NEDs in Tech: From door opener to critical value creation lever

May 6th, 2023

NEDs in Tech: From door opener to critical value creation lever

Non-executive Directors (NEDs) used to be door-openers; highly experienced sector professionals, hired for their rolodex as much as their expertise. But their role has evolved in recent years, and while networking is still one of their big attractions, their value is now seen as broader and deeper. And in the current climate, tech firms should be maximizing their powers as a primary value-creation catalyst.

Many tech businesses are in a holding pattern as high inflation and interest rates put exits and funding rounds on the back burner. For others, the macro-economic environment means they need to find new ways to achieve growth and innovate, to be ready to exit or raise when the time comes. Plus, at the same time, they must be thrifty, looking to trim costs and squeeze more ROI out of the business wherever possible. In this climate, a strategic NED hire is one way to add focus, efficiency and bring greater complementarity to a leadership team.

Here are six of the biggest benefits of hiring NEDs.

Functional and technical experience

Rather than focusing solely on sector experience, NEDs can augment the balance of a management team, by plugging any technical or functional competency gaps. For example, for a traditional business looking to execute a digital enablement agenda, where internal processes alongside external service proposition will be transformed, the ongoing presence of a NED who has a track record of implementing such programmes may prove beneficial. 

Or, on the flipside, a technical, R&D-focused business may benefit from a NED with strong revenue and go-to-market background, whether in customer success, demand generation, account management, pricing or other sub-facets. For the time commitment of a few days a month, NEDs can provide mentorship on business strategy and roadmap as well as help define and refine future executive requirements, especially in situations where ambiguity exists today.

Developing current leaders

There are significant advantages to grooming high-potential team members for more senior roles, including reduced hiring costs and disruption, plus improved retention, and employee satisfaction. NEDs can be an effective way of enabling this process, by mentoring and preparing high potentials to step up. Take a business that is going from a geographical to a functional go-to-market model. In this instance, you have country managers looking to step into functional leadership positions, with the ongoing mentorship of a NED helping to facilitate this transition.

Situational competencies

NEDs can also augment the current team in terms of their situational journey, whether that’s embarking on an M&A strategy, a particular stage of organizational growth, a drive for operational effectiveness, or entering a new geographical market. A business looking to expand into the US could benefit enormously from hiring a NED on the ground, who could assist with hiring, mitigating the risk of miss-hires early in the market entry process, as well as bringing local contacts to assist with channel strategy, or identifying acquisition targets. Or, if a business is going through a cloud migration, diversification of product proposition or entering new customer markets, a NED with situational competencies in that area would be hugely valuable.

Complement and support the chair

The chair is generally the most experienced person on the board, particularly in terms of situational experience and mentorship. However, they aren’t a one-size-fits-all answer, and a NED who aligns closely to acute and critical parts of the value creation plan can provide a second sounding board to complement their expertise.

We recently placed a chair into a technology business, who had exactly the right scaling experience at the right level, however, alongside them we also placed a technical NED who brought very specific digitisation experience that the chair didn’t have. By considering the two together, we succeeded in achieving strong complementarity, bringing a valuable dynamic to the leadership team and wider business.

An added benefit for the chair is that the NED can lean into other members of the executive team, other than the CEO. This arguably allows the chair to deal with more conventional board matters, whilst the NED engages in more specific activities.

Cognitive diversity

It is often assumed that NEDs must-have sector experience, but in fact, the opposite is true. By focusing on situational or functional, rather than domain experience, businesses also benefit from a perspective from outside the competitor ecosystem. This automatically increases the cognitive diversity of the team, which a study by the University of Bath demonstrated reduces groupthink, enables better decision-making and can enable firms to better respond to their stakeholders. So, it’s a win-win.

Hiring NEDs can be done at any point in a company’s growth and in fact, the sooner a company takes advantage of their outside perspective, the more value they can bring. For executives, pursuing NED roles is increasingly popular, and investors actively encourage it, as a way of learning from other businesses and leaders and taking time out of their usual business environment. Consequently, there are plenty of fantastic NEDs to draw upon and, given current market challenges, their fresh eyes, energy, and ideas could be just what tech businesses need to ride out the downturn.

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