NESTA MENTORING

PROGRAMME
The next steps
April 2010
Introduction 4

1. Amicable conclusion of mentoring 6

relationship

2. Continue informal mentoring 11

3. Consultancy role 16

4. Non-executive directorship 21

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 NESTA
to an end. Any subsequent decision to continue the collaboration
should be agreed together and must take into consideration other

MENTORING
commitments on both sides that might have an impact on that
arrangement.

PROGRAMME Depending on how well the collaboration has gone and the
sentiments of the relevant mentor and mentees, there are four likely

The next steps

options for progressing:
1. Amicable conclusion of mentoring relationship.
2. Continue with informal mentoring.
The NESTA Creative Business Mentor Network was set up 3. Adopt a consultancy role.
as a year-long mentoring programme, connecting creative
businesses with senior executives to help those businesses 4. Take on an official non-executive director.
achieve their growth aspirations. Each of the following sections illustrates the rationale behind
This quick reference guide has been created for both adopting any of the four routes. They show how the mentor could
mentors and mentees, outlining the key things to work within the business, and the potential benefits and risks for
consider before and during the final mentoring session both mentor and mentee. The purpose is to assist an informed
and illustrating the opportunities available for further decision for both parties on how best to proceed in the future.
collaboration. The information in this booklet is also for There will of course be variables depending on how strong the
individuals who would like to move from an informal personal relationship developed between the pair has been, so the
mentoring relationship to a more formal one. following is intended as a guide only.

At the end of a formal mentoring relationship, such as the

NESTA Creative Business Mentor Network, mentor and
mentee may be wondering what happens next, how they
should bring their particular relationship to an end or how
they should move to a new more formal arrangement.
In any programme it is important to provide closure and
officially end the relationship as it is. Mentors and mentees
should both acknowledge that the programme is coming

4 5
 1. AMICABLE
session both mentor and mentee can part amicably and choose to
stay in touch as often or as little as desired outside the constraints

CONCLUSION
of a business relationship.

At the final meeting

OF MENTORING It is important to provide closure and officially end the relationship
as it is. Mentor and mentee should both acknowledge that the
RELATIONSHIP programme is coming to an end, and if you decide to continue the
relationship, that is up to you.
Having engaged in the mentoring relationship for the past Please ensure that you have set a date and allow enough time for
year, both parties may feel that for whatever reasons, there your final mentoring meeting.
is no need to continue a business relationship beyond the
Following is a recommended format and questions based upon a
remit of the programme. The reason for deciding to part
NESTA mentoring session lasting two hours.
amicably and not continue need not necessarily be negative.
It may be the case that mentor and/or mentee do not have In the first hour mentees should make the most of the final
time to meet regularly with each other and both feel that mentoring conversation and focus on an important business issue
they have gained the maximum value from the relationship they are facing.
already.
The second hour is to reflect on the past 12 months and review the
In this case, there is little to do in terms of formal or legal next steps. Here are some suggested questions both mentees and
actions. In line with the arranged mentoring programmes mentors might want to focus on.
wrap-up, it would be highly recommended that both mentor
and mentee arrange a final meeting to bring the relationship Mentors and mentees ask yourself – over the past 12
formally to a close. months:
1. What did you find really useful?
How you might do this
2. What surprised you?
In the final meeting it would be beneficial for both parties
3. What would you do differently?
to look at the progress the company has made since the
mentor joined the team and to highlight key areas that 4. What aspects of the mentoring worked really well?
the company may wish to move forward on. After the final
5. What impact has the mentoring had on you/your business?
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 Mentees: the next steps for your business: Why you would choose this option
1. What would help you achieve more going forward? • You may not have the time to devote to continuing the
relationship effectively.
2. What action are you going to take to keep yourself on track
towards your goals? • The advice/recommendations you made over the past year
have been followed and implemented, thereby making your job
3. If you see the mentoring relationship continuing, what does complete.
it look like, how will it be structured?* Be honest and realistic
• You do not feel that you are adding significant enough value to
about the time needed to continue the relationship. You may
warrant an extended relationship.
not have time going forward. Consider whether you want the
relationship to become more formal and what that means for • Mentee has not chosen to implement advice given.
you both.
4. How will you make the most of the connections you made How you might do this
through the mentoring programme? • An amicable parting of ways, further to the close-out meeting.

* This booklet will help to answer question three, however it might be more Risks
appropriate for mentor and mentee to set up another meeting to discuss
this depending upon what options are being considered. • Possible loss of contact with creative company and individuals.

Benefits
• More time to dedicate to other projects.

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 Why you would choose this option
• You may no longer need external advice at this time, instead 2. CONTINUE
wishing to focus on the advice already given and having
possibly already implemented it. INFORMAL
• You may not have valued the advice from your mentor.
• You may not currently have the time to spend with a mentor.
MENTORING
How you might do this
• During a final mentoring session. It is hoped that both parties have formed strong working
relationships from the mentoring experience over the past
year. The notion of ‘informal mentoring’ suggests that the
Risks mentoring relationship will continue beyond the duration
There is the risk that in the mentor’s absence the business may not of the Creative Business Mentor Network programme,
have an impartial sounding board for new projects or an ongoing ‘on potentially in a less formal way.
the business’ perspective. Please note that the following overview considers
that despite being ‘informal’, certain parameters and
Benefits expectations of both parties should be agreed upon before
continuing the relationship.
N/A

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 Why you would choose this option Forming an agreement and understanding the terms of engagement
will provide protection for both parties. This may include signing
• Opportunity to continue adding value to a high-growth non-disclosure agreements.
business.
• Less pressure than taking on a non-executive directorship.
Risks
• With increasing regulatory and governance pressures
associated with directorial responsibilities, a structured • Any risks should be mitigated by developing a well thought-out
informal relationship may be more attractive for both parties. agreement between both parties.
• Ability to agree own parameters in terms of time and • Issue with giving specific advice – despite the informal nature
expectations. of the relationship, it is worth reiterating the importance of
setting specific parameters in the contract between what can
be deemed ‘guidance’ against delivering specific advice. It
How you might do this is expected that the relationship is very much biased on the
Despite being an ‘informal’ relationship, it is important for both the ‘guidance’ side as opposed to relying on the mentor to make
mentor and mentee to agree upon the level of engagement that the recommendations or to advise on a specific capacity. A solid
relationship will involve. contract will ensure that neither party can be legally sanctioned
should actions be taken as a result of ‘guidance’ from the
Whilst there will not be any contractual recourse if the ‘rules’ of the informal mentoring.
relationship are broken, it is important that both parties have shared
expectations to ensure no disconnects in the future. • There should be no issues in signing a non-disclosure
agreement on either side, as this is one form of protection that
As a part of this agreement, it may be advisable to consider the either party may wish to stipulate from the outset.
following when establishing an informal relationship:
• Time commitments: Will you meet on an ad hoc basis, once Benefits
a month, quarterly etc? Pre-determining this is important to
managing expectations for both mentor and mentee. • Continued engagement with mentee.
• Role of mentor: Determine if the role will involve advice only or • Ability to set parameters in terms of time and duties required.
implementation and delivery as well. • Less responsibility than a non-executive directorship.
• Financial issues: An ‘informal’ relationship may or may not
include remuneration of some kind. It would be advisable to
discuss these terms before engaging.

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 Why you would choose this option Risks
• Retain high-level, strategic advice from an industry expert. • Ensuring that the parameters of the relationship are agreed
• Avoidance of ‘official’, regulated involvement from mentor. from the outset, there is minimal risk to the company and the
individual mentee.
• You may not wish to involve your mentor officially in the
business but see value in maintaining an ‘informal’ relationship. • There should be no issues in signing a non-disclosure
agreement on either side as this is one form of protection that
either party may wish to stipulate from the outset.
How you might do this
Despite being an ‘informal’ relationship, it is important for both the Benefits
mentor and mentee to agree upon the level of engagement that the
relationship will involve. • Continued contact with industry expert (with probable deep-
seated knowledge of your business).
Whilst there will not be any contractual recourse if the ‘rules’ of the
• External, impartial advice on the business, environment and
relationship are broken, it is important that both parties have shared
competitive landscape.
expectations to ensure no disconnects in the future.
• No direct responsibility as not employed as a non-executive
As a part of this agreement, it may be advisable to consider the director. Flexibility in terms of time – however, predetermining
following when establishing an informal relationship: the amount of time likely to be required will manage both
• Time commitments: Will you meet on an ad hoc basis, once parties’ expectations.
a month, quarterly etc? Pre-determining this is important to
manage expectations for both mentor and mentee.
• Role of mentor: Determine if the role will involve advice only or
implementation and delivery also.
• Financial issues: An ‘informal’ relationship may or may not
include remuneration of some kind. It would be advisable to
discuss these terms before engaging.
Forming an agreement and understanding the terms of engagement
will provide protection for both parties.

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 3. CONSULTANCY Why you would choose this option
• Ongoing engagement with the mentee on a more formal

ROLE basis.
• Desire to remain engaged and assist growth with financial
reward.

How you might do this

• Contractually agree the remit of services that will be offered.
Choosing to hire the associated mentor as a consultant • Boundaries need to be set and agreed within the contract at
allows the mentee company access to the mentor’s skill base the outset to ensure clarity between both parties.
and network in a more formal manner without having to
install the mentor as a permanent part of the business, for • Remuneration – agree remuneration model that is
example, as a non-executive director. satisfactory to both parties (e.g. hourly rate, day rate, pro-
rata).
• Time commitment – how often will the mentor consult with
the mentee (once a week, monthly etc. for what period of
time)?

Risks
• Provided specific guidelines and contractual agreements are
in place there is minimal risk to the mentor.

Benefits
• Acting on a consultancy basis allows the mentor to earn a fee
from the company they have been working with and remain
involved with the business on a more formal basis.

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 Why you would choose this option to work with the mentor/consultant to agree this brief.
• Specialist expertise – well connected, impartial, industry 2. Agree a fee
experienced consultants can deliver solid value. Once the brief has been outlined, it is necessary to discuss
a fee that the consultant will be paid. Talk in depth about
• If you lack staff to resource specific projects. rates and build these into stage 3, the contract. Consultants
• In the case of one-off projects, it may not be practical to are not employees of the organisation and are responsible
employ a new member of staff, but a consultant could step for their own tax and National Insurance payments. Check
in to fill the knowledge and resource gap. whether VAT is included.
• Continued impartial sounding board for business. 3. Write a contract
• Flexibility (financial/time) – the contract between both parties Put together a contract with the consent of your other
can be designed to be flexible to enable consultancy to be used directors and preferably with the help of a solicitor. The only
as and when required. relationship between the consultant and the organisation is
• Flexibility (regulatory) – hiring a mentor as a consultant avoids the contract and no other employment rights exist. As such,
installing them as a member of the board and thus avoids the it is crucial to get this right from the start.
regulatory burdens that become pertinent to both parties. Consultant’s obligations: Make it clear in writing if there are
• Familiarity – having built a one-year relationship, hiring the any requirements on the consultant, such as abiding by your
mentor as a consultant would probably save time and expense organisation’s equal opportunities policy or not disclosing certain
as opposed to explaining to a new consultant the intricacies of information to third parties.
your business. Company’s obligation: The organisation’s only duty is under health
and safety legislation, to ensure safe working conditions for all
How you might do this workers and visitors to the premises.
• Agree remit of services, rates and time horizons contractually NB: It is important that both parties are aware of when a consultant
before engagement begins. switches to become a full-time staff member and as such, becomes
• There are a series of steps to hiring a consultant that can be eligible to pay National Insurance. One of the key differences
outlined as follows: between being a consultant and an employee is that employees
normally have less control over what they do and how they
1. Write a brief for the work required
do it, but they do benefit from certain legal protections which
The more specific the brief, the more effectively the
independent contractors do not. For example, only employees can
consultant will be able to deliver the work. You may choose
bring a claim of unfair dismissal against their employer.

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 4. NON-EXECUTIVE
Other factors which illustrate a worker’s employment status include:
• Working set hours, or a given number of hours a week/
month.
• Being paid by the hour/week/month. DIRECTORSHIP
• Working at the employer’s premises or at places determined
by the employer.
• Not being allowed to work for others (especially
competitors).
It is important to mark the lines in the contract where both parties This is the most formal route available to involve a mentor
see the role of a consultant in terms of time commitments, conflicts more permanently in the mentee business. This section
of interest, pay and benefits. Ironing out these issues at the start looks at how to go about moving the existing relationship
will save any confusion further down the line. into a formal non-executive directorship (NED).

Risks Purpose and role of an NED

Provided specific guidelines and contractual agreements are in place Non-executive directors are the ‘custodians of the
there is minimal risk to the mentee organisation. governance process’ and whilst they do not get involved in
the day-to-day running of a business, they are accountable
Benefits for providing oversight and monitoring of the executive
activity and contribute to the development of strategy. It
• Similar to those available in the ‘Why you might choose this
is likely that both mentor and mentee have already been
option’ including:
working on strategic direction and as such, a mentor may be
• Specialist expertise, covers lack of staff to resource projects, well placed to adopt such a role should it suit the company
continued impartiality and flexibility of employment, tangible and the individual mentor.
measurements of success.
In line with the Higgs Report, non-executive directors have
responsibilities in the following areas:
Strategy: Non-executive directors should constructively
challenge and contribute to the development of strategy.

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 Performance: Non-executive directors should scrutinise the Why you would choose this option
performance of management in meeting agreed goals and
objectives. • Formalise the existing relationship.
• Having worked with the business for a year, the mentor
Risk: Non-executive directors should satisfy themselves that may enjoy being involved at a more formal level with the
financial information is accurate and that financial controls and mentee’s company.
systems of risk management are robust and defensible.
• Remunerate the existing relationship.
People: Non-executive directors are responsible for determining • By way of salary or options, the mentor would hope to
appropriate levels of remuneration for executive directors and receive payment for their ongoing services to the business
have a prime role in appointing, and where necessary removing, and to represent the added risk they would be accepting.
senior management, and in succession planning.
• Formalised entrepreneurial mentoring.
A non-executive director sits on the board of a company alongside • In a new business, a non-executive director might act as an
the executive directors. They act as an independent voice on every entrepreneurial mentor, providing inspirational leadership
important decision. He or she will not work full-time and is unlikely and an experienced voice to ensure maximum potential is
to be concerned with day-to-day issues. reached.
Having spent the past year working with the mentee’s business, it
is likely that the mentor should have a good understanding of the How you might do this
business, which is an obvious requirement for such a role. In time,
the mentor will need to learn more about what each department A mentor looking at the option of becoming a non-executive
does and become more familiar with monthly sales figures and director should consider the following:
accounts. This will allow them to make informed decisions in the • Do I have something to contribute to the mentee’s board?
interests of the company. • Am I capable of passing judgment on the company’s
management/strategic plan/risks/alternatives/competition?
• Do I have sufficient time and am I sufficiently committed?
• Am I aware of the risks in terms of regulations? (See risks
section below.)

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 The role of a non-executive director may include looking at issues Risks
such as:
• Personal risk due to regulatory change
• Personal interest. Expectations of non-executive directors are changing rapidly,
• Duty to shareholders. and their role is under more scrutiny than before. The Companies
• Disqualified directors. Act of 1973 lists a number of transgressions that could lead to
criminal prosecutions that fall squarely on the non-executive
• Disposal of property.
director’s shoulders. The role can expose them to risks of claims of
• Governance and management. negligence quite disproportionate to the rewards in many cases.
To accept a role as a non-executive director, certain questions need
As has previously been the case, directors can be liable to
to be clarified with the mentee company including:
disqualification, the reasons for this include:
• What will be the exact relationship to the board?
• Allowing the company to trade while insolvent.
Will the non-executive director be titled as such, e.g. could
they assume the position of a ‘Chairman’ under the auspices of • Not keeping proper accounting records.
a non-executive directorship? Laying down and understanding • Failing to prepare and file accounts.
the title and fit within the organisation is key. • Not sending returns to Companies House.
• How often will the board meet? • Failing to send tax returns and pay tax.
Typically, meetings occur 6-10 times per year. Non-executive
directors will typically be required to attend all annual general In some cases, directors could also face criminal charges, fines or
meetings and any extraordinary general meetings unless agreed being made personally liable for the company’s debts.
otherwise. Disqualification proceedings are handled by the courts or the
• Agreement of remuneration Insolvency Service. If they find against the director, disqualification
Research carried out by The Institute of Directors found that can last between two and 15 years.
an average salary for a non-executive director is £17,320 , but While disqualified, directors must not:
this can vary according to the size of the company to between • Be a director of any company.
£15,000 and £26,061. Options in the business are another
suitable remuneration form. • Act as a director – even without being formally appointed.
• Influence the running of a company through the directors.
• Be involved in the formation of a new company.
• Act in a way that promotes a company.

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 Ignoring a disqualification order is a criminal offence. Fines may be Why you would choose this option
payable and prison sentences of up to two years have also been
recorded. • Good corporate governance
The role of a non-executive director is primarily to protect
shareholders’ interests, help set strategy, and monitor executive
Benefits performance in achieving that strategy.
• Financial compensation • Expertise and impartiality
A non-executive director will typically be paid for their role In small companies, non-executive directors often need to
on the board. As such, the role has a financial benefit but contribute industry expertise, good contacts and a sense of
importantly enables the individual to be a part of a growing ‘been there, done that’. It is also likely that non-executive
company and to use their knowledge to good use. directors of smaller high-growth firms may be required to be
• Personal satisfaction more involved with the business on the days they are in the
Each non-executive director will have their own reasons for office.
deciding to become involved with a company, some financial, • External innovation
some more subjective. A good non-executive director should bring innovation and
experience to the board whilst monitoring executive decisions.
The challenge for them is to remain independent of the
business and its day-to-day operations, while maintaining a
level of knowledge that will allow them to ask tough, objective
questions when necessary.

How you might do this

Being the most formal route to choose, there are a number of steps
to follow to install a non-executive director in your business.

1. Ensure the mentee company has a board in place

This is a requirement to officially install a non-executive
director. If you are just setting up a board in order to install
the non-executive director then it could just be formed of the

26 27
 management team initially. The executive team will report to • A managing director – employed by the company or
the board on issues such as budgets and governance and the who is the owner/founder of the company – who runs
non-executive director will need to gain approval from the the business on a day-to-day basis. The managing
board members before joining. director reports to the chairman and oversees the board
of executive directors.
a. Setting up a board
• A team of executive directors (management team) –
• If your company does not currently have a board, the they will sit on the board, draw salaries and manage
following outlines the key members it should include and key areas of the business, such as finance, sales and
the way this should be structured within your business. operations. They may also be incentivised with options
• Start-up companies often have one director, the minimum or a shareholding in the business.
required by law for a private limited company. The • Non-executive directors – as outlined above, the
director may also be the main shareholder and the person purpose is to advise on the strategic direction of
who runs the business. the business and decide remuneration of executive
• As your business grows, you may find that a single directors.
director may not have enough time to cover every • Having a clear structure allows shareholders to
responsibility and importantly, may become removed from understand the roles of and reasons for appointing
the real strengths they can bring to the business (e.g. executive and non-executive directors. It is a good idea
sales or innovation). In this situation, the business may to have a senior, independent non-executive director as a
decide to appoint a board of directors, with each director point of contact for shareholder grievances.
taking responsibility for a certain part of the business,
• Having a well-structured team is also beneficial for staff
e.g. human resources, finance, sales and marketing, or IT.
who often feel happier knowing who is responsible for
• If you appoint a board of directors, you should ensure which business areas and who they can go to if problems
they fall within a clearly defined reporting structure. For arise. In smaller companies, staff may well work alongside
example, the sales and marketing teams could report directors but as the company grows they may have less
to a sales and marketing director who is responsible for day-to-day contact.
strategy in that area.
• Typically, a board structure may consist of the following: 2. Present a case to the board to hire a new non-executive
director
• A chairman – often non-executive – who oversees the
whole business. Typically, once the desire has been expressed to find and
hire a non-executive director, the board may require a form

28 29
 of ‘selection’ or interviewing to occur to ensure the right Alternative option
candidate is hired. As such, a tight specification on exactly An alternative option to installing the mentor as a non-
what is required from a non-executive director needs to be executive director from the start may be to ‘test the water’
produced to manage expectations on both sides of the table. by first installing the mentor within a consultancy role that in
Defining the requirements of the non-executive director and time may progress to a full non-executive directorship post.
holding an interview to make sure that all members of the A non-executive director is allowed to deliver consultancy-
board are happy is good practice even if there is no pressure or based work but would typically be excluded from discussions
impetus from the board itself. on the consultancy contract. It is not uncommon for an agreed
initial package to include both a mixture of non-executive
Running background checks on any incoming non-executive directorship and paid consultancy.
director is standard practice and ensures that there are no
conflicts of interest (please see ‘Risks’ section).
Risks
3. Agree terms of engagement • Relevant experience
Once the board has reached agreement on a suitable Ensure that the potential non-executive director has the
candidate, it would be advisable to hire a solicitor to draft a relevant experience to suit the business ambitions. The NESTA
contract between the mentee and non-executive director that programme will have paired mentors with relevant companies
will cover some of the following: but it is important to ensure both mentor and mentee share a
• Details and requirements of the role. vision.
• Number of days available per year. • Financial cost
• Number of meetings/type of meeting required to attend. Non-executive directors will need to be remunerated on an
annual salary basis or with options.
• Remuneration package/salary and/or options.
Indemnity insurance will also be required to protect the non-
4. Register non-executive director with Companies House executive director against possible claims from shareholders.
Once the non-executive director has been selected, Companies The mentee company needs to ensure they are able to afford
House must be notified to make the position official. the non-executive directors’ salary requirements.

When contracts have been negotiated, reviewed and signed the • Proximity to the business
non-executive director can start. In accepting a directorship, the mentor would be accepting
a share of responsibility for decision-making guidance. Both
parties must be absolutely sure that the new non-executive

30 31
 director is able to work at a strategic level and also at a ‘shop • Provision of focus and clarity (focus vs. innovation)
floor’ level. Focus: In entrepreneurial companies, non-executive directors
should have an influence to moderate a CEO who by nature
• Current directorships
wants to try different things and start new projects. A non-
It goes against The Companies Act and the FSA’s Code of
executive director should provide focus to help firms stick to
Conduct for a non-executive director to hold similar positions in
their goals and achieve them.
conflicting companies. Ensuring a background check is carried
out on the potential non-executive director is important, but Innovation: The non-executive director may provide a necessary
will incur a cost. bout of entrepreneurship and suggest that certain avenues are
pursued.
Benefits • Provision of specialist knowledge
The non-executive director, if they are previously part of the
• Good corporate governance
NESTA mentoring programme, is likely to have worked in the
Recent high-profile governance failures are driving demand
mentee’s sector before. They should have intimate knowledge
for more diverse and specialised non-executive directors as
of the industry environment and the competition.
businesses appreciate the benefits of having the right people
on their boards.
A good non-executive director will help drive strategy and
make big decisions with the company. From a governance
perspective, having the right and well-respected non-executive
directors on board will ensure that growth comes in the
appropriate manner and will help boards look more attractive if
and when fundraising.
• An impartial, questioning voice
Good non-executive directors will challenge ideas and issues
whilst also provoking new thoughts.
• Not a ‘day-to-day’ role
Being removed from the everyday running of the business, non-
executive directors see risks and opportunities in the market place
that are sometimes overlooked by the executive management.

32 33
 FURTHER
NON-EXECUTIVE
DIRECTOR
INFORMATION
The Combined Code (2003), Higgs Smith and Turnbull
Guidance and the Sarbanes-Oxley Act.
The Law and Practice of Corporate Governance by Mark
Womersley of Osborne Clark is reputedly the ‘go to guide’
for detailed information on NED positions.

34
NESTA
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research@nesta.org.uk
www.nesta.org.uk