tawandamusarurwa
Memory Nguwi
AT some stage, most organisations will need to appoint non-executive directors to sit on their boards. Apparently, some organisations do it to make up the numbers for compliance with regulatory requirements or to create a perception of good corporate governance.
A non-executive board member is a board member who does not hold an executive position within a company. They provide independent oversight and guidance to the company’s management team.
They are typically appointed based on expertise in a particular area, for example, finance, law, human resources or marketing. They are expected to bring diverse perspectives and experiences to the boardroom.
This has sometimes been interpreted to mean they do not represent any particular shareholder’s interests.
However, in practice, this assertion is rarely possible, as shareholders and other influential members of an organisation tend to recommend the appointment of most directors. Non-executive directors – like other senior members in an organisation – require certain knowledge, skills, abilities and other characteristics to make them effective.
According to scientific research, the top drivers of employee performance, in order of priority, are cognitive ability (general mental ability), job knowledge and integrity. These predictors of performance hold if an individual employee or director has no personality defects.
As you hire your directors, remember that if you hire a non-executive director without integrity, you cannot correct that through training. This is so because integrity is largely hereditary and partly emanates from childhood experience. This is equally true if you hire non-executive directors with personality defects. You cannot correct that through training.
The situation becomes even worse if the non-executive director lacks the cognitive ability to operate at board level. The job knowledge of the non-executive director will be immaterial if they do not have the cognitive ability to operate at this level.
Besides the above-mentioned mandatory requirements, other profile traits of an effective board member include the following:
Integrity
Integrity is a crucial attribute for non-executive board members, because they provide independent oversight and guidance to the company’s management team.
By acting with integrity, board members can help ensure the company operates ethically and transparently, which can build trust with stakeholders and enhance the company’s reputation.
Integrity also means being willing to speak up when something is not right, even if it is unpopular or goes against the status quo. This can help prevent unethical behaviour and ensure the company stays on track towards its long-term goals. To demonstrate integrity, a non-executive board member must be transparent in all communications, avoid conflict of interest and act in the best interests of the company and its stakeholders.
Critical thinking
An effective non-executive board member should possess strong critical thinking skills and be able to analyse complex problems from multiple perspectives. Critical thinkers go beyond information presented in board packs; they dig deeper to understand the logic of the thinking process supporting any particular recommendation or conclusion.
This includes identifying underlying assumptions, evaluating evidence and making sound judgement based on available information.
Candour
An ideal non-executive board member should be candid and willing to speak their mind, even if their opinions are unpopular. This includes being able to provide constructive feedback to other board members and management, as well as being willing to challenge the status quo when necessary.
Candour is important because it allows for open and honest communication among board members and management.
When board members are candid, they can freely share their opinions and perspectives, leading to better decision-making and more effective oversight of the company’s operations.
To apply candour in board meetings, non-executive board members should be willing to speak up when they disagree with something, ask questions when they do not understand something and provide constructive feedback to other board members and management.
It is important to do so respectfully and professionally, but also to be willing to challenge the status quo when necessary.
Strategic thinking
An effective non-executive board member should be able to think strategically and provide valuable insights into the company’s long-term goals. This includes understanding the competitive landscape, identifying potential threats and opportunities, and developing strategies to achieve the company’s objectives.
Strategic thinking is important, because it allows non-executive board members to provide valuable insights into the company’s long-term goals, as well as identify potential threats and opportunities.
By thinking strategically, board members can help the company stay ahead of its competitors and adapt to changing market conditions.
To apply strategic thinking in board meetings, non-executive board members should be able to ask probing questions about the company’s strategy, challenge assumptions when necessary and provide input on achieving the firm’s objectives.
Doing so collaboratively and constructively is important.
Financial acumen
A good non-executive board member should have a strong understanding of finance, and be able to provide financial guidance to the company. This includes analysing financial statements, understanding financial ratios and providing guidance on financial decisions.
Financial acumen means having a strong understanding of finance and accounting principles, and the ability to apply them in a business context.
It also means communicating financial information clearly and effectively to other board members and management.
Business acumen
Business acumen refers to the ability to understand and analyse business situations and make informed decisions.
Non-executive board members need to have business acumen, because they should be able to provide guidance on a wide range of business issues, including strategy, finance, marketing and operations.
Leadership skills
An effective non-executive board member should be a strong leader, who is able to guide the company in times of crisis.
This includes contributing towards setting a clear vision for the company, inspiring others to achieve that vision and making tough decisions when necessary.
Risk management
An effective non-executive board member should be able to identify potential risks and provide guidance on mitigating them. This includes understanding the firm’s risk profile, developing risk management strategies and monitoring risk levels over time.
Ethical standards
An ideal non-executive board member should have high ethical standards and be committed to acting in the company’s best interests.
This includes avoiding conflict of interest and maintaining confidentiality when appropriate.
Industry knowledge
A non-executive board member needs to understand the industry in which the company operates. This includes understanding industry trends, competitive forces and regulatory issues.
Accountability
Accountability is also a key feature for non-executive board members. By holding themselves and others accountable, board members can help ensure the company operates responsibly and ethically. Accountability also means taking responsibility for mistakes or failures and working to address them promptly and effectively.
Non-executive directors cannot feign ignorance of the goings-on in the company, whether good or bad. Ultimately, they will be held accountable, whether they were aware of the issues or not.
Communication
The ability to communicate and influence decisions without being dictatorial is key for non-executive directors.
Track record
A good career track record is a must-have for non-executive directors. You cannot hire non-executive directors to learn on the job; it is too risky to do so at such a high level. If you hire novices onto the board, they often fail to separate the role of a board member from the executive management.
The major weakness in hiring rookies is that they dabble in operations, creating conflict with the executive management.
Knowledge of the business
Understanding the organisation’s business is key for non-executive directors. This includes grasping the business’ mandate and how it adds value to shareholders. The other challenge, not only in Zimbabwe but also across the world, is that an organisation may get members who are primarily on the board to further their own interests.
Some board members only seek to raise their profiles.
An organisation may get inflexible board members, whose sole purpose is to prove who has more power between them and management.
And the worst board members are those who come for meetings unprepared. They sleep through board meetings. Others make no effort to understand the organisation’s core business, and these are the least effective.
In some instances, an organisation can get directors who are in it for the money. It is a big risk for any organisation to hire directors who depend on board fees for a living.
Above all, non-executive directors are not acting in the best interests of the company they serve if they are silent about breaches of regulations and questionable management practices.
Online Reporter