An NED crisis is holding back Scotland’s scale-ups - Tanya Gass

In this high-stakes game of growth, independent advice is not just valuable – it is essential. Increasingly, scaling businesses are turning to non-executive directors (NEDs) to provide this crucial perspective. NEDs bring a wealth of experience and insights that can help navigate the treacherous waters of growth.

However, getting the right advice is not always easy. New research conducted by BDO and executive search firm Norman Broadbent among 200 UK Board Directors reveals a growing chasm between the demand for quality NEDs and the available talent pool. The study highlights a particular shortage in NEDs with deep understanding of specific industries or product markets – precisely the kind of expertise that scaling businesses desperately need. According to our research, half of all SME respondents said industry knowledge was the most valuable technical competency for a NED.

For Scotland's ambitious scale-ups, this talent shortage presents a significant hurdle. These companies often require their NEDs to wear multiple hats, providing guidance on everything from market expansion to investment strategies. The ask is greater, the challenges more complex, and the risks higher. Yet these are the very businesses that often have less financial muscle to attract top-tier talent.

The problem lies in a misalignment of incentives. As the responsibilities, time commitments, and risks associated with NED roles increase, the rewards are not keeping pace. Many potential NEDs feel that the compensation offered by scaling businesses doesn’t justify the increased demands and potential liabilities they might face.

This mismatch is contributing to a shrinking pool of the most valuable NEDs – those with experience at C-Suite level – which threatens to stall growth. Without access to seasoned advisors who can provide industry-specific insights and strategic guidance, these scale-ups may find themselves making costly mistakes or missing crucial opportunities. We risk seeing potentially game-changing businesses plateau prematurely or, worse, fail entirely due to preventable strategic missteps.

Addressing this challenge will require a multi-faceted approach. Scaling businesses need to get creative in how they attract and retain NED talent. This might involve offering small equity stakes, performance-based bonuses, or other incentives that align the NED’s interests more closely with the company’s success without compromising their independence.

Additionally, industry bodies and government agencies should consider initiatives to support scaling businesses in accessing high-quality advisory talent. This could include subsidies for NED compensation or programs that match experienced advisors with promising scale-ups. It is also worth noting that good advice doesn’t have to come from NEDs alone – board advisors without fiduciary duties could alleviate the often-unappealing personal liability that comes with sitting on the board.

The road to growth for Scotland's scale-ups is fraught with challenges, but securing the right guidance can help business leaders navigate choppy waters. As we look to the future of our economy, ensuring that our scaling businesses can access advisory talent must be a priority. The success of these firms isn’t just their own – it’s Scotland's success too. It’s time we bridged this talent gap and unleashed the full potential of our scaling businesses.

Tanya Gass, Partner at Norman Broadbent