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What makes an effective agency NXD?

What is an agency NXD?

Agency NXD, Non-Executive Director, Non-Exec, NED. Whatever terminology they use, many agencies are now utilising the skills of an experienced person who is not directly involved in the running of the business but supports the directors in its development.

NXDs are not the sole preserve of the agency sector of course, far from it. The role of an NXD originated and is widely used in larger companies and in particular PLCs across sectors. Indeed, an independent director who oversees the executives’ management of the company is a key requirement for many organisations whose shares are publicly traded.

Historically, these NXDs were very experienced retired or semi-retired former executives. Increasingly, NXDs are now younger and either employed as an executive at another company, running their own business or even operating as a portfolio NXD.

There are many benefits to having an NXD. They are particularly highly prized in larger companies. Stakeholders can take comfort in the fact that there is one, or often several, NXDs monitoring and challenging the activity of the executive team. As NXDs are not full-time they are comparatively cheaper and can act as a sounding board for directors and a safety net for non-director shareholders.

The role of an NXD

The role of an NXD is to hold the executives to account for the delivery of the business objectives.

NXDs are focused on 2 areas; governance and growth. Whilst good governance is crucial to any organisation. In a smaller business, and in most independent agencies, it is the pursuit of growth that usually takes precedence.

Running any business can be exhilarating, fulfilling, challenging and frustrating. When you’re running an agency you can experience all these emotions in a single afternoon! 

Its a cliche of course but it can be lonely at the top of an organisation. As an agency principal, even if you’re not a sole director, it can feel like you have nobody to turn to for advice or counsel. Balancing the demands of your clients and your people can seem like an impossible task.

Having a supportive agency NXD who understands your challenges and has walked in your shoes can be of great asset to your business.

It is appreciated that NXDs cannot give the same continuous attention to the business of the agency. However, it is important that they show the same commitment to its success as their executive colleagues. 

The characteristics of a good NXD

NXDs are usually selected for their personal qualities, experience and specialist knowledge. Its vital that they not only possess wisdom, but are familiar with current trends and developments.

Some of the key characteristics of good NXDs are:

– Independence – it’s crucial an NXD has a strong relationship with their exec colleagues but retaining a level of independence is key. It not only provides objective scrutiny but enables the NXD to maintain a “helicopter view”. They must not get too close to the business so that they can’t see the bigger picture. This is usually why the directors need an NXD in the first place.

– Challenging but supportive – the NXD must be able to probe and challenge without creating conflict. They need to be constructive and diplomatic so they can ask difficult questions whilst offering support and guidance on problematic issues.  Mutual trust is vital.

– Courage and integrity – NXDs must have strong principles and the courage to stand up and say if they feel something is wrong or risky. Despite being engaged by the business, they require the courage to disagree.

· Great communication skills – they must be able to communicate complex ideas clearly and without being dictatorial. They should command respect but listen and absorb information as much as they talk and have input.

– Deep understanding of the business – whether they have industry experience or not, they need to quickly understand the products/services, the culture, the management team and the customer base. 

– Breadth of experience – we are faced with more operational issues than ever before. Reputation management, health and safety, ethics, social responsibility, risk and technology are all vital areas to observe when running a business. Companies need NXDs with specific knowledge and experience to frame discussions around these areas.


My own experience

We had a total of 6 people who operated as our agency NXD over the 15 years I was running my agency.  A number of our NXDs had agency experience, others had very little agency knowledge at all. At the time, this was a conscious decision on our part. We wanted to work with people who had different perspectives. This included other agency experience but also client-side and similar businesses operating in different sectors.

Looking back, I consider the people with agency experience to have been more effective as they hit the ground running and needed less context around some of the issues we discussed.

We chose to work with one NXD at a time, but we could have appointed more than one person.  In hindsight, I think this would have further supported and accelerated our growth. That said, we were in a fortunate position. Not every agency has the ability to invest in one agency NXD, never mind two or more.

The benefits of an agency NXD

In addition to the benefits to the agency outlined above, one of the key things myself and my business partners wanted from an agency NXD was personal growth. We recognised that even if you are not the sole director, leading an agency can still be a lonely role. It can also be a hard position from which to achieve progress in personal development. You’re often fire-fighting and switching your attention between interacting with clients and staff. It can leave little time or outlet for you to develop your own skills.

I’m a believer that you can learn something every day from anybody, but even if you are working with incredible people as I was, there is a massive benefit to bringing in external knowledge, experience and opinion. It’s not just about expanding the gene pool though. You can get very comfortable and familiar with your business partners and work colleagues. Too comfortable. Challenging them and yourself to improve your performance in the agency can become harder as time goes on. 

When we sat down in a board meeting it was hard for us to challenge each other if certain actions hadn’t been completed. We usually knew what had taken priority instead and invariably we ourselves were in a similar situation.

With an NXD in attendance, we knew that they wouldn’t be aware or concerned by the reasons why certain objectives hadn’t been met. We all raised our game when it came to these meetings as we knew an external person was attending and we wanted to ensure we continued to make a good impression on them.

Thinking back to the non-execs we used, whilst they all brought different perspectives, support and additional knowledge to the table, the real benefit for us as directors of an agency was the added accountability they instilled in the business.

This was the real value I got out of working with an agency NXD.

Do you need an agency NXD?

If you’re agency owner considering working with an NXD, I would ask yourself 3 questions:

1. Why do I need an agency NXD?

2. What benefits do I want them to bring to the agency?

3. What sort of person do I want to work with?

The reality is nobody needs an agency NXD. They need somebody to help the problems they are facing.

I see a lot of agency owners considering agency NXDs as a new business channel. Independent directors can bring a larger network into your agency and this can, in theory, bring new client opportunities. In reality, I’ve never seen this really bear fruit. If this is the primary reason to appointing an agency NXD then I would think about the position again.

No matter what level of experience you have, there is always an opportunity to learn from others. Whilst an agency NXD is likely to have more experience than you, even if they don’t, they will definitely have different experiences than you. That said, it’s vital you think through and articulate what value you want them to bring to your business. How will you – and they – measure their success?

As with all recruitment, nobody really wants additional headcount. You want the value that a person can bring, not the role itself. Good chemistry is crucial though. You must connect and enjoy working with the agency NXD as much as you do the other members of the senior team.

Gareth Healey
Gareth is the founder of Beyond Noise. He has 25 years experience in the agency sector. A business coach and mentor, he works exclusively with ambitious owner-directors of established independent marketing agencies.

Grow Your Digital Agency

Gareth Healey speaking at the 2019 Grow Your Digital Agency Summit with Robert Craven

Grow Your Digital Agency Summit 23rd October 2019

I was asked by Robert Craven to open the inaugural Grow Your Digital Agency Initiative Summit. On 23rd October I joined close to 100 agency leaders and agency growth coaches, some of whom had flown in from as far afield as North America for a full day of presentations, debate and networking. 

The day was a massive success and surely will become the first of many Grow Your Digital Agency conferences. I look forward to the next one, but in the meantime, you can read a transcript of my speech below.

Good morning GYDA!

I’d like to start by taking you on a quick trip back in time. Back 20 years to 1999…some of you may have been still at school or at least still in education. Mark Zuckerberg certainly was. He was a freshman in High School. He did have a website though, although Facebook was just a twinkle in his eye.

Meanwhile, in Yorkshire, I was starting a new job as an account handler at an agency in Leeds. Gratterpalm wasn’t a great name for an agency but it was an established design business with about 35 people. A family business, it was run by a very charismatic and successful chap, but it was very much his baby and everything started and stopped with him.

It was something of a surprise when just 3 years later he approached 3 of us about doing a management buyout so that he and his wife could take early retirement. Once we looked up what a management buy out was…it seemed like an opportunity too good to miss and we acquired the agency.

Over the following 15 years we grew the agency into one of the largest regional agencies in the country. We evolved into a large integrated agency, embracing broadcast media, digital and everything in between, We worked with some of the biggest brands in the UK – ASDA, Greggs, B&Q, Ladbrokes Coral, Pets at Home, DFS

Three partners became just the 2 of us and we achieved £12.5M Turnover with an EBIT north of £2M. We acquired a London digital agency giving us a headcount of 175 and putting us in the top 1.1% of businesses in the UK by employee numbers. Of course, like many GYDA members we were award-winning, but the award I was most proud of was the Investors in People Gold accreditation.

Despite being CEO and equity partner for 15 years, by 2017 I’d had my time with the business. I needed a change and a new challenge so I exited selling my shareholding to my business partner and I now work as an independent consultant and with Robert on the GYDA Initiative.

So what did I learn in 15 years of running an agency?

Of course, I learned a lot. We made plenty of mistakes but had our fair share of successes too. So to open the GYDA Summit, I’m going to briefly take you through the following:

Some things we AMAZINGLY well

Some things we could have done BETTER

A couple of things I RECOMMEND you do as GYDA agency

One thing you simply MUST do.

Things we did amazingly well…

We understood SIZE is not a strategy. We didn’t obsess about growth. We obsessed about doing a great job. Indeed for marketing agencies, especially in today’s market, it is the smaller agile specialists that are more geared up to thrive. Our growth was a consequence of our actions rather than our plans. We were 100% client-focused and got a kick out of making clients happy and delivering for them. Consequently, they tended to give us more and more work.

We built STRONG relationships. We hated losing clients. We were great at client retention and brilliant farmers (if you are familiar with the analogy of hunters winning clients and farmers developing them). We were certainly not harvesters, we took retaining clients VERY seriously and as a consequence had 3 or 4 clients with a relationship of 10 years or more. A project from a new client was only ever a foot in the door in our view. The long game was always to retain them and if possible land and expand into other areas or channels. We specifically targeted clients that need ongoing support and monthly of not weekly output. We created, if not always contractual monthly recurring revenue, certainly monthly relationship revenue. A client service ethos ran right through our organisation. We learned so much from our clients as well as gave them a lot. It’s for another time, but frankly, I’m worried that modern agencies don’t have the service ethos we did. I’ve witnessed levels of service or attitude to clients that I just wouldn’t find acceptable (although not from GYDA members I hasten to add!)

We nurtured our people and our CULTURE. Your clients can never be happier than your colleagues. People and talent are the lifeblood of every agency, and a good culture is obviously important to any business. They say 1/3 people you hire are great, 1/3 are OK, 1/3 are a disaster. We managed to disrupt those odds. When they did leave for whatever reason people always used to say it was the people that made the agency.

We embraced the NUMBERS. From Day 1 we had a firm grip on then finances and internal metrics. Maybe we had to as we’d done an MBO, mortgaged our houses ad loaned money from banks (yes GYDA you could do that back then!).

We focused on a NICHE market. We were specialists. When we bought the agency we quickly realised our niche was retail. Maybe it’s not a niche I would choose now with the High Street announcing retailers going to the wall every other week. As owners who were client-facing people we enjoyed the knowledge and authority we had in this area. We were seen as experts and this gave us confidence. We understood retailers, we knew their problems and how they liked to work, we were familiar with their terminology. We didn’t need someone to explain it to us. We onboarded clients far quicker and easier. We benefitted from referrals of course.

We GREW with the agency. We navigated the growth journey, learning and adapting as we went. My business partner and I transitioned from Account Handlers to Business Owners to CEO. It wasn’t always easy and we did make mistakes but we were willing to learn, retain the essence of our values but adapt our style and approach. We tried to grow as people and as leaders as the business grew. I can’t tell you what the secret was, but it was rooted in an acknowledgement that the same systems and process and thinking that helped you to survive, are not the same ones that help you to thrive. You can’t operate a business of 5, 15, 35 people in the same way you do 55 or 155.

We deployed and optimised a lot of PROCESSES. Consistency is a friend of growth. Complexity is an enemy. Repeatable processes helped us run a more efficient and predictable agency. We were transparent with the results and clear on the goals.

Things we could have done better…

So what would I reflect on what we could have done better, and what might I recommend you do to grow your digital agency?

We DIVERTED from our specialism. Focus scales, depth does not. We had a strong market niche in retail and had the focus to maintain it for a long while, but we succumbed to pressure to broader. Don’t do that GYDA members!

We didn’t evolve our CULTURE. Monitor the impact your culture has on your business model (beyond service). We had a great culture, but it was designed to deliver one outcome; no mistakes. We prided ourselves on accuracy and attention to detail. This made us a lot of money, but it limited our creativity.

We were poor HUNTERS. Marketing and sales are different things, both are your responsibility as the agency leader GYDA members. We entrusted our New Business to a succession of New Biz people. Sales is the last thing you should stop doing as an agency owner.

Things I recommend Grow Your Digital Agency Initiative members do…

These are some of the things I definitely recommend you do to grow your digital agency…

Have a Long-Term vision but a Short-Term activation. Making plans is great but executing plans is better.

Productise and Systemise. Scaling means serving many customers frequently. You can’t do this if you don’t have the right processes in place.

Create digital ASSETS and IP. Scale needs reach and a successful sale (of your agency) needs assets to maximise the value you receive.

Solve client problems and deliver VALUE. Don’t be a service business, be a solution business.

Enjoy the journey and enjoy the Grow Your Digital Agency Summit

“It’s not the destination its the journey” Ralph Waldo Emerson.

Too many agency owners I know are focused too much on the destination. A sale or “value creation event”.

Don’t think about the end (the exit)…think about making the journey better.

Enjoy the journey, it really is the best part.

Thank you GYDA!

 

Gareth Healey
Gareth is the founder of Beyond Noise. He has 25 years experience in the agency sector. A business coach and mentor, he works exclusively with ambitious owner-directors of established independent marketing agencies.
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