UK firms that have appointed non-executive directors (NEDs) to their boards have grown their revenue a third faster than those without NEDs.
According to research by recruitment firm Edward Drummond, UK firms in the top 100 with at least one NED have grown their revenue by an average of 12 per cent since the peak of the recession in 2010. The figure contrasts with just 9 per cent growth for those firms in the same bracket without an NED on their boards.
Just 24 per cent of the UK’s top 100 firms currently have one or more NED sitting on their management board. Edward Drummond director Dan Watt said that was because “the idea of law firms needing to behave like companies is still relatively new”.
He continued: “Roll the clock forward four or five years and you will see a higher percentage.”
The research shows that there is a growing trend towards firms adopting corporate management structures as a way of gaining competitive advantage, in addition to bulking up their commercial expertise.
Watt said: “The reason why firms are looking for non-executive directors is not that they bring specific sectors or knowledge or connections with them. Rather, it is someone who can take that strategic or helicopter view of the business.”
He added that NEDs can help firms to find out how to attract new clients and engage with new clients.
Neill Fry, another Edward Drummond director, said in a statement: “Law firms that have good corporate governance structures certainly aren’t exempt from failure, but they are more likely to have more stringent processes for making strategic decisions.
“The key to appointing a director who will help deliver turnover growth is finding the right individual who offers a mixture of strong commercial expertise and who also understands the unique structure and demands of the professional services sector.”
The firm followed others including Weightmans (13 March 2014) and Ashurst (29 May 2013), which also added external members to their management boards for the first time during the 2013/14 financial year.