Top tips for becoming a good non-executive director

By Parmi Natesan and Prieur du Plessis

Any lingering doubts about the importance of having the right people on the board have surely been laid to rest by the reports of the Zondo Commission.In response, expect greater scrutiny of the credentials of non-executive directors (NEDs) and a more definite move towards professionalisation, something the Institute of Directors in South Africa has been advocating for quite a while.

In that context, people with aspirations to be an NED need to take a strategic approach ̶ those with the correct competencies should find themselves at the top of the list. Based on our joint experience in being NEDs and in training them, here are the main things for which search committees are looking:

Personal qualities

The Chartered Governance Institute UK & Ireland sums up the qualities an ideal NED must possess: “Effective non-executive directors question intelligently, debate constructively, challenge rigorously and decide dispassionately.” These interpersonal skills need to be supplemented by a considerable degree of courage; courage to challenge the cosy consensus that can often develop on a board and also the pressure of vocal external stakeholders.

NEDs are particularly valued for their ability to take a strategic, long-term view of any issue ̶ a vital balance to the executive directors who are involved in the day-to-day minutiae of running the company.

Above all, one might argue, an NED must possess a strong moral compass in order to negotiate complex issues, manage conflicts of interest and maintain a focus on the organisation’s best interests.

Business knowledge and skills

These skills were traditionally gained from a career in business, but as directorship becomes professionalised they will have to be actively acquired. They include a high degree of financial understanding and acumen – certainly the ability to analyse financial statements is non-negotiable. Deep knowledge of the relevant industry sector is a big plus in helping an NED to provide the big-picture thinking an organisation requires. It goes without saying that an NED needs to understand thoroughly how a business runs.

Leadership is an important skill. We list it here rather than under personal qualities because knowing how to lead a business is rooted in experience rather than personality per se. Former CEOs or senior executives are in pole position provided they understand that their role is now to make the CEO a successful leader.

Also, NEDs need to understand how performance management works and how to oversee a framework of management controls with an appreciation of risk.

Governance understanding

Directorship is ultimately a governance role, and NEDs must have a deep understanding of what governance is, and how it works. Obviously they must have a current understanding of governance codes and legal frameworks, as well as meeting procedure. NEDs must never confuse governance with execution – the latter is very much the province of the executive.

Time

The director’s role has been growing in complexity as more regulations have come into force. NEDs need to have the time to spend on doing a good job – a general estimate is 1 to 3 days a month. NEDs also need to be flexible enough to give more time in the event of a crisis. Be aware that new directors will have to give more time while they learn the ropes.

Willingness to investigate

NEDs will always know less detail about the company than executives, who spend all their time there. NEDs must assume responsibility for looking beyond the board pack, developing other sources of information to assist in making rational business decisions.

Once a prospective NED has understood what the role requires, the next step is to undertake an objective assessment of how well he or she fits the mould. Care must be taken to distinguish between a successful career as an executive and what the NED must do.

If it’s all systems go, you would be well advised to build a visible “NED personal brand”. This could entail heightening your presence on social media and other channels, such as active involvement in the professional body for directors. Embarking on the journey to achieve one of the IoDSA’s director certifications is an excellent investment too.

Finally, when you are eventually approached to join a board, do not omit to undertake a thorough due diligence of the company. Having gone to all the trouble of making yourself NED worthy, it would be a pity to associate yourself with a suboptimal organisation!

NEDs have a huge contribution to make – prepare yourself properly for a worthwhile career.

Parmi Natesan and Dr Prieur du Plessis are respectively CEO and facilitator of the Institute of Directors (IoDSA); email: info@boardgovernance.co.za

Parmi Natesan		Dr Prieur du Plessis