Every business needs an NXD

Ask yourself what the fundamental difference is between a British business and an American business?

The answer is simple, just look at the typical Board structure of both and all will quickly become clear. The Board of a British business has only executive directors (usually 3) who are all working in the business. The average American SME has 5 directors, two executive and three Non-Executives (external professional mentors).

In the British company there is no need for a formal Board meeting; why, because the principals meet everyday, one of the three is ‘boss’ and makes the decisions and why waste time talking about “what we discuss everyday.”

In an American business the Executive Directors are required to air issues, share problems and seek guidance to inform the decisions the Board makes, collectively, for the strategic development of the business. These decisions, accurately recorded in the Minutes, are then enacted by the MD (with clear understanding and parameters) who reports back at the next meeting.

Now I recognise that to many would-be ‘entrepreneurs’ this would be an imposition but to introduce this level of rigor to the business’s governance is an essential element for success.

Running a business can be an extremely lonely pursuit and NXDs don’t just bring knowledge, experience and wisdom (although these are all essential elements of the role), they also bring that invaluable ear; someone to talk to.

If more British businesses had just one NXD then the quality of governance would improve dramatically and there would be significantly fewer early stage business failures.

(Please note that I am about to write a blog on what an NXD should do for you and what you should pay for what level of input – coming soon)

Gareth