BCKR Event: Lucy Armstrong – private companies
BCKR members were pleased to welcome Lucy Armstrong this month. The Chief Executive of business growth accelerators “The Alchemists”, is also an experienced chair and non executive director – she spoke to us about how lawyers can best position themsevles to add value as a non executive member of the board.
Here is a summary of what she said:
NED roles in Private equity (PE) could not be more different from those in the Public Sector. Involve shorter timescales and a different attitude of mind from roles in Public Sector, or indeed PLCs or most privately/family held companies.
PE is an umbrella term and can be sub-divided as follows:
- Venture capital
- Investment capital
- Mid size PE
- Top PE
Lucy suggests that the mid sized space is the most intellectually rewarding
- You need to decide if you are trying to join a board to add expertise which is missing from the current boardroom (but if so, remember that, while you might as a lawyer get there for your experience of transactions, your contacts, attitude of mind etc, it won’t be for your specific legal expertise)
- In PE companies, you need to have a very good understanding of the investor’s business plan and be clear about ‘whose man’ you are…who is your master? The company the executive or the PE firm (and who within it ?). Unlike other boards, you can find yourself quite openly serving two masters!
- Building a rapport with the executive team is vital (as with all boards) but the NED roles and boundaries are less clear cut and vary by PE firm
- Understand you will have at least two crucial relationships to manage, which takes skill and confidence.
- PE, despite its great success, is in some ways still a relatively unprofessional ‘cottage’ industry. In the PE world, ‘gut feelings’ count for a great deal and investors often consider themselves to be master of their own universe.
- The approach to appointing NEDs is often informal, PE does not always work well with headhunters.
- Be careful – success on a PE-backed board will be as much about the relationships you strike up there as what you know and can bring to the business.
The plus sides of a PE NED role are:
- You are not exposing your reputation publicly
- They can be a good place to start
- There is very little formal governance and the subject matter is highly commercial and interesting
People will label you as a lawyer and advisor and put you in that box. You need to be able to demonstrate how you have managed to break out of it! But, lawyers are not alone in this – other people (including big ‘corporate types’) also have to show they ‘get’ the PE environment.
Private and small businesses
- Shareholder and executive teams tend to be closer (and less distinct)
- A lot is about relationship building but in a more aligned way
- You will encounter a mixture between structure and control versus chaos, confusion and energy!
- As a NED, you will need to demonstrate flexibility, balancing between independence and being part of the team
Try to work out what you are dealing with: ie
- are you there to add value to the business or to the people? (You need to have a clear answer to that question.)
- they may need a well rounded confidant, not necessarily for somebody to show them how to grow their business.
- With privately held and family businesses, do spend time building a rapport. It’s a good idea to ask them for a job specification (or write it together). Ask to be assessed periodically, ie how they judge your contribution?
- Ask that your initial appointment be no more than three years (possibly with an option to terminate after one year) – and six years is usually enough on both sides.
These are all ways which make both of you think about how you can add value to their business.
Three tests when visiting a company where you may be in line to join the Board:
- Ask to walk around the business. Do the people on the shop floor respect the man/woman at the top?
- Find out how much of the senior team is working on the business not in it. Do they value, rather than cost, external advice. As a lawyer, you have been a part of that external team and know how to add value.
- Has your leadership team stopped being control freaks versus controls freaks
“The size of the business in not important. As a NED It is more about where they are in their journey towards professionalism.”
Public Sector Boards
In the case of these boards, the Chairman is the firewall to protect the Minister from any kind of embarrassment and the Civil Service will do whatever needs to be done to protect the Minister’s reputation!
Unless you are Chair, your role is likely to be largely irrelevant.
Universities, however, are more autonomous and have greater scope for learning the role of a NED, as do Hospital Trusts (though they have many challenges, and the rules around money are tighter). Other niches, such as the board of the Historical Royal Palaces, for instance, can be fascinating … there you are likely to be able to make more of a difference
Follow your passions! Your passion (or lack of it) will come through at interview.
How to find opportunities
- Use your network
- Ask for feedback from your client base
- Get referrals – you get invited in through referrals
- Entrepreneurs love to show off their businesses. Ask to go and visit their business – show interest
- Use these opportunities to explore what the employees do, to understand the business culture
- Use a functional CV rather than a chronological CV. In interview, don’t lead with the CV, leave it as your calling card and focus on what you can bring during the interview
Think about what is in your professional tool box: for example:
- Project management
- Time/people/stakeholder management skills
- Problem solving analysis
- Communication skills
- Include non-work experience eg. Church Warden, school governor etc that show commitment and team skills
Once you are in the boardroom
- Don’t be afraid of asking the stupid questions ‘I just want to check I understand that …’
- Be prepared to listen a lot
- Don’t wait until you are in the boardroom to ask questions. Make phone calls before hand or arrange meetings with other board members
What are the consequences of failure?
- If it’s a PLC that fails, then reputation is damaged. In a PE this is less of a problem.
- A period of tenure as suggested above is really important. Twelve months to roll-over to 3 years with an absolute maximum of 6 years. If things aren’t going as planned, this gives both sides a dignified way to exit the relationship
In conclusion, lawyers are well placed to manage multiple stakeholders on Boards. But don’t rely on having been a lawyer. You are selling yourself as a future NED.