is essential and what is unessential
however changes when viewed over different time
horizons. The typical SME view is correct when viewed
over the very short term, but becomes less and less valid
as one extends one’s time horizons. One does not need to
advertise to survive or even prosper tomorrow, and that
may still be true for one months-time, three months-time
or even 6 months-time, but eventually a business is likely
to stagnate and then wither if nothing is done to promote
its products and services.
Equally the temptation for most owners and managers of
SMEs is to spend time working in the business rather than
on the business – again viewed over the short term this is
right, but in the long run it is wrong, working on the
business looking at such things as strategy, direction and
process is absolutely crucial to sustainable success.
Businesses that grow and succeed in the long term are
the ones that discipline themselves to allocate time,
resource and finance to activities that protect and support
the long term as well as the short term. Probably the best
way to secure this difficult balance is to have a quality
non-exec – it also happens to be the simplest and
easiest, and (properly selected) the most cost effective
way.
Now I am going to go off at a tangent for a moment
because as much as there is a huge danger of SMEs
spending all their time and effort on short term activities
with immediate and tangible paybacks, there is also a
real danger with some businesses that the balance can
swing the other way and they become fixated on the long
term, don’t take enough care over today’s issues, and
don’t survive into the long term. I am sure you will have
come across such businesses, always taking about the
grand plans for tomorrow with heads up in the clouds, but
never with a proper grasp about what’s going on today.
This is to be avoided – ‘today’ must come first, but
‘tomorrow’ must not be ignored. Again, a good non-exec
should be able to help you with this balance.
So, if one buys into the idea that some time, effort,
resource and finance should go to long term objectives
and activities, in what circumstances would a non-exec
be an appropriate part of this? The answer could be
regarded as glib – but it is not, the answer is - always.
The right type of non-exec with a relevant background for
the SME concerned is always going to add value in the
long run provided it is allowed to function properly within
the business. I am absolutely certain at this point that a
number of people will strongly disagree and be in danger
of losing interest, but I insist on the point - the issue is
not whether it is appropriate, it is how much of this non-
exec’s time is appropriate.
The non-exec will not just help with the difficult balance
discussed above regarding the short term long term
dilemma, the non-exec will crucially perform a role that
you as business owner/leader and none of your
employees can do. The non-exec is positioned on the
edge of your business and brings a level of
independence and fresh perspective that it is not
possible for someone working ‘in’ the business to do.
Whether you like it or not, your vision around your
business is restricted –to coin two phrases, familiarity
breeds contempt and you can’t see the wood for the
trees.

But that’s not all, a non-exec can also perform a number
of other functions, the full range of which will be covered
later in this e-book, right now I want to cover two other
crucial roles. Firstly it is a fact that the perfect, fully
rounded business man does not exist, a multitude of
different business academics have tried to
compartmentalise and describe the different styles,
attributes and strengths that need to be present to ensure
a well-managed business. I do not propose to cover all or
indeed any of them specifically here, I purely want to
observe that all of them in their different ways make it
clear that it needs a mix of styles, attributes and strengths
to ensure quality management of a business and thereby
maximise the chances of sustainable success.
Secondly it is a fact that being a business owner/MD/CEO
is a lonely job especially when it comes to making difficult
and/or important decisions. It’s not until you are there that
you realise just how lonely and isolated you can be, I
know, I have had first-hand experience and the really
difficult part is there’s no one to just chat things through
with. I remember longing to have a trusted
colleague/advisor who I could discuss difficult issues with
openly and without fear of repercussion, who could act
both as a sounding board and a devil’s advocate,
someone who would ‘look after my back’ and try to protect
my (as well as my company’s) best interests, someone
who would empathise rather than judge, and perhaps
most of all someone who would not take ‘political
advantage’ of me opening up my heart.
Part 2 - How can I possibly afford a non-
executive director or board advisor?
This is inevitably the second question I get when I am
talking to smaller businesses - even if I do manage to
convince them that a non-exec is relevant, there is always
the real and understandable concern over the cost
especially because of the calibre of non-exec involved.
Indeed it is an equal concern for those non-exec’s
themselves.
My answer is always the same, let’s start with what you
can afford. Now it is true that some people’s response is
that they can afford nothing and frankly if this is genuinely
the case then they should probably be contacting an
insolvency practitioner and if they are not technically
insolvent then they could, if they wanted to, afford
something. So this issue moves to amount that can be
afforded and more importantly the perceived value that a
non-exec would bring.
At this point the SME owner/MD/CEO falls into one of
three categories; those who don’t perceive any value;
those who perceive value and are willing to pay
something for it; and those who perceive some value but
view it as a bit intangible and uncertain and so are
nervous about paying anything for it.
Let’s deal with the two extremes first and then spent
some time on the big group in the middle which is
probably where you are.
The first extreme is comprised of those that don’t
perceive any real value and in any event are certainly not
willing to pay for such a service. Strangely this group was
probably a much bigger group before the recession than
it is now – the days of making money easily are over for
most and so whilst they can arguably less afford to take
on a non-exec, they can’t afford not to. Today there are
relatively few business leaders that are so confident, or
dare I say it so arrogant, as to believe that they don’t
need anyone else to help them; but where they do exist
they are unlikely to be persuaded to take a non-exec on
other than on an FOC basis and even then possibly not.
There are however still quite a number who don’t want to
involve someone else in what they consider to be their
own private business, indeed this is typical of owners of
lifestyle businesses – and let me be clear, there is
nothing wrong with this. If you are a business owner with
a viable business and no particular ambition you may
well value your independence and privacy more highly
than bigger profits and a more valuable asset. With this
sub group, it’s not that they don’t perceive the value, it’s
that they have decided they don’t want to go down that
route, so there is no arrogance or over confidence it’s a
simple matter of choice.
.

The second extreme is made up of those who immediately
embrace the idea of taking on a non-exec and are willing
to find a budget to pay for it. I don’t think the recession
has had any real impact on the size of this group, it was
relatively small during the good times and it is relatively
small now in the not so good times. For me it is great to
come across such people who are completely in tune with
my belief and passion about the enormous value that non-
execs could add to the SME sector and indeed the whole
UK economy if they were engaged on a large scale, but it
is still the exception rather than the rule. With these
business leaders it is a matter of working with them to
ascertain the optimum input of time/cost to get the best
level of returns for the business concerned
The third group is however the big one because many of
the people that used to believe they didn’t need any help
have moved their position and are now interested in
getting help and advice, but are concerned about the cost
and the certainty of getting the returns. This is where we
deal openly with the question about affordability. This is
also when I need to start talking more specifically about
how we do things at NXD as opposed to the generic
aspects of taking on non-execs, because NXD has been
set up specifically to try and make it as easy, affordable
and flexible as possible for SMEs to take on top quality
non-execs.
Our process at NXD for engaging with SMEs is as follows:
firstly we understand the SME concerned, where it is now,
where it wants to go, what challenges it faces and
something about the key people involved especially the
owner/MD/CEO; secondly we identify whether we have
the right person to become involved and whether we think
we/he/she can add real value; thirdly we work out with the
SME the level and structure of reward for the non-exec;
fourthly we jointly measure and review the tangible results
that are achieved.
It is important to say at this point that NXD is not a
recruitment company, we are about helping SMEs
improve their financial performance and deliver their
vision. In order to do that we need to understand enough
about the business to be able to identify the right resource
to go in and help deliver the desired results. Our first step
is therefore to carry out an assessment of the business
and where it wants to go. There are times when we
agree changes to where they want to go with the SME at
this very early stage typically because the previous
objectives were either unrealistic, not challenging enough
or simply there was a better direction.
Once we know enough about the business and where it
is going, we will try to find the right person (on occasions
it could be more than one) to become involved. In
practise this may occur in parallel with carrying out the
assessment of the business as mentioned above, but
even when it does it’s important to view them as two
distinct tasks. The ‘right’ person will involve a mix of
experience, skill set, functional background, contact
network and personal chemistry – and it is important to
get all the boxes ticked, it’s doesn’t have to be a big tick
in every box, but if there are any crosses be very careful
before proceeding and if the cross is in the personal
chemistry box simply don’t proceed.
The thing that we and our members (the non-execs
involved) are most interested in at this point is whether
they can genuinely add value to the SME and help
deliver the vision/direction /objectives of the business. If
this is in doubt we will not proceed, we would rather walk
away than fail to deliver reasonable results against
expectation.
Once we are clear that we can add real value we look to
agree a remuneration package for the individual who is to
become the non-exec. It is normally true to say that this
has been discussed in principle in advance of this point,
in reality it is normally discussed in principle prior to
commencing with the first step of this process, but it is
finalised when we all have a better idea of the likely
dynamics involved and the time and magnitude of the
results to be achieved. The other thing to mention,
following on from the earlier comment about NXD not
being a recruitment company, is that unless the SME is
going to employ the non-exec directly, NXD do not
normally charge any kind of placement fee, its income
primarily comes as a small percentage of the non-exec’s
income.

The main principle we work to when we first engage with
an SME is to keep the fees as low as possible to begin
with. We don’t normally have too much of a problem
getting our customers to agree this approach – no one
wants to spend more money than they have to, at least
not until there is clear evidence of the returns that the cost
is generating. The way we minimise cost is to be very
‘mean’ with the time our member puts in – we don’t want
to compromise on quality and we don’t want our members
earning ‘peanuts’, but we want to be affordable. By using
time as the flexible parameter we can ensure the best
quality input from non-execs that are earning a fair reward
at a cost that is affordable to the customer.
For example, with a small business we might start off with
just half a day a month plus reasonable telephone support
– whilst a larger time involvement may be able to add
more value, half a day is better than nothing and is
enough to add real value to a small business. Almost
inevitably once the results of the involvement start to be
felt, the time commitment and obviously cost also
increases – but the point is that the cost is small for that
initial period where the customer perceives it will get value
but doesn’t know it for certain. On occasions, NXD will
add further flexibility by agreeing terms involving success
fees and/or ‘sweat equity’ as part payment, typically this
will be for businesses that need to grow or develop quickly
and consequently need more input than they can afford to
pay for right now.
The other thing we suggest, especially to begin with is that
there is no legal longevity to the arrangement. In other
words we do not look to have any kind of ‘contractual’
term or notice period, our view is that a business should
not get tied into commitments unnecessarily and that it
should be able to cease the arrangement whenever it
wishes and for whatever reason. Having worked in a
business sector (contract logistics) for much of my career I
have a very strong view that long term contracts usually
result in difficult relationships between provider and
customer because the customer feels trapped and that
short notice periods or no notice periods result in longer
term and much more healthy relationships.
As with any business process, it is not enough to start a
process going that is designed to engage an affordable
non-exec that will help create real additional value in the
business, it is crucial to make sure that value is being
delivered in reality. So measuring results is important –
the results you measure will obviously depend on the
objectives you have defined (this is the loop back to the
first step) and there doesn’t have to be a complex set of
criteria against which you measure success, but you
must check that what you originally brought your non-
exec on to do has been/is being/ will be delivered in the
timescale agreed. Then you need to review matters and
decide how to proceed:
 continue involvement, appropriate when results
are being achieved but either too early to
increase involvement or no significant perceived
additional value to be gained;
 increase involvement, appropriate where results
have been good and there is a clear view that
additional involvement will generate further
results;
 decrease involvement, appropriate after a period
of more intensive involvement related to specific
objectives that have now been achieved;
 redirect involvement, appropriate where the
involvement has concentrated on one particular
aspect of the business and value is perceived to
address another specific aspect of the business;
 change involvement, appropriate when someone
with a different skill set, experience or
background could add more value than the
incumbent;
 stop involvement, appropriate if results have not
been achieved and/or there is not sufficient value
to be created in the future.
The point I am trying to get to here is make a positive
decision when you review performance, do not just
continue by default. Don’t be afraid of cutting back on
something or redirecting effort to get the best return and
don’t be afraid of spending more on it if it’s really
working. Most importantly don’t be afraid of changing
your non-exec if you need a fresh set of skills and ideas
and don’t be afraid of stopping it altogether if you’re not
getting the right level of returns – to be honest, if you
take on the right non-exec he or she should be broaching
the subject of change or stopping if they cannot see how
they are going to continue to add genuine value

Part 3 - How do I go about finding the right
non-exec for my business?
This is the question that prompted me to set up NXD in
the first place. When I left the corporate world at the end
of 2007 I started getting involved with some SMEs for the
first time in my career (prior to that I had only ever worked
with and for large businesses), and the thing that hit me
like a bolt of lightning was the value that a relevant,
experienced business leader could provide to most SMEs
by spending a small amount of time but over a long time
period working as a non-executive. The problem was, if
you were an SME owner/MD/CEO where could you go to
get such a ‘beast’? For most the choice was to a
recruitment company and pay a handsome fee; to a friend
or member of the family; or make do with getting some
advice from an existing professional service provider –
none of which (as we shall cover) really provide adequate
results.
There was however an even more fundamental hurdle to
overcome which was the fact that very few SMEs even
thought about taking on a non-exec. The general view
was, and to a degree still is, that non-execs are expensive
luxuries for large businesses and not relevant to small
businesses. So when I formed NXD I knew full well that
the initial challenge would be to even get small business
owners to consider taking on a non-exec; but unless
someone put a sensible, practical and cost effective
means of small business finding the right non-execs for
them, then this situation would never change. Thus NXD
was born.
So what are the do’s and don’ts of finding the right non-
executive director or advisor for your business:
 Do make sure you are clear about whether you
want a director (i.e. formal appointment to the
Board) or advisor. If you decide to take on a
director, that individual will have legal
responsibilities and will want and need to have
access to detailed information about the finances
and other aspects of your business. Also, the
Inland Revenue regard non-executive directors as
employees of the business and will therefore
expect Employers NIC to be paid. If you appoint
someone as a Board Advisor it is a less formal
role, that individual will still want to satisfy
themselves that you are operating legally and
everything is above board, but there is no formal
appointment, no need to add them to your list of
directors. Furthermore the legal obligations and
responsibilities, and the position with the Inland
Revenue, are different. If you are going down the
Board Advisor route it is better to deal with the
Advisor’s limited company and if necessary take
advice from your accountant/lawyer as to the
best way to structure things.
 Do be clear about what you expect from your
non-exec both in qualitative and quantitative
terms and make sure you clearly articulate this to
him or her. This will help you both to work out
whether there is a good fit or not. If you do this,
the non-exec should give you a clear view of
whether in his or her belief it can be achieved or
not which will help you decide on who to engage
with and whether or not to alter your
expectations.

 Do get someone to help you find the right person.
There are various organisation out there who can
help you, many are recruitment companies or
similar and will charge you, others like NXD will do
it free of charge and others still at a nominal
charge. Clearly you need to be careful not to
spend money on this unnecessarily but, and it is a
very important but, the cost of getting the wrong
person on board is likely to be much higher in the
long run. I am sure some people will believe they
can do it themselves, but unless you are an
experienced recruiter of non-execs with a large
pool of suitable candidates from which you can
choose and a slick and efficient process that you
can use to evaluate and short-list them, you are
highly unlikely to get close to engaging the
optimum person for your business – and even if
you do it will probably be at huge expense of your
own time. The fact of the matter is, if you can get
someone to do a lot of the work for you and if that
someone has a large pool of good people to
choose from, it becomes a rather compelling
proposition to use them; and if that someone will
do it either completely free of charge or for a
nominal sum it becomes a bit of a ‘no-brainer’. A
side benefit of getting someone else involved is
that they will help you in your deliberations about
what profile of person you want to search for.
 Do make sure that you check the personal
chemistry fit. First and foremost with yourself, but
also in relation to your company culture and other
key individuals with whom the non-exec is likely to
interact directly with. What I am not saying here is
‘bring in more of the same’ or ‘don’t rock the boat’,
what I am saying is be aware if you are bringing is
someone different or someone who will rock the
boat - by all means do it if that’s what’s right for
the business, but do it deliberately and in any
event remember that you have to be able to work
with that person effectively.
 Do look for someone with a great attitude and
outlook ahead of someone with a great track
record and qualifications. If you handle the
process properly you should only agree to meet
people who have a sufficiently good track record
and the qualifications you require to suit your
needs, so actually when you meet people it
should be to test out the softer things such as
personal chemistry, but also to understand what
is motivating them to work with you and what
’gives them a kick’. Someone with good skills
and experience and a real desire and belief they
can help you achieve your objectives will deliver
more to you and your business than someone
with superb skills and experience that is primarily
interested in demonstrating his or her excellence
and earning fees. Particularly beware of those
that are living off past glory.
 Do look for someone who is practical and down
to earth and be careful of people who like to sit in
‘ivory towers’ away from the ‘muck and bullets’.
The reality is that unless all you are looking for is
a figurehead, the non-exec can only add proper
value if he or she gets properly involved in the
detail of the business and will engage with you
and your team on your terms. There are some
people around who have great senior level
backgrounds but have forgotten how (or are
simply unwilling) to ‘lower’ themselves to deal
with real down to earth business issues and
there are others that have simply become
bureaucrats and everything is about meetings
and reports – these people may still have a value
in the corporate world, but they certainly don’t in
the SME world.
 Do not engage a non-exec purely for his or her
contacts. It is a perfectly legitimate part (part
being the operative word) of a non-exec’s role to
help open doors you would not otherwise be able
to open, but if that is all you want them for then
be fair, don’t try to dress it up as a non-exec role,
go out an engage what you really want – a sales
consultant or a part time sales director. Most
non-execs will be willing to use their contact
networks to support a business with which they
are involved, but only where the business values
the wider input of the non-exec and only when
the non-exec is confident that the business
concerned and its products and services are of a
standard that he or she is comfortable to be
promoting.

 Do not engage family or friends as your non-exec.
There are all sorts of issues involved when
working with family and friends because the
relationships are not purely at a business level. In
family owned businesses these issues are almost
by definition unavoidable (indeed a significant part
of our business in NXD is helping family owned
businesses deal with these issues more
effectively), but do not compound the problem by
appointing a non-exec who is family or friend. One
of the key aspects of a true non-exec is
independence, and you only get real
independence when you bring in someone you
don’t know.
 Do not close your mind to the possibility of
appointing a non-exec from outside of your
business sector – I not saying do it, I am saying
don’t rule it out. This is an interesting topic, I
guess the vast majority of businesses we come
across that want a non-exec are adamant they
want someone who understands their business
and its products, services, market and customer
base intimately. There tends to be a view that they
don’t want to bring someone on board who they
have to effectively train up, they want someone
who can to coin a phrase ‘hit the ground running’
– and in many cases this is absolutely right for the
business concerned. However, depending on the
rationale for bringing a non-exec on board, there
is a counter argument that a non-exec from
outside of the business sector concerned can add
value by asking the stupid questions that no one
else will ask, but that desperately need asking. It
is also a fact that some SMEs primarily need
someone who can help with business process
rather than content; and a further fact that one of
the major advantages of a non-exec is the fresh
perspective that they bring to a business. One
final point, whether or not you end up choosing
someone from within or outside of your sector as
your first non-exec, for those businesses that go
on to grow substantially, when the time is right to
take on a second there becomes a very strong
argument for having one with and one without the
specific sector knowledge/background.
 Do not expect your non-exec to take on executive
duties. I know this is stating the obvious, but you
would be amazed how often we come across
organisations seeking to do exactly that. It’s one
thing to be a practical, hands on non-exec which
I am absolutely in favour of and even to end up
on odd occasions ‘doing’ rather than just
‘advising’, but you must remember that the real
value of a non-exec is someone that sits on the
edge of your business, someone who can see
the wood from the trees, and someone who
guides, encourages and motivates the executive
team to get the job done. If what you really want
is a part time executive not a non-executive, then
go out a part time executive.
 Do not look for perfection. There is a balance
here, by no means should you just accept
whoever comes along first or is easy to find, but
at the same time if you get overly fussy you will
end up never making the appointment. The fact
of the matter is that you can never be 100%
certain about anyone until you have actually
started working with them and can start to see
what kind of person they really are and what they
can deliver in reality. So, be confident in your
own mind that the person is a good fit and there
are no fundamental ‘chemistry’ issues and don’t
enter into any kind of arrangement that would be
difficult to get out of until you have got to know
the person and their capabilities.
 Do not limit yourself to local people. It’s more
important to get the right person than to engage
a non-exec who lives close by. Typically, if you
are looking for someone to help with your
general business process then you should be
able to find someone reasonably local, but if you
are looking for someone with a very specific set
of skills and experience you may have to engage
from further afield. Either way, I repeat, it’s better
to get the right person than minimise travel costs
– and given that a non-exec by definition is only
spending a small amount of time with you, it is
both practical and affordable to make distance a
secondary rather than primary consideration.
To conclude this section of the book, let me detail a
few of the more important qualities that you should
look for in any non-exec: high level of integrity, clear
leadership skills, sound judgement, good listening
and communication skills, an individual who is
intelligent, responsible, flexible and resilient.

Part 4 – What role can I expect my non-exec
to play?
To a large degree the role you get your non-exec to play
will be dependent on your specific needs and
circumstances and these will vary from business to
business and may change over time, so what I want to
cover here are areas that you could expect a non-exec to
cover. In reality you can expect your non-exec to have
some involvement in most if not all of these things, but
you will select the ones that are of greatest importance to
shape the role to your needs.
At the highest level I think one can define the role of a
good non-exec as someone who can ensure that the
business has a good and workable strategy backed up by
the resources appropriate for the strategy and with a
business process capable of delivering the strategy. The
non-exec can also be expected to add value as a wise
and confidential sounding board; an independent member
of the board bringing fresh thinking; and an aide to the
executive team.
Let’s look at some of the specific roles in more detail and
for this I am going to use the findings of a survey of 3i-
backed CEOs across Europe. Whilst this was undertaken
back in 2002 and by definition only includes businesses
that have received venture capital investment, I still think
the findings are interesting and relevant.
In answer to the question: “In your company, in which of
the following areas are non-executive directors principally
expected to perform a role?” the following responses were
recorded
78% - Strategy of the business
62% - Board appointments
56% - Remuneration policy
50% - Investor relations
46% - Strategy of the ownership
46% - Financial strategy
45% - Financial controls
34% - Coaching the executives
30% - Fund raising
28% - Risk management
13% - Human Resources policy
12% - Finding new customers
11% - Technical input
5% - Other
A follow up question in the survey was: “What skills,
knowledge and attributes do you principally look for in a
non-executive director?” - it received the following
responses
78% - Independence/willingness to speak their mind
72% - Experience in running a business
45% - Good network of investor/financial contacts
40% - Good network of business/non-financial contacts
40% - Experience in the same business sector as your
company
38% - Interpersonal skills
35% - Pragmatism/ability to find a compromise
30% - Intellect/qualifications
24% - Financial/accounting skills
3% - Other

I think these survey results say just about all that needs to
be said without further comment, they encapsulate the key
roles and attributes of non-execs and certainly helped us
shape the criteria for eligibility of membership of NXD. I
will therefore finish this section with some further words
that describe other possible roles of a non-exec:
counsellor, adviser, devil’s advocate, sounding board,
mentor, supporter, connector, stimulator, tactician,
questioner, substitute, intervener, peacemaker, catalyst,
advocate, expeditor, facilitator, partner, nurturer, script
writer, discipliner, teacher, confidante, challenger, warner,
and more.
Part 5 – What benefits can I expect from a
non-exec?
Hopefully having read the book to this point you will know
that the potential benefits are many and varied and
specific benefits will be dependent on the business, its
circumstances and objectives and role(s) you have bought
the non-exec in to fulfil. I can however detail some of the
more common benefits that should be experienced in
most if not all cases:
Financial – frankly unless your non-exec is delivering
some financial benefit well in excess of their cost, you
should be questioning their role in your business.
Sometimes the financial benefit may be in highly tangible,
easily quantifiable, directly attributable things, other times
it may be much more subjective, difficult to calculate and
indirect. Either way you should expect your P&L to be
benefitted by a non-exec not damaged by it.
So, cost reductions and sales increases resulting directly
from advice or introductions from your non-exec are easy
to recognise and quantify, but others like a more focused
and effective strategy and a more co-ordinated
management effort may actually be worth far more but the
value may be hidden in the overall company results and
you will therefore have no alternative but to estimate the
value-add from the non-exec.
Strategic - I cannot think of circumstances where a non-
exec would not be expected to be involved in the strategy
of the company concerned. As the survey above showed
it is the most common role for a non-exec to play and it
makes total sense for the person one step removed from
the day to day running of the business to add real value
in terms of strategic input.
Quite often our non-execs are engaged specifically or
primarily for their ability to help with strategy, and this
tends to be at one of three levels (again as borne out by
the survey results): overall business strategy, ownership
strategy or financial strategy. Developing a good strategy
requires an interactive process, it requires sound
knowledge, good experience, fresh ideas, open
communication and constructive challenge. It’s very
difficult for a business owner to do with his management
team unless he has built a proper board with people
senior and experienced enough and sufficiently
confidential and trustworthy to play their role. The reality
is most business owners either don’t have a clear
strategy or they have one that is purely based on their
own ideas and thoughts.
One of our most recent NXD roles is for a non-exec to
help a digital marketing company develop a strategy for
their business for the next 5 years. The owners (of which
there are 2) have been operating profitably for a number
of years but with no real growth or direction and entirely
within a narrow market sector that leaves them
vulnerable to any changes that may occur in that sector.
Some recent changes scared them into realising they
needed to do something and whilst on this occasion the
changes turned out to be if anything beneficial to them
they know they have to develop a realistic and robust
strategy for their business or one day everything they
have worked so many years for could be lost. This first
step of developing a clear business strategy is now
leading them to consider whether they should start
considering an exit strategy also.

More and more we are getting called into family
businesses to help with succession planning and the
related ownership strategy. Sadly many family businesses
never seek help and independent advice and never really
question the inherent strategy that seems for so many to
be that of passing it on to the next generation – and all too
often this ends in disaster. The failure rate of established
family businesses remains alarmingly high and yet a non-
exec and an accompanying questioning process focusing
on ownership strategy and succession planning could
avert most disasters to the benefit of all concerned. This is
an area I am passionate about and I have a plea that if
you are a family business owner and you are thinking
about or actually approaching the point of handover to the
next generation, please get an independent non-exec
involved, it will pay for itself many times over and may just
prevent yet another total disaster.
Management – MD/CEO/Business Owner is a very lonely
position, I know, I’ve been there. The fact is when you are
at the top of the organisation you often have to deal with
things that you cannot discuss with anyone else in the
business. Sometimes it’s because of confidentiality,
sometimes because it might ‘spook’ others, sometimes
because it directly affects others, whatever the reason you
often end up with no one to chat it through with. One of
the biggest benefits a non-exec can provide is that person
to be able to chat anything through without fear of
repercussion. Often just talking about it to someone helps,
but a non-exec can also provide wise counsel and play
the devil’s advocate role as well as that of a sounding
board.
The benefit a non-exec can bring to the management of a
business is not however restricted to helping the
owner/MD, a non-exec can play a valuable role working
with the whole board/management team. The presence
and input of an independent in the management team
usually automatically brings benefits. In any
board/management team, the individual members of the
team have their own agendas. A good independent non-
exec can help in any or all of the following three ways:
they can help to align agendas, getting the various
individual agendas to point in a similar direction by using
influencing skills, tact and diplomacy; they can help to
emasculate or eliminate personal agendas by introducing
sufficient structure, formality and records to prevent
‘rogue’ agendas from causing havoc; or where all else
fails, they can ‘out’ personal agendas and get them in the
open so at least they can be dealt with even if it gets a bit
‘bloody’. If you look at any successful high profile leader,
they always have a trusted supporter who quietly handles
a lot of the people issues that would otherwise become
damaging – and so it should be with an SME business
leader. This applies even more so to family businesses
where there are a number of family members involved in
the management of the business – the propensity for
personal agendas to run riot is even greater.
Planning – a non-exec should always add value to the
planning process. In some businesses it may be to
instigate an effective planning process in the first place,
in others it may be to improve what’s already there and in
others still where there is already a robust and
professional process in place, it may simply be to add
some input and experience.
Process – many smaller business lack a good basic
business process, by the same token one could argue
some large businesses are too process driven. A non-
exec in an SME should be expected to help build
sufficient process into the daily business routines to
increase efficiency and reduce the risk of serious error or
omission.
Performance – one would normally expect a non-exec to
positively influence performance in the business.
Performance is the output from doing a number of other
things, ultimately the quality and effectiveness of the
strategy, management, planning and process in the
business will feed through into its performance.
Risk – a non-exec can help with the whole issue of risk
both through their own personal experience as well as
through helping to get a process in place which puts ‘risk’
on the agenda. You can split risk into two categories,
fundamental on-going risks to a business that need
continual monitoring, and ad hoc risks that crop up from
time to time which need to be identified and addressed
when they occur. Simple examples of on-going risks are
things like health and safety, human resource issues, in
some businesses even cash flow. Ad hoc risks tend to
come externally (although not exclusively) and can be
things like a competitor’s pricing or some form of
legislative or regulatory change. Members of the
executive management team can often get so absorbed

Story Title to be added here
in the day to day running of the business that they fail to
notice risks until its too late, a non-executive is not
burdened by the day to day worries and will often fulfil the
role on the board of ‘custodian’ of risk.
Image – the final generic benefit of a non-exec that I want
to cover is in the area of image. A good non-exec with
gravitas and good presentation and communication skills
can significantly enhance the image of a small business.
Customers, suppliers and funders will all gain some
comfort and confidence from a clearly senior business
professional being involved with the company. It inherently
improves the standing and image of the company in the
eyes of those around and can be crucial in gaining new
business or improved terms or needed additional financial
facilities. On occasions this benefit can add weight to the
argument for engaging a non-exec with relevant sector
experience – a known heavyweight in a specific sector
can sometimes be the key to gaining a contract with an
important new customer or attracting investment to enable
the next stage of growth.
Part 6 – Conclusion and Summary
I guess now is the time I need to question whether I have
succeeded in my objective of getting you to view non-
execs as potentially relevant and affordable to you? I have
always found it much easier to do this in a face to face
discussion than through the written word – indeed when I
talk it through with people they normally ‘get it’ quite
quickly. My hope is that this e-book will stimulate enough
interest for you to at least drop me an email or give me a
call so that we can explore the relevance to your particular
situation.
Let me therefore try to draw some conclusions and
summarise some of the key points:
I think it is clear that non-executive directors or board
advisors can be relevant to small businesses, indeed they
are likely to be relevant to most small businesses
providing there is a good match between the business and
the individual non-exec.
I think it is also the case that a non-exec can be made
affordable to virtually any PAYE based small business by
using a mix of sensible pricing, limiting the time involved
(especially to begin with) and on occasions using
success based reward for the non-exec.
As far as where one goes to find one and the whole
selection and engagement process, this is where NXD
has opened everything up by providing a matching
service which is normally free for the recipient company,
designed to be as user friendly as possible, and founded
solidly on the principle of creating/adding value to the
company concerned.
Perhaps most important of all, I hope that the sheer size
and variety of the benefits available to small businesses
as a result of engaging a non-exec make this a
compelling proposition to explore further. Few small
businesses have everything ‘buttoned down’, most have
areas of weakness, concern or pain and most have learnt
to live with them rather than deal with them – this is the
opportunity to deal with them.

Biography
15
ABOUT THE AUTHOR
Stephen is the founder and managing director of NXD,
having taken it from an idea back in late 2007, to reality in
late 2009, to its current state of being a significant and
growing national presence in the area of providing non-
executives, part time executives and investing directors
into the SME sector.
NXD is a membership organisation comprised of current
and former Managing Directors and Chief Executives who
are committed to building portfolio careers helping small
and medium sized organisations achieve their goals and
realise their full potential. It is an organisation committed
to creating value rather than exploiting value and is
capable of providing support to any SME in any sector in
the UK and on occasions beyond.
Stephen’s background before NXD was in supply chains
and logistics where he has many years of practical senior
level experience. He has been on the boards of large
retail businesses and managing director of 2 national
logistics companies. He has provided logistics and
supply chain solutions to many leading companies both
in the UK and Europe.
Stephen continues to devote some of his time to the
logistics sector, but through his activities with NXD has
really enjoyed working across diverse sectors with small
and medium sized organisations generally and especially
with second, third and fourth generation family owned
businesses.
To contact Stephen – stephen.barter@nxdservices.com
Stephen Barter
Founder & Managing Director of NXD

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