Small firms see the benefits of an in-house outsider

A small company seeking to boost sales will try many tactics. Recruiting a non-executive director is unlikely to be one of them.

However, smaller companies are at last becoming aware of the benefit of an experienced pair of hands, TEN says. And the recent round of corporate scandals has led to a growing pool of people wishing to help them.

Some experienced business people are beginning to see smaller companies as a better prospect,” says William Montgomery, CEO of TEN, the UK’s leading performance improvement network. “Not everyone wants the risks and the liabilities that come with corporate companies. Smaller companies no longer see non-executives as an issue for the big players only. They are thinking what could one do for my firm?”

The answer is a large number of things, according to Montgomery. “They can offer extra expertise in finance, marketing or sales and provide networks and good contacts,” he says. A non-executive director can also give specific support in a flotation or an acquisition, steer a company through a difficult patch and warn against measures that may harm a business, such as over-trading.

In a family firm, they can resolve disputes by providing an opinion – and a vote – that is free of emotion. Their ‘helicopter view’ of the business can also prove invaluable.

Research indicates the value of non-executive directors. A recent study by Cranfield School of Management into the exit value of companies pinpointed a non-executive director as the main variable in boosting profit.

However, benefits result only for businesses that understand the relevance of a non-executive director and recruit one in the right way. “It is vital to have a clearly defined role for him,” says Montgomery. “Look at the business and see what is missing that it cannot fulfil for itself. Then you will be adding value with a non-executive director.”

That approach also makes it easier to assess the director’s performance. “If the brief is clear it will be clear when they have fulfilled it and that they have given their money’s worth,” Montgomery says.

Good chemistry between the non-executive director, the company and its people is vital. So is starting with ground rules to make clear what lines the director cannot cross, so lessening the risk of ill-feeling or disputes.

What about remuneration? Experts are divided on this. Some say that handing over a share of the business is an excellent incentive and will attract a higher calibre recruit. Not so, says Montgomery. “Giving over a shareholding is not a good idea,” he argues. “It gives the non-executive an agenda when they should be independent in every way.

Fees, which run from £5,000 a year to £30,000, should not be seen as an unnecessary cost, according to Montgomery. “It can be one of the most valuable investments you make for you company, he says.

For more information visit askten.co.uk, email mail@askten.co.uk or call +44 117 325 2010. For an interview with William Montgomery please contact Melissa Neill at HYPR on +44 845 347 0027 or email her at melissa@hy-pr.co.uk.