Learn how non-executive directors help organizations with strategic planning, budgeting, mentorship, and fundraising assistance.
A non-executive director (NED) is someone who holds no direct responsibility for running a company or managing its employees. You may also think of a NED as an independent director or advisor who guides an organization’s direction rather than taking charge themselves.
They’re typically not involved with day-to-day operations, but they can still significantly impact an organization’s success by helping it make strategic decisions and provide advice. To help them drive success for the organization,NEDs often leverage a board management solution like OnBoard, which streamlines communication and facilitates strong relationships with other board of directors and members.
In this comprehensive guide, we’ll cover:
- What is a non-executive director?
- Non-executive director responsibilities
- Non-executive vs. executive director: what’s the difference?
- Frequently asked questions
What is a Non-Executive Director?
Organizations include various types of directors, from CEOs and CFOs to presidents and chairpersons. But what about those who aren’t directly responsible for running a company? These individuals are often called non-executive directors. They’re usually appointed to boards because they bring expertise in development strategy, finance, marketing, human resources, and more.
Non-executive directors serve on boards at all levels, from small family-owned businesses to nonprofits and large multinational corporations. They can play a vital role in helping companies navigate through difficult times, and also help guide organizations toward growth and prosperity.
Non-Executive Director Responsibilities
The role of a non-executive board member varies depending on the company’s size and needs. In some cases, a non-executive director provides guidance and counsel to the CEO, while others focus primarily on supporting the board.
However, these four responsibilities usually remain constant regardless of the size of the company:
- Strategic planning
- Managing budgets
- Mentorship and guidance
- Fundraising assistance
Here’s a closer look:
1. Strategic Planning
It’s common knowledge; establishing clear goals and objectives for the future is the first recipe for success in any organization. A good way to do this is to set up a strategic plan that outlines the vision for the company and provides a roadmap for achieving it.
After establishing the plan, the board should work together to ensure proper implementation.. This includes ensuring the right people get hired, the right processes are put into place, and the right systems are developed.
A non-executive director plays an influential role in this respect. Although their job isn’t to manage the business day-to-day, they can still play an active part in ensuring the company is headed in the right direction. For instance, a non-executive director might suggest ways to improve the company’s financial performance during an annual general meeting or suggest ways to streamline its operations.
2. Managing Budgets
It’s critical for any company to establish a well-defined budgeting process. Without one, it becomes very easy for expenses to spiral out of control and leave the company in debt.
To avoid this situation, a non-executive director must monitor the organization’s spending habits and ensure initiatives stay on budget. If necessary, they can advise on cutting costs or recommend outsourcing certain services.
Here are a few more ways non-executive board members undertake their budget management responsibilities:
- Mobilizing the executive management team around organizational objectives
- Providing input on capital expenditures
- Providing informed and constructive criticism on expenditures and budgetary allocations, if necessary
3. Mentoring and Guidance
As mentioned above, a non-executive director’s primary responsibility is to support the executive team by offering guidance and mentorship. However, it’s common for an NED to take on additional duties related to specific issues facing the company.
For example, if the governing board is concerned about the quality of a particular product line, they may ask the non-executive to oversee the development of a new product. Or, if there’s concern about a potential merger, the board may ask the NED to lead a committee to evaluate the deal.
Here are a few more ways NEDs provide mentorship and guidance:
- Helping to develop a strategy for improving employee morale
- Assisting with hiring decisions
- Supporting the recruitment of key executives
- Assisting the marketing board to make better decisions regarding advertising campaigns
4. Fundraising Assistance
While fundraising may not fall under the purview of a NED’s responsibilities, it’s often something they get asked to help with. After all, non-executive directors have a number of fundraising skills they can bring to bear when needed. These include:
- Raising money from investors
- Managing donor relations
- Developing effective communication strategies
- Identifying and cultivating relationships with major donors
Non-Executive Director vs. Executive Director: What's the Difference?
A non-executive director serves on an organization’s board without any managerial authority over the company. In contrast, an executive director holds some form of managerial position within the company. They typically hold the title of chief executive officer, chief financial officer, or president.
Another key difference between these two positions is that non-executive board members aren’t intrinsically involved in the organization’s day-to-day operations, unlike an executive director. Instead, they work closely with the executive team to ensure the company makes sound strategic decisions and executes its business plan effectively.
In addition to their advisory role, non-executive board directors also serve as mentors to the executive team. That means they offer candid feedback on performance and equip the organization with unique ways to achieve success.
Frequently Asked Questions
Consider these FAQs on the non-executive director:
Is a CEO an Executive or Non-Executive Director?
The CEO, together with the Chief Financial Officer (CFO) and Managing Director, typically serve as the executive directors of any organization. But because the CEO has ultimate control over the company’s direction, they are considered the “chief” executive director.
What are the Benefits of Being a Non-Executive Director?
Being a non-executive board member offers the opportunity to contribute to the growth and success of a company while enjoying the benefits of being part of a dynamic group of professionals who share common goals. It also gives you the chance to learn from other leaders in your industry and gain valuable experience.
Are Non-Executive Directors Paid?
No, only the executive directors are salaried employees of the company. Contrarily, non-executive directors get a fee for the services rendered.
Streamline Your Executive Board Meetings With OnBoard
As you can see, there are many different roles available to you as a non-executive director. And perhaps the most gratifying part of this job is knowing you’re helping to steer your company in the right direction. Also, working with other think tanks means you’ll be able to network with like-minded individuals and collaborate on projects to benefit both organizations.
But your role as a non-executive director can never be complete without a board management platform. OnBoard is a cloud-based platform that makes running your nonprofit or corporate board easier than ever. The solution allows you to streamline your board meetings by automatically generating agendas, minutes, and meeting notes. But that’s not all; OnBoard fosters collaboration among board members by supporting real-time communication and announcements via the centralized dashboard.
Powerful OnBoard features include:
- Secure and public storage for historic records
- Drag-and-drop meeting agenda builder
- Task management
- Voting and approvals
- Secure messenger for 1-to-1 discussions
For a small taste of what OnBoard’s full-service platform can do for your organization, download our free board meeting agenda template.
About The Author
- Adam Wire is a Content Marketing Manager at OnBoard who joined the company in 2021. A Ball State University graduate, Adam worked in various content marketing roles at Angi, USA Football, and Adult & Child Health following a 12-year career in newspapers. His favorite part of the job is problem-solving and helping teammates achieve their goals. He lives in Indianapolis with his wife and two dogs. He’s an avid sports fan and foodie who also enjoys lawn and yard work and running.
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