A non-executive director is a member of a company's board of directors who is not part of the executive team. A non-executive director typically does not engage in the day-to-day management of the organization, but is involved in policy making and planning exercises.
Why add a non-executive?
Expect to hear the phrase “sounding board” a lot if you ask an entrepreneur running a private company why they decided to add a non-executive. The cliché that running a small business is a lonely occupation is particularly apt when it comes to making crucial strategic decisions. “Only experience can help us make the right decisions when we come across challenges,” says James Parsons, director of recruitment firm Arrows Group. “Our non-exec [former Harvey Nash chief executive David Higgins] stopped an area of our European expansion which we now realise would have been a bad move.”
The right adviser can also add credibility ahead of a major deal or prospective investment round. “An experienced non-executive gives an investor confidence in three ways,” says Mike Chalfen, general partner at venture capital firm Advent Venture Partners. “First, it has been able to attract an informed senior person who is willing to devote time to coaching the team. Secondly, the non-executive should have added some perspective both to the decision to take new capital and the plan to support it. Finally, some aspects of due diligence can be focused by the non-executive’s views of where the company and team is struggling and needs reinforcement.”
Equally important is the challenge a robust non-executive can provide to a single-minded and autocratic business owner. “Disagreements indicate that non-execs are adding real value,” says Guy Nixon, chief executive of £29m accommodation services business Go Native, which added two non-executives as part of a radical shake up of its senior management last year.