Why Every Board Should Set Objectives and Appraise Non-Executive Directors

Non-Executive Directors (NEDs) play an increasingly pivotal role in the growth, success and governance of family business, scale—up, PE backed enterprises,  corporate entities and third sector organisations They are appointed not to run the day-to-day business but to provide independent oversight, constructive challenge, and strategic counsel. Yet, despite their importance, too many boards appoint NEDs without clearly defining expectations, setting objectives, or providing structured feedback.

As both a NED and a Chair, I’ve seen first-hand that clarity, accountability, and review are just as important for non-executives as they are for executives — albeit framed differently.

The Difference Between Executive and Non-Executive Roles

Executive directors are immersed in operations: they are accountable for delivery, managing teams, and executing the business plan. By contrast, NEDs:

·       bring independence of thought and external perspective,

·       act as a “critical friend” to executives,

·       safeguard governance and compliance, and

·       ensure decisions are aligned with long-term shareholder and stakeholder interests.

The responsibilities may be the same in law, but the emphasis is different: executives do, non-executives scrutinise, challenge and support.

Setting Clear Objectives at Appointment

A strong appointment process doesn’t end with the role description. Boards should define, in writing, the specific objectives each NED is expected to deliver during their term.

These might include:

• Bringing sector-specific expertise (finance, digital, international markets).

• Expanding networks or stakeholder relationships.

• Strengthening governance or risk oversight.

• Contributing to succession planning or cultural change.

Clear objectives make expectations measurable and help assess return on investment (ROI) in both qualitative and quantitative terms.

Terms of Office and Succession Planning

Best practice is to appoint NEDs for a fixed term — often three years — with renewal subject to appraisal.

This ensures:

• A balance between continuity and refresh.

• A framework for structured rotation.

• Avoidance of “group-think” from static board composition.

Planned succession supports diversity, fresh thinking, and resilience.

The Appraisal Process: More Than a Box-Ticking Exercise

An effective annual appraisal reviews a NED’s contribution across five dimensions:

1. Contribution to Board Work – attendance, preparation, quality of input.

2. Governance & Oversight – accountability, compliance, risk management.

3. Strategic Value – expertise or networks brought to the table.

4. Board Dynamics – behaviour, collaboration, constructive challenge.

5. Future Fit – alignment with evolving strategy and needs.

The best boards combine self-assessment, Chair or peer review, and sometimes 360° feedback.Crucially, reviews should tie back to the objectives set at appointment — otherwise they risk becoming generic.

Measuring ROI for Non-Executive Directors

While NEDs aren’t evaluated on operational metrics, their impact is still measurable through:

• Enhanced governance and risk resilience.

• Strategic initiatives shaped or accelerated.

• Improved board culture and decision-making.

• Strengthened reputation and stakeholder trust.

These qualitative indicators can be tracked through structured board evaluation and Chair feedback.

Raising the Bar on Board Effectiveness

Objective-setting, appraisal, and succession planning are cornerstones of board behavioural dynamics — the way boards operate as cohesive teams.

Governance research consistently shows that boards who invest in these processes are more effective, resilient, and trusted.

As Chairs, we must ensure NEDs are not treated as honorary roles, but as purposeful, accountable appointments that add measurable value. Transparent expectations and regular reviews aren’t bureaucracy — they are the levers of effective governance.

Conclusion

The NED role is distinct from that of an executive — but no less accountable. By setting clear objectives, defining term limits, and conducting meaningful appraisals, boards can ensure their non-executives deliver tangible value.

Done well, this strengthens governance, enhances strategy, and supports long-term organisational success.

Ready to strengthen your board’s effectiveness? If you’d like support developing objective-setting frameworks, appraisal processes or improving board behavioural dynamics, we can help.

Get in touch to discuss board evaluation or NED appointment support.

Frequently Asked Questions

Why should non-executive directors have formal objectives?

Because clarity drives accountability. Defined objectives help ensure each NED contributes measurable value and aligns with the board’s strategic priorities. It also supports fair appraisal and ROI assessment.

How often should NEDs be appraised?

Best practice is annually, with a more comprehensive review at the end of each term (typically every three years). Regular reviews help maintain performance, board culture, and strategic alignment.

What should be included in a NED appraisal?

An effective appraisal covers contribution to board work, governance oversight, strategic input, boardroom behaviours, and future fit against the organisation’s evolving needs.

How do NED objectives differ from executive objectives?

Executive objectives focus on operational delivery and KPIs. NED objectives focus on strategic contribution, oversight, challenge, governance, and value-added expertise — not day-to-day management.

How can boards measure the ROI of a NED?

Through qualitative indicators such as improved governance, enhanced risk resilience, strengthened culture, greater strategic clarity, and the value of external networks or expertise the NED brings.

Should NEDs always have fixed terms?

Yes — fixed terms (often three years) with renewal based on performance help promote board refreshment, reduce complacency, and prevent group-think.

What happens if a NED isn’t meeting expectations?

The Chair should use the appraisal process to give honest feedback, offer support or development where appropriate, and make succession or rotation decisions if needed.

What role should the Chair play in NED objective setting and appraisal?

The Chair is responsible for ensuring objectives are clearly defined, reviews are meaningful, and the board operates with high behavioural standards. They also hold NEDs accountable for contribution and performance.