Independent Directors – A Valuable Addition To Any Company

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In my experience, the majority of small business owners presume that only big companies use independent directors.  However, independent non-executive directors can add a great deal of benefit to businesses of all shapes and sizes.

Owner-managed businesses are often opposed to engaging outside directors or consultants.  I’m sure this is partly due to our Kiwi “she’ll be right” approach or prefer to take their advice from family and friends.  

Either way, their businesses may flounder without the help of an external pair of eyes.   

This attitude is likely to hold many small businesses from reaching much higher potential.  New Zealand is well known for having small family run businesses. Many only have a single director or a husband and wife team.  

They rarely meet to discuss business strategy or review financial performance, except to sign off their annual accounts..

New Zealand’s affinity with the “number 8 wire-fence” or “can-do” attitudes often results in many owner-operators not seeking advice.  But those who do, understand that independent directors and consultants bring valuable skills and experience.

Business owners often juggle competing tasks on a daily basis are often guilty of working “in the business” rather than “on the business”.  

Daily activities consume their time.  They have little energy or time to focus on making strategic decisions that set the building blocks required to sustain the business.  This in an essential component of any business success.

It’s also an often overlooked key responsibility for any business owner or director.   

Directors and owners of small businesses must look to build a sustainable future for the business.  

They need to look at the big picture.  They need to examine the economy, their competitors, financial performance and much more.  They need to know which threats could derail the business. They need to know which opportunities to exploit.

External advisors and non-executive directors will provide momentum to achieve this.  Competent ones will have extensive experience in this area. They’ll use their skills and knowledge to plan and evaluate aspects of your business that you may have overlooked.

Because they aren’t involved in your business’ day to day activities, they’ll provide valuable independent insight.  They’ll help identify risks, weaknesses (as well as strengths) and offer recommendations to deal with them.

External non-executive directors will often offer guidance and support and become valuable mentors.  Their independence and objectivity may bring some harmony and professionalism to your business.

Many business owners have strong technical abilities and skills in their chosen field.  But many lack the skills and training in other areas, such as accounting, strategy, marketing, etc.  

Choosing the right person with one or more of these skills will help manage and grow your business.

To continue to develop and prosper, all businesses need healthy profit margins.  An independent director will bring new perspectives and won’t be afraid to examine and objectively question the status quo.   

How do you find the right person to serve as an independent director?  Consult your chartered accountant, business advisors, bank manager or solicitor.  They will know people in their network who have the right skills and personality to add value to your business.  

When you’ve chosen the right person, you’ll need to brief them.  They’ll need to understand your business and how it currently operates.  They’ll need to know your vision, your plans and any challenges you’ve faced.   

The right individual will add valuable insight and discipline to your business.  They’ll challenge you but will also guide you.

Choosing an independent director will probably be a big step for you.  You may feel uncomfortable at first. It’ll likely result in a significant change to how you’ve operated before.  

The change will benefit the way your business operates and performs.  

Independent directors are valuable in any effective and efficient boardroom.  They will often bring together different components, experience, skills and cultures.


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