Appointing the Right NED for Your Professional Services Firm

NEDs can play a pivotal role in professional services firms, offering unique perspectives and strategic guidance. Historically, privately held professional services firms operated without non-executive directors, instead relying on their own executive experience to govern their business, or at most, augmenting their experience with an informal advisory group.   

Following the Audit Firm Governance Code, professional service firms looked to supplement their leadership and governance with non-executive directors. Many were large firms, but over the past 10 years, a raft of mid-sized law firms, accounting firms, and consultancies have appointed their first NEDs and gone through subsequent rotations.

These NED roles primarily supported growth strategies, but we are now increasingly asked to appoint NEDs for the following:

• Strategic guidance and expertise 
  NEDs provide deep industry knowledge and strategic expertise, often outside of the partner group’s skillset. They bring fresh perspectives and insights, helping firms navigate complex challenges and capitalise on emerging opportunities. There’s particular interest in international growth strategy and market entry, geopolitics, regulation, reputation and risk management, cyber security, DE&I, organisational development and remuneration. 
• Governance and risk management 
  NEDs enhance corporate governance by providing an independent oversight mechanism. They contribute to sound risk management practices, ensuring firms comply with regulations and make informed decisions while mitigating potential risks. Importantly, partnerships can learn from other partnerships. Some of our most successful appointments result from bringing an experienced NED from a more progressed partnership to a firm earlier in its governance journey. 
• Objectivity and accountability
  NEDs serve as a check and balance within professional service firms. Their impartiality and accountability help maintain transparency and ethical conduct, fostering trust among clients and stakeholders. 
• Networking and business development
  NEDs often possess extensive networks within the industry. Their connections can open doors to new clients, partnerships and opportunities, providing a valuable avenue for business development. It is not uncommon for a NED with particular sector or subject matter expertise to support business strategy and development, in addition to their governance responsibilities. 
• Succession planning, organisational development, and remuneration
  NEDs can provide objective input on leadership transitions and talent development, ensuring the continuity of the firm's success – this is a particular advantage for partnership groups where the succession process can be influenced by subjective input. We also see a number of highly experienced former chief people officers appointed to these boards, reinforcing the importance of good people management strategy in human capital businesses. And of course, NEDs are typically drawn into the annual remuneration negotiations.

How to match your firm’s needs with the right NED

Regardless of size, with the right story and approach, you can attract real quality to your board. A professional services NED role can provide a unique intellectual challenge and expose the NED to some of the greatest minds in business advisory. What’s more, there is increased interest from the private equity community, who are drawn to the uncommon levels of profitability, and so far, lack of consolidation. Requests are also growing for pre-IPO board builds, which require specific NED skillsets.  

With this in mind, selecting the right NED for your particular business requirements is critical. Here are the factors you should take into consideration:

• Define your needs
  Identify the specific skills, expertise, and experience your firm requires in a NED. Consider the current challenges and long-term goals of your organisation. Generalists NEDs will not be enough for a professional service firm.
• Conduct a thorough search
  Conduct a comprehensive search, including internal referrals, industry associations and professional networks. Our expertise can cast a wider net, provide access to existing relationships with NEDs, and ensure objectivity when defining business needs and making the right choice.
• Evaluate track record
  Scrutinise the NED's track record, looking for evidence of successful strategic contributions, governance expertise, and ethical conduct in previous roles. Look for contributions in human capital businesses, high value business-to-business environments, scenarios where decisions are made collaboratively, and in complex international structures.
• Assess cultural fit and culture add
  Ensure the NED's values and working style align with your firm's culture, while bringing something new. Particularly in professional services, where those senior in the partnership group have high intellectual capability and curiosity, NEDs must mirror and be able to show the same level of credibility, whilst bringing a fresh perspective.
• Clear expectations and responsibilities
  Clearly define the NED's role, responsibilities, expectations and understanding of potential time commitment, as well as the annual cycle of that commitment. Prized NEDs will already have substantial existing and immoveable commitments. Many appointments fall through at the final stages due to diary overlap with existing responsibilities. Address this earlier rather than later.

The right non-executive director can bring strategic guidance, governance expertise, objectivity, networking and succession planning capabilities to a firm. A structured process that aligns their skills and experience with your firm's unique needs, culture and goals, can lead to substantial value. We combine deep relationships with extensive experience of the professional services sector to help firms find the right NEDs for their specific requirements.  

For help appointing your next NED, follow the links below to discover more about our expertise, contact our authors or contact your local Odgers Berndtson office.