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Article:

The Diary of an SME NED: 6 things you should know when you step into the space

15 May 2018

We asked John Shinnick, a portfolio non-executive director and Coach-Mentor-Adviser for his view on some of the challenges facing NEDs with roles in a SME.

Oh, if I could only find an analogy to compare a FTSE or big Civil Society NED role with working as a NED in the SME space, I would be a happy man. The closest I can get is comparing Premiership and Non-League football – SME NEDs can occasionally find themselves washing the kit or scouting for new players.

I currently have four non-exec roles: three are SME and one is big Civil Society and I see the contrast between the two types of role on a daily basis.

To me, the SME NED role is delivered down three strands:

Oversight

Being in touch with and commenting on what is happening in the business; financial and non-financial KPIs, cash flow, business development tracking, R&D and change management processes. This is information that the NED should be able to access directly as it may not come out automatically.

Governance

Providing guidance, advice and mentoring to the Board as a group. Holding the Board to account when needed, prompting and supporting the Board members to work to a common purpose and following through on decisions that have been taken. This is not dissimilar to a big company NED role.​

Intervention

At times, standing in to support the Board; project managing a change event, leading a funding process, researching and resourcing business process change or perhaps a software change. It is moving into the executive space to intervene and then passing over the ongoing leadership of the issue or opportunity to the executive team.

In summary, it is being as committed to the performance and future outcomes of the business as the executive team are.

6 things you should know when you step into the SME space

1. Marriage

There is a temptation to take on a NED role in haste; you want to start the NED journey and you want to be that NED. Perhaps, take a step back and have a proper courtship. What does that mean?  Get to know each other.  Agree what you each want from the relationship. Find out how you would handle a falling-out. If you are taking on a statutory role, think about working on an advisory basis for 3 months before signing up - treat it as a probationary period on both sides. I have recently signed as a statutory director where I have been a ‘non-exec advisory’ for 15 months - we really know each other well now.

2. Groupthink

Believing that you have a diverse Board may not stop faulty decisions being made because “group pressures lead to a deterioration of mental efficiency, reality testing or moral judgement” (Irving Janis, 1972).  Be the independent thinker who is a step away from the pressures and can call out opinion dressed up as fact.  You may be the only independent, unpressurised voice.

3. Intervention

We all have read definitions of a NED: independence, dispassionate critique, not executive. I get it and I see it in my Civil Society role but in the SME space, it is more likely that you will intervene. Be clear and vocal when you see what needs to be done and be prepared to follow through on your thinking.

4. Network with a mindset

I network a lot. Not to gain assignments, although it does keep me out there, but to gain understanding. What is new? Who can deliver? Who is reliable? In the past two years, I have found lawyers, planners, tax advisers, accountants, content writers, digital specialists, researchers, coaches and recruiters for my non-exec clients.  My clients joke about me being able to find the right people to resolve issues but they know that being able to do this isn’t chance.

5. Coach-Mentor-Adviser

This is a good way to think about your SME NED role and is how I frame my broader offering. For example, in a morning with a NED client, you may help them to resolve an issue, guide them using your experience or roll up your sleeves and work with them to sort an issue. Coach-Mentor-Advise: it’s a continuum.  

6. Be a good guest

Good guests are like fish: they go off after three days.  You are in your NED role helping the business to grow and improve. You are absolutely what they need – for now but not, perhaps, for always. Recognise that and test yourself periodically against whether you are still fit for purpose. Be appraised by your Board. Look for feedback.

There you have it, a personal view on being a NED in the SME space. I am often asked are four roles too many? I don’t think so. I was a partner in an international accounting firm and had twenty key clients. I now have four and have room for one more. My committed time is 5 days a month but one of my NED clients is always doing something which expands the time. I love the variety.  My wife will whisper to me some mornings as we wake. “who are you today?” and I may whisper back “I haven’t decided yet”.

John Shinnick is a Chartered Accountant, NLP practitioner and EMCC Coach-Mentor. In his Coach-Mentor practice, he coaches into the FTSE and into professional partnerships. He can be contacted at  [email protected]