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Why Non-Executive Directors? – Laura McHarrie, The Hidden Edge Ltd

A non-executive director is one appointed to the board who is not affiliated with the company in any other capacity nor is s/he involved in the management of the company.  Your board may only be you and your ‘other half’ – if so, a non-exec is probably more important in its outsiders view on your growth strategies.  A Non-Exec has the same legal responsibilities as you, the executive directors: that is to:

1.  Lead with effective yet prudent controls

2.  Assess and manage risk

3.  Ensure the company has the resources to meet the demands of its business growth strategies

4.  Assist with creating and upholding company values and standards

A non-exec can benefit a small business in many ways, not least in his or her capacity to lend an objective view on growth, finance, risk and people management.  Good governance will support those seeking bank lending or private equity financial investment.  For a small company, I would recommend a one-two year contract with the option of renewing.  This allows a small company to bring in a non-exec with a different profile/experience as the company grows.  What profile you require will depend on where you are in your growth stage.  See Greiner’s Growth Curve.

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Here are 10 key questions to consider when appointing a non-exec.

1.     What operational experience do they have at board level and at what size of business?

2.     Do they have a business reputation for independency and integrity?

3.     How extensive is their network of contacts?

4.     Do they understand figures and finance?

5.     Will their personal style enhance the existing management team or fill any gaps?

6.     How good are their mentoring and facilitation skills?

7.     Will they challenge strategic changes positively and constructively?

8.     Do they have resilience and capacity to follow through to completion?

9.     Can they manage the executive team to deliver timely performance reports?

10.   Above all – do you feel you can trust them?

Further reading: Link to FSA code of conduct.

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Laura McHarrie is a non-executive director of a growing e-commerce media company.  She assists business start up companies find the funding they need to set up and mentors them as they grow.  She is a qualified trainer, delivering workshops on business growth strategies, interpersonal leadership skills and business maths and finance.

Contact information: laura@thehiddenedge.co.uk : 07962 626604 :  www.thehiddenedge.co.uk

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