Explore the ScaleUp Annual Review 2022

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Building up board-level expertise

Scaleup leaders have consistently recognised the need to build up their leadership and management capacity. In this year’s scaleup survey, the development of the skills of senior management teams remains a high priority for many. Central to the development of internal capacity is support from peers, mentors and non-executive directors – and the annual survey shows that seven in ten scaleups either have a board of directors or are planning to establish one. Unsurprisingly those who are planning to establish a board consider it vital to have access to networks of potential non-executive directors who have experience of growing a business with 7 in 10 saying this is vital or very important to their plans, with 4 in 10 of those with a board already in place desiring better access to such a network.

Having the right advice and board structures in place are vital for scaleups to achieve their full potential – and it starts with the appointment of a chair. “A chair has to be an independent voice, acting as a coach to the founder and helping to advise and shape the senior leadership team,” says Ken Whipp, programme director of Scale-up Scotland

A chair needs to have a track record of leading scaling businesses, particularly to help first time founders avoid some pitfalls, says Cate Poulson, head of the BGF talent network, one of the largest groups of board-level non-executives in the UK and Ireland and which has made more than 400 non-executive appointments in the past ten years. “That need for experience and to bring in diversity of thought remain strong requirements.”

However, specific sector experience or niche product knowledge is less of a requirement. “What we want are people who know how to help take a fantastic concept that is starting to gain commercial traction into a truly scalable business,” says Poulson; this is particularly the case in sectors such as cleantech.

In terms of board structures, Whipp says that he sees quite a range among companies joining the programme. “If they have raised some sizable equity funding, they tend to have non-executives in place. Others might have advisory, rather than formal, boards. Some founders are still struggling with relinquishing tasks and entrusting them to capable executives. But of all the companies who have been on the programme, the ones who have grown fastest and quickest are those who have formal structures in place.”

“If you don’t have external investment, you might think you don’t need a board,” says Professor John Anderson, programme director of Strathclyde University’s Growth Advantage Programme. “Listen – build a great board!” 

For many scaleups, their main question – and challenge –  is knowing whether the appropriate people are available.

“It’s rare that we can’t talk to management about two or three really high quality people,” says Cate Poulson. “For someone who has exited their business, or who is already an established non-executive, working with a funded scaleup is an exciting prospect – it’s fast-paced and agile and they can bring tangible value. A few years ago we began to say that candidates did not need to have been a chair previously in order to be a chair of a BGF portfolio company. That opened up our pool further.”

Cohort members on Scale-up Scotland do tap into the programme’s wider network and will also be pointed towards potential candidates through the programme’s partners, says Whipp. And while Scotland’s “pool of formally registered non-executive directors is too small and not sufficiently diverse,” he says that “there’s a raft of talent out there who could make very good non-executives; they need encouragement and a route map. For many exited entrepreneurs, becoming a non-executive can be a great way of giving back to the ecosystem.”

However, the search boundary is not limited to the central belt of Scotland. Companies in the Scale-up Scotland programme have board members based elsewhere in the UK as well as overseas. Access to the international business network Global Scot means the Scottish scaleups can tap expatriate Scots to become non-executives – they may be based abroad but they do travel back to Scotland periodically during the year.

As companies scale, there is a need to build up non-executive capacity to the board. “Typically, we like boards to be fairly lean,” says Cate Poulson, “as they can make decisions quickly and be agile. The chair will be more involved with the CEO than in a large corporate environment.  But increasingly, we are seeing the need to have another board member, usually with digital or international skills. There are attributes that are necessary for a chair but you can be more creative when appointing a second non-executive.”

There are alternatives to boost senior management capacity without immediately bringing more non-executives on board. 

BGF has developed eight pools of functional “expertise on demand,” senior board-level executives who are not necessarily interested in joining the board as statutory directors on a long term basis but who want to consult and advise. “They will operate in different ways,” says Poulson. “Some will join effectively as a board adviser and come to every board meeting; others will engage for an intense period on a particular project; some can be involved on a short and sharp basis, perhaps just talking to a CFO for a few hours.” 

And here, she says, there is no shortage for candidates. “The Covid pandemic has accelerated the number of people wanting a flexible, plural way of working and who have seen that it is reasonably straightforward to be connected to interesting, fast-growing businesses.”

Another area is the concept of board apprenticeships, where high-performing individuals from large corporates can join the board of a scaleup for a year as a non-voting director. The scaleup gains insights from a different perspective. (For example, a scaleup in the FMCG sector could gain great benefit from having someone from Diageo sharing their insights at board meetings.) It provides continuing professional development for the board apprentices, exposing them to innovative, high-growth companies as well as exposure to main board operations far sooner than they might in their corporate career.

“We are encouraging some of our portfolio companies to look at board apprentices,” says Cate Poulson. “Structured programmes such as Board Apprentice have begun to emerge but it has taken time for scaleups to embrace them. After all, if you are running a scaleup you don’t have a lot of time thinking about the best constitution of your board; so you need your investor or chair to do the work and find these kinds of solutions.”  

The changes in working practices that were accelerated by the Covid pandemic open up opportunities for scaleups and the composition of their boards. “Doing away with the artificial restrictions of demanding physical attendance of all board meetings does massively open up the talent pool,” says Ross Tuffee, a non-executive director and former founder who participated on the Scale-up Scotland programme. “One of my boards meets face-to-face once a quarter – to which we also attach visits to customers – supplemented by monthly one-hour Zoom calls.”

“We are back to seeing board meetings being held in person because our chairs didn’t just want to see the board but to see the whole business,” says Cate Poulson. “There’s still huge power in face-to-face meetings, seeing the sites and so on. But most chairs are not holding every board meeting in person. There’s now a hybrid model; say, one in three being held in person as well as strategy days.”  

Virtual ways of working also open up the possibility of more international boards. “Four of our non-executives are US citizens, or are based in the US, as that is where the greatest demand is coming from our portfolio,” says Cate Poulson. And BGF is also extending its talent pool in key European tech centres as well as Australia and south-east Asia. In addition, she says, BGF is thinking about how to build its network in China.

In 2023 the ScaleUp Institute will work with Innovate UK EDGE and the collective ecosystem to develop a new Non Executive Director Hub in a private sector collaboration bringing together leading players to further enhance access to key skills at a board level.

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