Journey to NED
For many CFOs, taking on a non-executive director (“NED”) role will be the logical next step in their career but before embarking on this journey careful consideration needs to be made to make sure they don’t fall at the first hurdle. At our recent CFO Network event, we invited an esteemed panel of speakers, to share their own experiences and provide their insights into the rewards and challenges likely to be encountered.
Chaired by our own Chairman, Nick Owen, the panel comprised of:
Mark Williamson – Chairman of Imperial Brands and Spectris and Audit Committee Chair of National Grid.
Lucinda Bell – CFO of British Land and Non-Executive Director and Audit Committee Chair at Rotork.
Sandra Schwarzer – a member of Russell Reynolds Board Directors and Chief Executive Officers practice, specialising in non-executive director roles in the UK and Europe.
To set the scene, CFO to NED is a well-trodden and familiar path – 79% of FTSE 350 CFOs sit on their company’s board as an executive and that experience in the boardroom makes them a highly attractive NED candidate and sets them up well for a future portfolio career. Furthermore, in the FTSE 350, 27% of sitting CFOs have an additional board role for a quoted companyi. The most natural path leads to Audit Committee Chair where 72% of the FTSE 100 Audit Committee Chairs are ex- or current CFOsii.
Ask yourself why you want it
Sandra Schwarzer, who regularly interviews NED candidates as her role as head-hunter, says the first question for any NED candidate is “why do you want a NED role?” followed by “what do you want to get out of it?” Whilst those questions may be obvious, there isn’t always a simple answer and so definitely requires some serious thought before you start the search process. Do your research, talk to your peers and mentors and perhaps most importantly seek guidance from your Chairman and CEO early because you will ultimately need their support and backing or your aspiring NED career won’t get off the ground.
Lucinda reaffirmed the need to be absolutely clear for yourself as to why you want the NED role and then it is critical to get the support of your Chairman and CEO. She explains, “there is an ongoing conflict between your time commitments to your executive role and your non-executive role. You need a Chairman and CEO who is understanding and supportive of this. Furthermore, think about the impact to your personal life, can you really fit in a NED role and most importantly, will you ENJOY it? You really have to want to do it.”
Know what you can bring to the table
As an experienced Chairman, Mark made clear that these days the Board and Nominations Committee will already have a defined set of skills they want on their board so they will be looking for very specific skillsets, whether it be global experience, specific sector knowledge or even knowing how the City works in a global board – or a combination of all three.
Lucinda also explains that as a CFO or finance professional you should expect that the Chairman will invariably be looking for you to become the Chair of the Audit Committee further down the line so bear that in mind when you are thinking about where your NED journey will lead.
Once the search firms have been tasked with finding the right candidate, you need to think carefully about how you meet each of the Board’s requirements, so have an open conversation with the head-hunter because more often than not the candidates put forward to the Board hit all of their key requirements. It’s what you brought to and learned from each experience as much as the fact that you had it.
The interview process is very thorough and can take a long time – but it should be balanced
Gone are the days of the Chairman picking a NED and the process is over. Your skill set has got you in front of the panel and now it’s all about personality, character and strength of views. Mark likes to see how strongly a candidate stands by their views but beware because there is a fine line between confidence and arrogance. Ethics are also very important and getting a sense of the candidate’s ethical position in a range of situations is a good indication of whether they will “fit” in the board and organisation.
As a Chairman, Mark wants genuine diversity in thought and opinion on his boards to ensure problems are approached from different perspectives and avoiding the danger of “group-think”, but at the same time his job is to ensure there is the right chemistry amongst the members to achieve a productive outcome.
Sandra adds that strong candidates project themselves to be willing to sit in the role for at least the medium-term as boards are less interested in the short-term thinkers.
Mark warns that the process can involve many interviews and whilst every process is different, you could be interviewed by the whole board and you must remember that the interviews are a two-way street – you are also interviewing them. So it’s important to also do your due diligence and speak to the lawyers, auditors and brokers to get their views of the company and board.
For Lucinda it took a year from deciding she wanted a NED role to actually securing one. The search and interview process is very different to finding an executive role, “its ok to be open about your process and you should ask for views on the prospective company.”
What help is out there to get me match-fit?
There are many sources of support out there to help you along all stages of your NED journey. Consultancies offer help preparing your CV and board bios, creating your own portfolio strategy and even coaching for interviews. Likewise, mentoring programmes offer guidance from those who have been there before and of course your own board members can provide you with valuable insights and advice.
Whilst Mark didn’t use a consultancy when he looked for his first NED role he did enrol in a mentoring programme when he became a chairman, “It was an awesome experience. I had two mentors helping me, one year before becoming chairman and during my first year. It was fantastic to have people to bounce ideas off.”
What Lucinda found most helpful for taking on her first NED role was becoming a trustee at the University of Westminster. You really learn a lot from being on these types of boards and they help you hone your boardroom skills.
Sandra sees many candidates take on charity and NHS trustee roles which are tough and challenging in their own right but highly rewarding and ideal places for learning. And of course, typically there will be some very well connected, senior and experienced NEDs on these boards too so they are fantastic places to grow your network.
Lucinda also found her Audit Committee chair Transition Lab with Deloitte an invaluable experience to help her manage her new priorities and really take the time to take stock and think about how she will manage the next 12 months.
So you’ve got your first NED role but how do you navigate your way around the boardroom?
When about it comes to boardroom etiquette, Lucinda advises that you must be very clear you know which hat you are wearing, and demonstrate that you know the difference between an executive role and a non-executive role. Showing you have the ability to step away from an executive mind-set will stand you in good stead with the rest of the board, building your credibility and their confidence in you.
You will quickly discover that there is another layer of discussions that happen at the board level and as the new NED on the block, the induction process is crucially important to understand the ins and outs of the organisation.
Indeed, NED induction programmes are different in each company but in Mark’s experience building relationships is critical. Spending time with other board members, going on site visits, meeting the lawyers, understanding the company’s KPIs and strategy as well as simple things like learning the company’s jargon and acronyms all adds to the NED’s confidence and ability to add value, to contribute and to ask the right questions.
Be confident – they expect you to raise challenges and expect a response, it’s why you were appointed
Lucinda refers to a NED’s effectiveness as their “hit rate” – how many of their questions and challenges actually lead to action and change in the board or organisation? If a NED raises an issue does that trigger additional work streams for the executive team to investigate or explore?
So don’t be afraid to challenge, there’s no such thing as a stupid question (especially when you are new) but be constructive.
To maximise your influence in the boardroom it comes down to knowing the people around the table, what are their personalities and values? Observe and learn from how others interact with them and adapt your style accordingly.
For those that already sit in their company’s board as an executive, it is a great opportunity to observe the boardroom dynamics – “It’s a real skill to pick up on the dynamics and being able to read the room. Also seek feedback from the Chairman – ask what have you done well in the boardroom?”
At the other end of the scale, when NED appointments are not successful it often gets put down to the individual not having the right “fit” in the boardroom but what does this actually mean?
Chemistry is key
Sandra explains that sometimes the NED will not have thought carefully enough about why they want to be there or have not carried out thorough due diligence. Sometimes there are other board members they have come across in a previous executive life that they don’t get on with, and sometimes it is simply an irreconcilable clash of personalities.
It’s a challenge that the chairman is constantly monitoring. A strongly opinionated individual with big ideas and more of an edge, whether right or wrong, may make a fantastic NED on paper but could be seen as a threatening force to the executive team to the point where the atmosphere becomes counter-productive. Finding that balance in chemistry which fosters progression but also encourages challenge is key. So now you have a CFO role and a NED role, but how do you find the right balance?
Mark offers his observation that when you are a CFO you feel like the audit committee and the auditor are working against you but it became very clear, when he became an audit committee chair that actually, the objectives of the executive, audit committee and auditor are all completely aligned. Having that insight helps prioritise and manage your tasks in both of your roles.
It is simply a fact that there will be increased demands and occasional conflict in managing your time between roles, but to turn that on its head, it is also an opportunity for you to delegate some of your CFO tasks to your team more effectively. Giving them more responsibility allows them to step up while allowing you to focus on the most important agenda items and frees up time to do your NED role.
Trust is king
A supportive Chairman and CEO should see this as an opportunity for them too as you will be bringing your learnings from your NED role back into your CFO role which can only be a good thing. But trust is king – Lucinda and Mark both underline that there must be high degrees of trust between you, your team and your Chairman and CEO for this to work most effectively.
There is an acknowledgement that your executive role takes precedence over your non-executive role so being able to find that balance, and giving the right assurances to management that your CFO role is well under control builds that trust to no end.
Prepare. Navigate. Balance
Nick summarised the panel discussion with some top tips for the three key stages of the NED journey for the CFO to consider:
Prepare – Getting yourself ready
- Know why you want it – and project yourself for the long term
- It’s a two-way process – know what the board and company can offer you
- Be patient – it can be a long road to NED
- The first appointment is crucial – make sure you do thorough research and find the company right for you. Leaving your first NED role prematurely can seriously hamper your ability to find other roles
Navigate – Being a smooth boardroom operator
- Know which hat you are wearing at the table – it’s important you show the board you know the difference
- Read the room – understand the people around the table and spend time with them
- Ask the right questions – bring a fresh perspective and don’t be afraid to challenge
- Gain trust and integrity – with the board, with your chairman and CEO and with your team
- Enjoy it!
Balance – don’t forget your CFO role
- Get the support you need – especially from your chairman and CEO
- Delegate – finding your own balance through measured delegation of your CFO tasks will help
- Show what you’ve learnt – bring your NED learnings back into your CFO role. Show your Chairman and CEO how you have developed from this experience and what you can bring back to the company
ii Russell Reynolds Associates, FTSE Chairs: The origin of the species