Getting NEDs Up-to-Speed

“As a new non-executive director there are so many things that you need to be involved with from day one; you need to hit the ground running. You should make sure you get up-to-speed as quickly as you can,” says Geraint Anderson, Non-executive Director at Premier Farnell.

“You’re not expected to know everything but you have to contribute. Every company has a different rhythm, pulse and way of communicating. You need to understand that to add value. Each chairman will run things differently as well.”

According to the UK Governance Code, the chair of listed companies should ensure that all directors receive an induction that is ‘full, formal and tailored’ when joining a board. Beyond that, there is a lack of practical advice on how to achieve this and room for interpretation.

Criticaleye spoke to non-executive directors and advisors in order to answer some of the questions about the NED induction process and reveal others’ experiences.

1) Why is it important to get the induction process right? 

Geraint Anderson, who is also a NED at manufacturing company Fenner, joined the board of electronic products and repair services Premier Farnell in November last year and is currently going through an induction process, which he says has been comprehensive.

“The induction process is very important. Going into that first board meeting with some sort of visibility of the business apart from what you can read, getting out and meeting as many of the team as possible, is hugely important – it gives you a much better perspective,” he explains.

“At the first board meeting I felt a lot more comfortable knowing a lot about the business, rather than just reading board papers – it helps to build context and enables you to contribute more.”

2) Which key colleagues should you build relationships with?  

In order to create the right boardroom dynamic, it’s vital to build relationships in those first few months. Julia Fearn, Director at executive search firm Warren Partners, says: “A NED will want to make an impact quickly, but they need to establish key relationships and earn respect before they jump in with both feet.”

Alison Carnwath, Chairman at FTSE 100 commercial property company Land Securities, notes some of the key relationships that need to be developed and the information that should be shared: “The company secretary should kick off proceedings by providing the legal framework. HR should provide the organisational and talent outline and, for those members of the remuneration committee, how these schemes work.

“The CFO should provide management accounts, medium-term plans and, for audit committee members, the key issues relating to the annual reporting cycles.”

A NED’s relationship with the chairman and CEO is fundamental. Looking at the role of each, Alison comments: “The chairman should provide details of succession plans for board members and executives, go through board effectiveness reviews and shareholder feedback, as well as critical strategic matters. They should also explain the workings of the board and set a warm, friendly, open tone.

“Then the chief executive should spend time answering questions and outline how they expect NEDs to contribute, both in and out of the boardroom.”

Geraint adds that it’s also important to approach to a variety of individuals: “Don’t just speak to the CEO, CFO and fellow board members. Spend time in the field talking to a wider group of executives.

“I enjoyed getting a different feel for the business from various individuals and now I understand how they can be of more benefit to board meetings. It was great to show you are a real person, with real experience and spend meaningful time with them.”

Tom Beedham, Director of Programme Management at Criticaleye, comments: “While it should be controlled by the chairman, all the other key non-execs and executives should be involved and take part.

“If you’re going to be an effective non-executive director you need to have a deep understanding of the business and the personalities within it, so you can ask the best questions, provide the best input and be trusted as a valued member of the team.”

3) How long should it last?

The larger and more complex the company, the more detailed and longer the induction will be. Tom notes:  “If the company is spread wide geographically, I would recommend that non-execs visit the key regions; that might take time and effort. The NED will have to get up-to-speed quickly, particularly if the company is heavily regulated, such as in financial services and the NED doesn’t come from that sector.”

Geraint says: “It could take six months or 12 months but I don’t think you should put a firm time on it. It will take a while to go through that process and no one should say that after a handful of meetings you’re fully inducted.

“My induction process is still ongoing at Premier Farnell. It will take a few more months – I have more people to meet and need to build a better picture. The first wave was helpful but I expect more to come over time.”

Alison echoes this point: “Businesses do this in different ways – some have sessions that are not board agenda items, such as training after meetings. The process should be relatively formal and the chairman should keep an eye on how it is going by checking in with the NED.”

4) What is the NED’s responsibility during the induction process? 

It’s as much up to the NED to help steer the induction process as it is the organisation to deliver it, according to Julia.

“NEDs should ensure that an appropriate induction programme is in place and need to be clear on what a good process looks like. They should build an external network in order to benchmark their induction against other organisations,” she comments.

Geraint adds: “It’s the NED’s responsibility to let the chairman know if there is anything they are uncomfortable with. If there are areas you want to see or people you want to meet, you need to make that happen.”

By Dawn Murden, Editor, Advisory

Do you have a view on this subject? If you have an opinion that you’d like to share, please email Dawn at: dawn@criticaleye.com

Paul Brennan, Chairman of cloud management software solution company OnApp, will share insights about his career at Criticaleye’s next Aspiring NED Dinner

https://twitter.com/criticaleyeuk

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