Non Executive Directors and Board Advisors for Scale Up and High Growth Business
A scale up is a company who has an average annualised return of at least 20% in the past 3 years with at least 10 employees. A scale up can be identified as being in the “growth phase” life-cycle.
The importance of scaleups and the rise of their terminology can be found in the study of the World Economic Forum which found that not all start-ups make it big, but the ones that do greatly impact society by means of new technology, services and increased employment
Mostly scaleups are seen as high-tech start-ups, but scale-ups can be much less visible in the economy for instance small local businesses growing and expanding from 10 employees to 17 in three years are already classified as scale-ups. These businesses are important to consider when looking at scaleups since these are the companies that add value to the economy by increased job offers. A key difference between a startup and a scaleup is the main challenges faced.] While a startup’s main challenge is to find a repeatable scalable business model, a scaleup’s main challenge is growth of the already identified business model while maintaining operational controls.
‘Leadership capacity’ is mentioned by many scale-up founders that I speak to as an area of need – it’s also identified by the Scale-up Institute as the 3rd most significant challenge that businesses they survey face. However, ‘leadership capacity’ means different things to different people.
“People tell me I need to engage with Non Exec Directors (NEDs) but I don’t know why or how”
The Scale-up Institute, according to their latest report, 65% of scaleups said that leadership development was “vital” or “very important.”
There is a lack of awareness and understanding of the value of NED support, they’re seen as an added expense and complication by some. Both founders and NEDs report concern about finding the right ‘fit’. When it comes to recruitment, clarity of expectations and role description on both sides is a sticking point. Along with a lack of awareness about the available opportunities and how to set up the right ‘package’ to attract an NED with the required skillset.
For entrepreneurs looking for strategic advice, a non-executive can be a fast-track to commercial wisdom, astute introductions and constructive criticism of your strategy.
A necessity in public companies, the official role of the non-executive director involves corporate governance, monitoring executive activity and providing strategic advice. The quality of the advice offered by those occupying the UK’s most powerful corporate governance positions over the last few years is a moot point. Thankfully, there’s a world of difference between a corporate non-executive position and what an owner-manager of a small business will be looking for.
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. 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.
Getting the best from them
- Agree a plan before they start:Agree beforehand what the precise role of the non-executive will be. Have a strategic plan in place. This will help the non-executive to add value through the implementation of that plan.
- Make the non-executive fit your business:Let the advisers understand your culture and fit them around your business, not the other way around
- Keep them informed:A non-executive’s performance depends upon getting the right information to them at the right time. Their role is to advise so it’s vital to have the complete picture. It’s important to keep the non-exec up-to-date on a weekly basis on how decisions are playing out and how the business is reacting to growth.
- Don’t be afraid to ask:Up to a point, more engagement might just mean more value. Bringing your non-exec into the inner sanctum will mean higher levels of engagement and ensure that there is real time advice available to regularly deal with any issues that crop up.
- Keep analysing performance and value:Periodically, the business needs to ask itself why they hired the non-exec in the first place, what would be different if they were not on the board and what they would lose if they were not there anymore.
- Know when to call it a day:Expect to be challenged and expect disagreements to inform the decision making process. If the arguments become too frequent, however, the chemistry probably isn’t right. Consider looking for an alternative board advisor.