How SMEs and Scale-Ups Can Afford the Very Best Executive Directors on a Budget
For an SME or scale-up to succeed, its board and executive team needs to be at the top of their game. They’re responsible for business strategy. They have to find the plans and processes which will allow the firm to grow. Adding more experience, knowhow and skill to the pool of decision makers is a great way for any firm to progress.
Unfortunately, the very best executives don’t come cheap. They’re often out of reach of smaller businesses with more limited budgets. That is, if those businesses want to hire them full-time. Taking on executive directors on a part-time or interim basis is a far more viable option. It allows SMEs to enjoy the knowhow and abilities of the very best executive directors. All on a budget.
Running a scale-up or an SME is a continuous balancing act. The long-term aim of any such company is always to grow and progress. Growth and progress can often only be achieved with significant investment. For a business to survive in the here and now, however, it must also live within its means. The budget of most SMEs is limited at best.
Decision makers at smaller companies have to find innovative ways to move forward. They can’t endlessly invest more money in an effort to grow. That would be a mistake that could prove terminal. When frugality is a must, there are a surprising number of creative solutions which SMEs can turn to.
Read on and you’ll learn about a creative way in which SMEs can still get the very best executive directors. The kind of high-level decision makers that can be key to a firm’s progress. Hiring such individuals in the traditional sense is often beyond smaller businesses. They can be brought on board on a part-time basis, however.
Part-time directors can provide invaluable assistance when needed. Below, you’ll learn all you need to know about outsourcing to bring part-time directors on board.
What Are Executive Directors?
Executive directors are members of a company’s board. They also have management responsibilities within the firm. They are company employees at the senior executive level, as well as being board members. On top of their day-to-day duties within a firm, they also contribute to the decision-making of the board. They are tasked with helping to determine the business’s overall strategy. As well as performing the other functions of their role.
Executive directors are joined on most boards by non-executive directors. They’re board members who do not have responsibility for daily management or operations. They’re employed by businesses purely to help with the big picture. To contribute to overall strategy and aid the board’s decision-making. What exactly, though, do different executive and non-executive directors do for a firm?
What Do They Do?
Executive director is a catch-all phrase. It describes a range of different roles within a company. All executive directors sit on the business’s board and play a role in high-level decision making. Exactly what they do for their organisation, however, depends on their specific role:
- Chief Executive Officer (CEO) – A firm’s CEO is the man or woman in charge. They’re responsible for the business’s overall operations and performance. They must maintain corporate policy and help shape a firm’s long-term strategy. Sometimes, a business’s CEO will also be the chairperson of the board.
- Managing Director (MD) – The MD of a company plays a similar role to the CEO. In fact, the two roles are often confused. An MD is one of the most senior positions at any business. Unlike a CEO, though, they’re often more focussed on managing the day-to-day operations of a company. They will generally report to the chairperson of the board. They still also play a key role in high-level strategy decisions.
- Chief Operating Officer (COO) – A COO is another high-ranking member of any business’s board. Their duties are typically threefold. They’re responsible for day-to-day running of key departments. Such as manufacturing, sales and distribution. They also work to implement processes which improve the efficiency of those departments. Finally, they report back operational information to the CEO.
- Strategy Director – These directors focus on a firm’s position in the wider industry. They collect and evaluate information about the industry and wider market trends. They then use that information to inform discussions and decisions regarding business strategy. Their overall aim is to define a path toward success and keep a business on that path.
- Chairman and other Non-Executive Directors – It’s obvious that non-executive directors are different to executive directors. It’s worth mentioning them, though, as they also play a key role on company boards. They’re board members who aren’t a part of your executive team. Instead, they’re focussed on planning, policy making and monitoring performance.
How Much Are They Paid?
It should now be clear that executive directors are high-level employees. They’re skilled and experienced individuals who take on lots of responsibility. The way they’re paid reflects that responsibility and the high-level skill set they have.
Take the position of CEO as an example. According to recent statistics, the average salary for a CEO in the UK in 2019 is £89,020. On top of that, they’re also typical rewarded with an average annual bonus of £19,918. Alongside around £35,000 in other remuneration. That represents an average outlay of close to £145,000 per year for a firm to their CEO alone.
Plenty of CEOs earn more, of course. Other executives also typically command a lower average salary. Those stats do reveal something important, though. That is that taking on new full-time executive directors isn’t viable for many SMEs. There is a way, however, that those firms can still afford the very best executive directors.
How Can SMEs and Scale-ups Afford the Best?
You may think that the high remuneration commanded by executive directors puts the best people beyond the reach of SMEs or scale-ups. Fortunately, that isn’t the case. Due to an innovative and increasingly popular practice. The practice of outsourcing senior company positions to part-time operatives.
A smaller enterprise is able to bring on board a CEO, COO or strategy director for a fraction of their usual cost. They can choose how often and how much the director’s services are available to them. For instance, an early stage business with a low budget might bring the part-time Director on board for say only one day per month. More established companies might prefer 2 or 3 days a week. They can still benefit from their expertise and perspective without breaking the bank.
It’s not all about salary, either. There are other ways in which hiring part-time directors is kinder on an SME’s budget. Outsourcing a senior position does not incur a recruitment fee, which employing full time often can. Unlike hiring a full-time board member. An SME also doesn’t have to worry about negotiating an annual bonus or benefits package.
The executive directors SMEs and scale-ups can afford on a part-time basis can be of a higher grade. Their operating budget is no longer an obstacle. They can benefit from the skills and knowhow of the best executives. Cost-efficiency isn’t the only benefit of the part-time director route, either.
Other Benefits of Part-Time or Interim Executives
Hiring part-time executive directors allows SMEs access to a higher level of executive. That’s not the only benefit of choosing to outsource a senior board position, though. The following are other reasons why interim executives may be a better option for SMEs:
- Flexibility – A firm’s relationship with a part-time director can be tailored to their exact requirements. The business can scale up or down the level of advice provided as needed. Ending such a relationship is also far more straightforward. Part-time Directors can be hired on a fixed term or monthly review basis. If things aren’t working out, an SME has an easy exit available.
- Specific Expertise – Taking on a full-time director often takes months. Hiring an interim executive can be done in a matter of days. Outsourcing in this way, then, is a great way for a business to respond to a particular problem or challenge. For example, a board might be facing an issue that falls outside their field of expertise. They may have a problem with their digital marketing, infrastructure or technology. To nip the issue in the bud, they could quickly hire an interim director with digital expertise.
- Focus – Experienced and skilled executives brought onto a board on a part-time basis can give an SME’s issues their full attention. A full-time executive may have other duties. A part-time or interim director can focus on strategy and planning to meet a firm’s challenges. Often, such high-level executives can get three or four days’ worth of work done in two days or less.