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Would your business benefit from some independent thinking?

Unsurprisingly, given the recommendations of the UK Corporate Governance Code, the use of non-executive directors is widespread in public companies.  Their role is to provide some independent input to the leadership of the organisation including acting as a sounding board for the executives and offering a critical assessment of the effectiveness of the management of the organisation.  So important are these activities that having too few non-executives or independent directors is often viewed as a sign of poor corporate governance.  But since non-executive directors are seen as almost indispensible in public companies, why then are they less commonplace in smaller, private businesses?

I suspect that there are numerous reasons, but amongst these is likely to be the view that they are too expensive or, perhaps strictly, that the perceived benefit that they deliver does not represent good value for money.  This may indeed be the case and is obviously highly dependent upon the individual(s) concerned.  However, a good non-executive will devote substantial time to the organisation, be familiar with its business and management and their aims and objectives and will therefore be able to provide constructive criticism from an informed standpoint.  Having someone who is knowledgeable about your business asking you questions and challenging your views and arguments is invaluable when you are developing strategy and plans and making decisions.

Not convinced?  I too was sceptical about the value of a non-executive director or independent advisor but my eyes were opened to the benefits of having someone to act as a sounding board and challenge my thinking about 12 years ago.  It came about almost by accident as a result of an annual meeting with our auditors.  At that time there was still a requirement for an annual independent audit of accounts and since we had a well-qualified Finance Director who kept a very clean set of books, the large firm of accountants who we used as auditors would levy an exorbitant charge on us for essentially rubber stamping our management accounts.  As a consequence the annual audit meeting usually descended into an argument over the fees and the poor value that they represented from our standpoint.  At one such meeting, the exasperated audit partner conceded that sending in a large, well-qualified and highly paid team to perform the fairly perfunctory audit clearly wasn’t delivering much value to the clients and that perhaps we should rethink what should be done.  He suggested that the fees remain the same but that the audit team would be scaled back slightly, in line with their audit findings over several years, and that instead he would send one of his senior managers (already familiar with our business) along to attend one Board meeting each quarter.  The rest, as they say, is history.  From the outset the chap brought a fresh pair of eyes and a different way of thinking to the issues we were dealing with.  He brought new contacts and ideas and even in cases when we didn’t pursue his suggestions, I am convinced that his input genuinely enhanced the quality of our decisions.   Suffice to say that we were sufficiently convinced of the value that he was delivering that arguments over audit fees essentially disappeared even though they continued to rise in line with inflation.

So would your business benefit from some independent input?  Are you going to just wait for something to happen like I did, or are you going to be more proactive in pursuing growth?  You may well not want a non-executive director: appointing someone to the Board of your company is, after all, a big decision and not one to be taken lightly but there are other ways of achieving the same benefits.  The e-mk Advisory Board Programme is one means of affordably tapping into some independent thinking. Why not give it a try?

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