This is an interesting little book that does a very good job at telling a story about a big issue. It comes at an opportune moment as corporate governance and directors’ liability are hot topics. It is valuable simply because it contains practical advice about the governance of small to medium enterprises (SMEs), a relatively neglected type of organisation. The author draws from research, as well as from his 25 years of experience (and that of others) in consulting and SME directorships.
The author believes that books and other advice about directorships focus principally on directors of large, publicly listed organisations. He believes that his book therefore fills a clear gap when it comes to practical handbooks for those specifically involved in SMEs in the unlisted sector. He is of the opinion that although there are common areas of responsibility and attention for non‐executives across the entire spectrum of organisation types and sizes, the SME sector offers a quite particular set of demands and priorities to be faced.
He bases his book on what he has done and what he has learned, supported in some cases by empirical research and references to others. The first part of the book is an examination of what it takes to be a non‐exec in general, with an assessment of the relevance to SMEs. The second part has eight case studies drawn from his own experience that illustrate the corporate life of a non‐exec in the SME sector.
Chapter 1 addresses the non‐exec's function. Coverage is given to the over‐riding responsibility to exercise a duty of care as the base of all functions and responsibilities. Emphasis is then given to the need for all directors to work on the business instead of working in the business, with the prime areas of activity being strategy, policy, resources and performance. The need for a non‐exec to add value is a theme throughout the book. The author suggests that the principal role for a non‐exec in an SME is probably to augment the knowledge, skills, and experience of the full‐time management team, supplemented by a “teaching” element in guiding the executive directors through a kind of transition between being “managers” and being “directors”. There is also coverage of non‐execs in the public sector.
Chapter 2 expands on the principle thesis of the book – that SMEs are different and their requirements of non‐execs are different from those of larger businesses. Coverage is provided on the management characteristics of the typical SME, the evolution of a company, the psychology of the small business, and the special circumstances of both a new start‐up and a family business.
Chapter 3 examines the competencies required of non‐execs, accompanied by a discussion of how these competencies relate to SMEs. Here, the author draws his experience as part of a study of non‐execs and their links with high performance in the boardrooms of UK companies. A total of 25 distinct competencies were identified, grouped into four clusters of: thinking, influencing, getting results, and self‐managing. Some five competencies were categorised as distinguishing directors as “the best from the rest” – initiative, strategic influencing, self‐development, positive self‐image and flexibility. The other competencies were categorised as “threshold” – important enough to be a criterion for effective non‐exec performance but not necessarily each to be crucial by itself.
A relatively lengthy Chapter 4 examines the question of whether there is a universal SME non‐exec. The competencies mentioned above are part of the picture, but coverage in this chapter is also given to the roles expected of an SME non‐exec: leader, mentor, confidant, thinker, doer, evaluator, networker, and terminator. There is also a discussion on the perceived role of “mole” – where a non‐exec has been placed on the board of a subsidiary company by a parent company or when acting as a nominee for a third party, such as an investing institution.
The author is clear that, in an SME, there is a requirement for a non‐exec to be both pro‐active and engaged. But the need to be involved must be balanced by the requirement to maintain an element of distance, to not become part of the management team of a company. The author suggests that the true mark of an effective SME non‐exec is the ability to find and activate this balance, and that this is the real summation of the five distinguishing competencies of Chapter 3 and the eight roles in this chapter.
The author has done a tremendous job of demonstrating what the input of non‐executive directors should be and how their strengths can best be applied, especially in an SME. There are no lists neatly summarising the functions, roles and competencies. The world of an SME is complex, fast‐paced and (mostly) focused on survival, and Smithson has explained everything in this context.
The target audience for the book are people undertaking positions as non‐exec directors in SMEs and those appointing them or brokering such appointments. This is a valuable and thoroughly readable book, which I highly recommend.
