The ultimate aspirational role for many portfolio professionals is to sit on a board – you can help shape an organisation you are passionate about, and you are usually paid well for doing so. With a time commitment of only a day or two per month, you can also fit the work around your other responsibilities.
With more and more companies being created, there are an increasing number of opportunities for portfolio professionals to add non-executive director (NED) roles to their work portfolio.
What is a non-executive director?
Traditionally, board roles were created at large public companies. NEDs were paid an annual fee with no stock options, in order to give “sound” advice. They were focused on audit and control – aiming to ensure good financial management, plus occasionally replacing the CEO.
These types of board roles were mostly filled with former CEOs and finance professionals. There was a lot of committee work and many long documents to read.
Today, the playing field has change, with more board roles being created at smaller, privately owned companies. NED roles at these younger companies are being filled with experienced professionals – mentors to help shape company strategy, product development, talent, international expansion, etc.
The way that NEDs are paid varies significantly based on a number of factors.
For instance, a non-executive director at an early-stage startup (pre-Series A, with limited funding) is likely to be offered sweat equity only. This means that in return for their work (“sweat”) they will receive shares or options in the company (“equity”) but no cash compensation.
Once a startup reaches Series A and has raised sufficient funding (or when the company is sufficiently profitable) NEDs typically start earning £30,000–£50,000 per year, with this figure gradually increasing as the company grows.
For public companies – given the greater scale and formal responsibilities – the numbers get higher.
According to a study from Willis Towers Watson looking at the salaries of NEDs in FTSE 100 companies, the typical salary range for non-executive directors was £61,000–£80,000 per year. This figure was significantly higher for chairs of boards.
Many NEDs also agree to a “day rate” for any additional consulting beyond the core time commitment. These range from £1,500–£4,000 per day, varying based on level of expertise and the company size.
For startups, there is normally some form of equity offered, too. It is common to see around 5% of equity allocated for non-executive directors.
This would typically be split between 2–4 NEDs, with each receiving a stock option allocation of 1.25–2.5%. These percentages will be significantly lower for more established companies.
How do I prepare to become a non-executive director?
There are a number of ways that you can prepare to become a NED. The three most common reasons that ambitious young companies hire board members are for their functional knowledge, industry insights, or personal network:
Build demonstrable knowledge about how to grow a world class business function or company.
For example, technology companies like to have an experienced Chief Technology Officer on the board to mentor the tech team and help them with scaling; an HR software company might like a former industry leading HR Director to help shape product, marketing, and sales pitches.
Become a thought leader in how industries work now and how they will evolve, in order to shape company strategy.
For example, health technology companies might want NEDs with expertise in the future of medicine or healthcare; an education technology company may like a NED expert on how education will evolve for specific subjects, age groups, or countries.
All companies need to be able to find- and land meetings with – potential investors, partners, customers, and talent.
If you build a great network you will make a better NED.
Given that NEDs don’t actively run the company, the ability to coach and mentor others is critical. Those looking to become NEDs should become adept at this as early as possible.
Mentor as much as you can and as widely as you can throughout your career.
Online communities like The Portfolio Collective are a great way to link up with with people and share knowledge. Many of our members build connections through our Catapult course or through one of the many virtual networking events we host, which provide opportunity to meet a range of professionals from around the world. Once you start to see the effects of your mentoring, ask your mentees to recommend you on LinkedIn so you can grow that network even further. For inspiration, a great book on the subject is Trillion Dollar Coach, written about Bill Campbell, the Silicon Valley mentor to top teams at Google, Apple, and elsewhere.
Just remember, actually landing a NED role is not as easy as simply having the prerequisite skills to sit on a board.
It requires a lot more work.
How do I actually get a non-executive director role?
According to a survey by Board Appointments only 20% of NEDs are found through headhunting and responses to advertisements, with 15% coming from somebody approaching a company, and a whopping 65% coming through a personal connection.
Therefore, landing a NED role is as much about the networking you do in the years leading up to an appointment as it is about finding a role that is both open and that you are qualified to fill.
In recent years, this has become considerably simpler with the invention of sites like LinkedIn so it’s worth ensuring you have a strong LinkedIn profile.
Making sure you are building a robust, engaged network is essential to landing a role.
- Are you regularly connecting with investors, founders, accelerators, and thought leaders?
- Are you attending events – even virtual ones – to network?
Demonstrating thought leadership is another great foundation for becoming a NED. Writing insightful articles on a subject over an extended period of time communicates your expertise and passion for a subject.
In parallel, you should build a network of the people you want to work with on this subject, sharing your thoughts with them. Get their feedback and collaborate with them on their own work.
Remember to always be generous.
This will both build your network and cement your place as an expert in their minds. After doing this successfully over a number of months or years, when somebody in your network either has a space for a NED with your expertise or is told of somebody who does, you become an attractive choice.
Offering pro bono work to early stage startups is also a tried and tested method for snagging a NED role too. For instance, if somebody creates a startup in a specific area and you have experience within that area, you could offer to mentor them for free. When the startup grows and starts to look for NEDs, you will then become an obvious candidate.
There are always plenty of startups looking for mentors at the various accelerators.
A common way to demonstrate your skills and build a relationship with a company, whilst also getting paid, is through consulting work.
Rather than approaching a company cold asking to become a NED you can instead approach them with consulting services, which in turn can lead to a NED opportunity once you have demonstrated value to the company.
Don’t write off the headhunters, even if your odds with them will be lower.
Although personal connections and networks are still the dominant way to get a NED role, there are platforms looking to improve the way NED matchmaking takes place, with Nurole being head of the vanguard in the UK.
Nurole is a jobs platform for board level positions that requires a certain level of experience to join. Once your application has been accepted and you have registered, you can see all of the available roles which are suitable to your background and apply in the same way as you would on a regular job site.
Summary: Key steps to becoming a non-executive director
Develop world class insights on something and stay actively involved to continuously update your thinking.
Polish your public profile and web presence to demonstrate your passions and expertise.
Learn to be a great mentor – potentially practicing for free with startups and charities.
Build a network of leading thinkers, investors, headhunters, and startups in your focus industries. Find ways to help them.
Sign up to Nurole (or similar sites) and selectively start applying for roles.
CASE STUDY: OPTIMI HEALTH
I recently joined the board as a non-executive director at Optimi Health, a startup that specialises in musculoskeletal injury treatment and prevention.
Given my background in the military and my passion for living an active life, this area is one that I find fascinating and wanted to get involved with.
I was initially approached by the company founder through Heropreneurs, a network for ex-military mentorship opportunities. I worked with Optimi for free for over six months, helping them to create a successful company.
I didn’t do this with an eye to sitting on their board. I did it because I believe that what they are doing is great and I could see that the company’s founder had potential.
Six months later the company is now looking to raise money and solidify its board. Based on the trust and mutual respect we had built up, I was on their list.
My board role is focused on business and leadership mentoring – looking at strategy, organisation, product, business model, fundraising, etc.
Optimi Health also brought on board a world-class musculoskeletal injury doctor and a visionary artificial intelligence leader as the other two board members.
We each have a complementary value for the company and were chosen as NEDs because we are seen to be the best in our individual areas.