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Attracting NEDs to unremunerated roles

For many not-for-profit organisations there is an ongoing debate which stimulates lively discussion - should Non-Executive Directors be remunerated or not?

A high number of NED positions in the not-for-profit sector are unremunerated, with many senior executives believing that taking the role in a voluntary capacity is a way of contributing to the community and ‘giving something back’. For the organisation, the benefit of an unremunerated NED is that their advice and expertise is free, and it often feels more appropriate to divert expenditure to the cause rather than into Board member fees. Although something for nothing is tempting, the question remains as to whether offering remuneration to NEDs would ultimately deliver greater value to the organisation.

Wickland Westcott’s view is that as long as a NED brings the required skills and experience to the organisation and clearly adds value, it doesn’t matter if they are paid or not. However, for many individuals considering a board role, there is an expectation that the organisation should recognise their value through remuneration. The anticipated level of reward varies considerably. When we ask this question of candidates they often respond that even a modest amount would help cement the commitment of all parties to the relationship. From a practical standpoint, our experience is that when organisations do remunerate their NEDs, this increases the calibre and breadth of field of potential candidates.
 
If the position is to be unremunerated, we have identified six factors to address to achieve a successful appointment:

1. Be clear and realistic on the time requirement

Our Chair and Non-Executive Director searches frequently encounter time as the greatest obstacle. Not-for-profit organisations rely heavily on the commercial expertise of new Board members, who often find that once appointed the time requirement of the role increases significantly. Experienced NEDs are aware of this and can be wary of becoming involved if the time specified is vague, or appears to have been under estimated. Typically a day a month is acceptable, beyond that the brief needs to be very clear in setting out the Board’s expectations.

2. Be flexible on the level of experience required

It is common for NEDs to have one unremunerated role, which usually resonates with personal interests. Aspiring Board members recognise that an unremunerated role offers the opportunity to gain experience in a hands-off, strategic capacity for the first time, allowing them to go on to develop a portfolio career. We typically have the most productive dialogue with candidates at this early stage of their Non-Executive career regarding unremunerated roles, and if not-for-profit organisations are prepared to consider less experienced candidates, they are more likely to be successful, securing greater time and commitment than if they pursue only highly experienced individuals who are already in great demand. 

3. Seek functional understanding, rather than specific functional skills

When Boards recruit new members, they often see this as an opportunity to fill a functional skills gap, for example IT, finance, estates, HR etc. However, individuals with the required functional experience are likely to be one or two levels down in large organisations and unable to create the time for a NED role. A more successful approach is to seek candidates with boardroom experience, who whilst not being functional experts, will understand the functional trends that need to be anticipated and addressed. They are likely to have more flexibility in their time and have a better appreciation of the role of the Non-Executive Director.

4. Challenge whether the location of candidates really matters

For organisations with a strong regional identity, NEDs are often recruited from within the local area. This is sometimes governed by the organisation’s constitution or the view that a local person is likely to be more accessible. However, this reduces the candidate pool. On the other hand, expanding the geographic location can deter candidates if they have to cover their own travel or accommodation costs. Our recommendation is to be open regarding location and where possible to reimburse expenses associated with undertaking the role, even if the position is unremunerated.

5. Employ Executive Search to support any advertising of the role

For unremunerated roles, advertising the position in the national media is not enough, as the opportunity may not attract the most desirable candidates. Executive Search allows the proposition to be delivered directly to candidates, stimulating discussion and increasing engagement. Executive Search identifies those candidates who fit the role requirements and are likely to have an affinity with the organisation. Examples of Wickland Westcott’s approach include contacting the alumni of Universities seeking new Non-Executive Directors; liaising with prominent fundraisers to identify Trustees for arts charities; approaching patient groups to identify strong patient advocates as NEDs for medical or clinical charities. We also utilise our broad industry networks to gain thoughts and recommendations from the market regarding suitable candidates for the position.

6. Analyse candidate motivation

For unremunerated roles, it is essential that candidate motivation is fully explored by the recruitment process. Evidence of passion for the cause is important, as candidates seeking a Non-Executive Director role merely to gain the kudos of adding another appointment to their CV are unlikely to provide the time, commitment and added value required. Using an external search process will fully and objectively explore this aspect of each candidate’s application to ensure that, if appointed, they offer the best fit with the organisation.

For more information regarding Non-Executive Director appointments within not-for-profit organisations call John Dodd on 01625 508100 or email john.dodd@wickland-westcott.co.uk

 

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