From CFO to NED
For many CFOs, becoming a non-executive director (“NED”) a logical career ‘next step’. However, before embarking on this journey, careful consideration should be taken. Being an effective NED can involve just as much work outside the boardroom as within it. During a crisis that time commitment can escalate very quickly as many NEDs will attest to this year.
Why do CFOs want to become NEDs?
Despite the challenges, a significant number of CFOs do choose to further develop their careers by taking on an NED role. From our experience, the reasons are varied and include:
- Gaining new insights into other sectors and businesses
- Understanding how different boards function
- Gaining new boardroom skills and experiences
- Being able to sit on several boards and building a portfolio of NED roles
However, while CFOs cite all the above (and more), the overwhelming majority of CFOs say the underlying driver is the ability to play an influential role in the future direction of a company.
What do companies look for in an NED?
When appointing an NED, the Board and Nominations Committee will already have a defined set of skills they want on their board so will be looking for very particular skillsets, whether it be specific global experience, specific sector knowledge, specific functional expertise etc.
Furthermore, they are likely to be looking to appoint someone who:
- Is well respected in their industry, credible, and with a proven track record of relevant achievements
- Is reflective, considered, and capable of listening, probing, and challenges constructively
- Has an independence of mind, but understands the need for/accepts collective responsibility
- Understands the boundaries of Executive and Non-Executive roles.
The Interview process
While the skillset will define whether you pass through long- and short-list stages, once that gets you in front of the clients’ panel, it is all about personality, character, and cultural fit. Ethics are also very important and getting a sense of the candidate’s ethical position on a range of situations is a good indication of whether they will “fit” in culturally with the Board and organisation.
Most chairmen want genuine diversity in thought and opinion on their boards to avoid “group-think”. Too much similarity in terms of background or experience can lead to the group moving as one along well-worn tracks, rather than exploring more radical/potentially better solutions. At the same time, the right chemistry amongst the board members is required to achieve a productive outcome.
The interview process for NED roles tends to be very thorough and can take a long time. Gone are the days of the Chairman picking an NED and the process is over. You may be interviewed by the whole board. Finally, remember that the interview process is a two-way street – you are also interviewing them.
Before accepting an appointment
Before accepting an NED role, due diligence is critical. You will already have gained insight into the organisation, its people, and culture through the interview process. But it is important to deepen your research at offer stage. Your checklist should include the following:
- Read as much as possible in annual reports, the company website, press coverage and analyst and rating agency reports
- Talk to the company’s auditors, bankers, lawyers and headhunters
- Try to meet the members of the board who have not been part of the interview process. Work out key relationships, styles, and values
- Is there an effective and constructive relationship between the CEO and chair?
- Ask for dates of board meetings and the year-end and check for any timetable conflicts. Find out the year-end to avoid/be prepared for a heavier workload at certain times of the year.
Navigating your way around the boardroom
When it comes to starting a new NED role, you must be able to demonstrate that you know the difference between an executive role and a non-executive role. Showing 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.
As a new NED, the induction process is crucially important to understanding the ins and outs of the organisation and building relationships. Spending time with other board members, going on site visits, meeting the lawyers, understanding the company’s strategy, and simple things like learning the company’s jargon and acronyms all help to build a up picture and settle into the role.
To maximise your influence in the boardroom, as with any team, it comes down to knowing the personalities and values of fellow board members. It is important to observe and learn from how individuals on the board interact with each other and adapt your style accordingly. It is salient to challenge and ask questions, but this needs to be done in a manner that retains a positive atmosphere in the boardroom.
How do you find the right balance?
Many CFOs feel like the Audit Committee and the Auditor are working against them. However, when CFOs become an Audit Committee Chair it becomes clear that the objectives of the Executive, Audit Committee, and Auditor are all aligned. Having this insight helps individuals prioritise and manage their responsibilities in both their CFO and NED roles.
It is 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 your team more responsibility allows them to step up and allows you to focus on the most important tasks, also freeing up time to do your NED role.
A supportive Chairman and CEO should see you securing an NED role as an opportunity for you to bring back your learnings from your NED role into your CFO role. This said, there must be high degrees of trust between you, your team and your Chairman and CEO for this to work most effectively. There also needs to be an acknowledgement that your executive role takes precedence over your non-executive role so being able to find the right balance, and giving the right assurances to management that your CFO role is well under control is critical.
If you would like to discuss this article further, learn more about The Norman Broadbent Group, or discuss specific people or organisational challenges, please do not hesitate to contact Angela Hickmore, Group Managing Director, via firstname.lastname@example.org or Wayne Poulton, Director, via email@example.com for an initial confidential discussion.