Balancing act required in recruitment of NEDs

Enlightened boards in public companies know that the recruitment of a
non-executive director (NED), boasting wide experience of industry and
commerce, can enhance an organisation’s performance in terms of strategic and
operational input. But this can lead to insinuations of meddling in the direct
management of the business.

It is crucial that the balance between strategic and operational input by a
NED is addressed early in the recruitment process. Board members and NEDs must
clearly understand the remit to be followed, the objectives, and how their
expertise can be fully utilised.

Predominantly, the recruitment of NEDs falls within the remit of the
chairman of a plc, a nominations committee (made up of the chairman and
existing NEDs) and potentially the chief executive (by invitation).

But the HR director can play a vital role, particularly in working with the
chairman to identify key candidates via search houses, and establishing a
specific NED profile – including desired outcomes, initial interventions within
the recruitment process and benchmarking of non-executive remuneration. They
can also assist with induction programmes and personalised, long-term
development needs. These are all crucial to successful placements, as
identified by the recent Higgs report, designed to advise companies on the real
role of NEDS.

Key to the successful introduction of NEDS are:

– Identification of real corporate needs

– Identification and attraction of the right skills, and achieving the
chemical fit with existing board members

– The measurement of contribution and continuous professional development.
This can cause consternation within the ranks of the non-executive team in
terms of the qualitative and quantitative measurement and development, as NEDs
may perceive they have been recruited for their knowledge, contacts and
existing skills. They may not understand the need to measure or develop
personal expertise.

The HR director also has a delicate task to perform in balancing the
priorities of the business, the individual personalities involved and the short,
medium and long-term success of appointees.

Another key component is the political relationship between plc board
members, the CEO and operational board members charged with growing the
organisation and improving shareholder value. I have seen some spectacular
clashes, both as a practising HR director and as an international consultant.
The most noteworthy was when a chief executive threatened to dismiss his
directors if they discussed any matters with NEDs without his involvement. That
could have proved interesting in a contractual context.

By Stephen Hall, Director, Stephen Hall & Associates

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