Q&A WITH RALPH KUGLER, CHAIRMAN OF MorphCostumes
How did you come to this role?
I worked at Unilever for many years in general management, latterly as a member of the main board. When I left, I was keen to get involved with entrepreneurial businesses, and for the last seven years that’s what I’ve been doing – either as a non-exec chairman or director, often investing myself and frequently backed by private equity.
What do you enjoy most about the role?
It’s all about the people. At AFG, I found a great team of young, dynamic entrepreneurs and that is highly motivating. I’m also a businessman. I’m excited by growth and this was a business with great products and brands, operating in an exciting space and demonstrating real potential. My starting point is always the relationship between the key people – the founder/entrepreneur, the CEO and management team, other shareholders and the non-exec. In the case of AFG, we have complementary skills and we get on well; there is a mutual sense of respect, and everyone is pulling together in the best interests of the business.
This is very different to working in a plc board?
What I think is fundamentally different with working with smaller businesses is that you need to roll your sleeves up and get involved. It’s not just a matter of sitting down at the board table. You need to be available to the business as it needs you and regular interaction with the CEO is key. But it’s also important to realise that it is management making the decisions at the end of day. As a non-exec, you are helping them to make better decisions.
Small and medium sized businesses – many of which are still young – have particular needs. What is it that they get from a non-exec?
SME businesses with a strong proposition and growth potential are spoilt for choice. Sometimes it is hard for them to step back from the day to day and non-execs bring objectivity and an ability to prioritise. One of your jobs is to help management make the right choices.
With AFG, where have you seen an immediate opportunity to make an impact?
We’ve been talking to a large retail customer – and it’s somewhere I have been before. We’ve thought about how to approach these discussions, what our priorities are and where we will and won’t negotiate. It’s been an engaging and rigorous process. There are all sorts of ways that this discussion could have been played; there was no one right or wrong answer. But we thought it through carefully, we agreed, disagreed and debated. As a non-exec, it is helpful to be the one to facilitate disagreement so that issues can be looked at from all directions, and then you stand behind the outcome.
What are the qualities needed to be a good non-exec? How do you make it work to best effect?
I think the most successful non-execs in small businesses are informal and their most important role is that of mentor to the CEO and management. This means regular dialogue outside formal meetings. Style is important – in my view it’s best to be frank, honest and straightforward.
If there’s a generational difference then it’s important to make sure there’s a good rapport and shared values between individuals. When you go into a business for the first time, the immediate challenge is to listen before you speak. I realise that the management knows more about the business than I do, so I listen and learn.
And a non-exec mustn’t swamp the management and try to become a quasi-CEO themselves. When you come in from the outside, you also need to appreciate that everyone on the board may not of be of the same mind. Different viewpoints are healthy and the job of the non-exec is to make sure that they are discussed and that everyone can have their say.
Sometimes management will make decisions that you don’t agree with. That is their prerogative. Some humility is important. A non-exec needs to remember that they are being employed for their experience not for their ego.
Are you always expected to have the answer?
No, but you are expected to be confident in helping to tackle the issue at hand. You need to help the team to achieve the best outcome and this is likely to be a collaborative process. Sometimes we get it wrong and when we do, it’s important to learn from it.
Does it help to bear some of your own battle scars?
Working with young businesses is not always plain sailing. All businesses hit roadblocks. What’s important is how they recover from them.
As a non-exec, you also need to learn from your mistakes and bring the benefit of that insight to the board table. Being able to see when a large influential customer is being unreasonable for example. It can be a very difficult thing for a young business to have the confidence to walk away. So you advise and you support.
What is your level of commitment?
At any moment, I hope my businesses think that they are my priority. The time commitment becomes superfluous. It’s about where I can add value. Certainly the role is more diverse than attending board meetings – and there are misconceptions out there, particularly among people who have never before worked with a non-exec. The agenda has to be driven by the CEO but certainly I’ve been to trade shows with management, met and paid respect to important license partners and customers – the role is varied and that is part of the appeal.
What do you see as the main obstacles to growth for SMEs?
Financial resource, of course. And human resource – it is important to make sure that you have people who are capable for the next phase of growth. You need good leadership and an entrepreneur who is employing a group of mates is very likely not to be doing the best for the long-term health of his or her business. Small businesses also need to invest in training, Lastly, innovation. Good ideas can be copied and superseded. So you need to continue to innovate and retain your unique position or someone else, probably a larger competitor, will eat your lunch. SMEs can go up like a rocket and come down like a stick if they don’t stay ahead of the game.