The new breed of non-exec takes off

Working part-time on the boards of other companies is seen as essential experience in making it to the top, reports Roger Eglin.  
   
THE days when non-executive directors formed a comfortable old-boy network, sharing out the plum jobs and attending a monthly boardroom meeting followed by a good lunch are becoming a distant memory.  
   
There has not been a fall in demand for non-executives. It’s just that attitudes have changed. Non-executive posts are no longer a grazing ground for those whose best is behind them. Instead, they are becoming a route to the top for thrusting young executives.   
   
Part of this is due to the Higgs review of corporate governance, which called for the appointment of more independent non-executives. It led to changes in the composition of the typical company board.   
   
Marks & Spencer went from three executives in 2002 to seven in 2005. DSG, the retailer that runs Dixons, Currys and PC World, will have eight non-executives this year, twice as many as last year. Tesco and Rolls-Royce will increase their complement from six to nine. British Land will go from four to seven. The number of non-executive directors in the top 20 FTSE companies will rise this year to 126 — they had 96 in 2002.  
   
These boardroom jobs would once have been the preserve of the “marzipan layer”, the people from operating boards just below the main board, running substantial ÂŁ500m operations. They would have seen this as an opportunity to acquire the experience that would stand them in good stead for a main board directorship.   
   
And where once it was up to the rising star to use his or her initiative to find a non-executive position, human-resources departments are now giving them a hand as part of their responsibility for director development. They are helping them to find non-executive positions at smaller companies so they can broaden their experience. If they don’t do this, they run the risk that talented young executives will go elsewhere.   
   
Directorbank, Britain’s fastest-growing recruiter of non-executive and executive directors, has set up a forum to advise HR staff on how to find non-executive roles for their employees.  
   
Sarah Grunewald at Directorbank decided something was afoot at the end of last year when the fourth HR director rang to ask her how to find non-executive positions for operational directors. “I realised this was a hot topic,” she said. “So we produced a simple guide covering the job roles that are most likely to be successful, practical details such as who keeps the fees, and tips for candidates on how to market themselves.”   
   
The candidates most likely to find non-executive positions are divisional managing directors and finance, marketing, sales and operations directors. Those deemed to have good qualifications include people who have managed large numbers of staff, have industrial-relations experience, a record of accomplishment in change management, or come from a dynamic sector going through rapid expansion.   
   
Reg Sindall, group director of human resources at GUS, which owns Argos and Homebase, believes this development benefits everybody. “Non-executive positions are a win for everyone. Smaller companies get the expertise of a top executive and this is a superb way of broadening a director’s skills and motivation."  
   
“They can be far more hands-on and feel they are making a difference in a smaller company in a way that would be difficult to achieve in a large one.”   
   
Grunewald said a non-executive could use his time on the board of a smaller company as an opportunity to achieve a specific development target. “Many companies are concerned about getting directors to understand corporate governance before they go on the main board — and the quickest way is to sit on someone else’s board.”   
   
She also believes such an appointment can help to thwart the growing challenge of poaching from private- equity companies. Sindall said: “We need to counter this by giving directors the same breadth of challenge and opportunity as non-executives in smaller companies.”   
   
Before joining GUS, Sindall was HR director at the brewer Bass, which had developed the idea of “internal” non-executives. Senior people from the marzipan layer acted as non-executives for group companies beneath them, helping them to prepare for more senior roles. The group subsidiaries benefited from having the more senior people on board and it was highly successful, he said.   
   
Grunewald points out that candidates must have a spark about them and be able to market themselves. “We are talking about very successful people, but it is a competitive market. Candidates have to be prepared to go back to basics — fit their diaries round others, research and prepare for interviews and make sure they are properly coached and trained.”   
   
This is supported by Denise Jagger, a former executive director at Asda. “At Asda we encouraged all our executive directors to hold non-executive directorships because this allowed them to develop a broad business perspective.” Now a partner with Eversheds, the law firm, Jagger was appointed non-executive of Scarborough building society while with Asda and is also on the board of SCS Upholstery and a number of not-for-profit businesses. “I certainly learnt many new skills, which I brought back to Asda. It broadened my horizons — and it kept me at Asda for longer.”   
   
Grunewald warns that being a non-executive is not always an easy ride. If the company hits a difficult patch or becomes a takeover target, non-executives can find themselves devoting a day or more a week to it. “Corporates need to have thought through and be happy with the impact on their own business if this happens,” she said.   
   
For a free copy of Directorbank’s Developing And Retaining The Marzipan Layer, phone 0113 297 8000.