How to Set Expectations and Boundaries as a NED: The Complete Guide

What's the #1 cause of friction between Non-Executive Directors and SME founders? If you answered "expectations," you're absolutely correct.

The Root Cause of Failed NED-SME Partnerships

The disconnect between what a business owner expects from their NED and what the Non-Executive Director believes their role entails is the root of most failed board relationships.

One founder recently shared: "I hired an experienced finance director as my first NED, but they spent the first three meetings critiquing my management style rather than helping with our cash flow challenges."

Another NED expressed their frustration: "The owner brought me in for my expertise but then resisted every recommendation I made."

This disconnect happens far too often, especially since setting clear expectations from day one is the foundation of successful NED-SME partnerships.

Let's explore four essential "Must Haves" at the start of every NED-SME partnership to establish proper boundaries and expectations in your roles.

Must Have 1: The Role Definition Conversation

Setting expectations begins with the role definition conversation, which is absolutely non-negotiable. It's dangerous to assume that you and the business owner share the same vision of your role without explicitly discussing it.

SME owners often have vastly different expectations of their NEDs than what's commonly understood in larger companies. Remember, the SME-NED market is relatively untapped and fertile for Non-Executive Directors looking for lucrative roles. Yet, new opportunities often come with a need for helping educate and raise understanding.

Your decades of experience and expertise are valuable only when properly aligned with the business owner's needs and expectations. Instead of assuming your role follows standard governance definitions, initiate a conversation about expectations before accepting any position.

Cover critical areas like:

• Meeting frequency and format
• Communication between meetings
• Decision-making authority
• Reporting expectations
• Access to information and people

One technology NED shared: "The most valuable conversation I had was asking the founder to describe what success would look like after 12 months of working together. His answer completely reshaped how I approached the role."

Clarity creates partnership in NED roles.

Must Have 2: A Structure for Your First 90 Days

The first 90 days in any new role sets the pattern for your entire tenure. Patterns established in the early days of your appointment tend to become permanent features of your working relationship, making it crucial to establish boundaries right away.

I recently spoke with an executive who struggled with an SME owner constantly calling at all hours with operational questions. When I asked when this pattern began, she admitted: "From day one—and I never addressed it directly."

SME owners look for directors who can be clear about engagement parameters while still being accessible and supportive. Rather than allowing scope creep or unclear boundaries to develop, establish clear working principles in your first few meetings.

For example:

• When and how you'll be available between meetings
• What constitutes an urgent issue requiring immediate attention
• How information will flow to and from the board
• Clear delineation between governance and operational involvement

A manufacturing business owner shared: "The best NED I ever worked with set clear boundaries up front but was flexible when genuine emergencies arose. It gave me confidence in when I could reach out."

Structure creates freedom in NED-SME partnerships.

Must Have 3: The Right Balance Between Challenge and Support

The art of being an effective Non-Executive Director lies in finding the right balance. As an experienced executive, your instinct might be to immediately highlight problems and challenges you see in the business. But too much challenge too soon can undermine the trust necessary for a productive partnership.

SME owners need both challenge and support—but the balance shifts as the relationship matures. A business adviser who works with family businesses explained it perfectly: "In the early days, support should outweigh challenge by about 80/20. As trust builds, you can move toward 50/50. But jump straight to 50/50, and you'll never get the chance to build that trust."

Instead of leading with your critique, start by demonstrating you understand the business, respect what the owner has built, and are there to help rather than judge.

Trust enables truth in board relationships.

Must Have 4: Written Documentation of Your Understanding

It's essential to document your mutual understanding to prevent future misalignments. Verbal agreements are valuable but easily forgotten or misinterpreted.

Documenting your shared understanding of the role, responsibilities, and working relationship provides a reference point when misalignments inevitably arise. A PE investor who appoints NEDs to portfolio companies told me: "We've learned the hard way that undocumented expectations lead to confusion and conflict. Now we insist on a clear board mandate document for every appointment."

This doesn't need to be formal or legalistic. A simple one-page document covering key points like:

• Primary areas where your expertise will add value
• Decision rights and escalation paths
• Communication protocols
• Key priorities for the first 6-12 months
• Success metrics for your appointment

One NED who sits on multiple SME boards shared: "Having a documented understanding has saved me from difficult conversations numerous times. When scope creep begins, I can gently refer back to our original agreement."

Documentation prevents disagreement in NED roles.

Building Successful NED-SME Partnerships

The success of your NED-SME partnership depends less on your technical expertise than on how clearly you establish and maintain appropriate expectations and boundaries.

When you include these four "Must Have" elements when negotiating and working with SME owners and founders, it reduces the chance of misalignment.

As someone who has appointed Non-Executive Directors to my businesses and advised executives making this transition, I've witnessed talented individuals fail not because they lacked knowledge, but because they never clearly established how that knowledge would be applied.

The most successful NEDs are those who invest time upfront clarifying expectations, documenting the shared understanding, and revisiting it periodically as the relationship evolves.

There's nothing wrong with being flexible and responsive to the business's changing needs. In fact, that adaptability is a hallmark of effective Non-Executive Directors. I'm simply cautioning against the ambiguity that leads to frustration on both sides when expectations aren't explicitly discussed and agreed upon.

Establishing Clear Boundaries in Your NED Role

Have you experienced challenges around setting expectations and boundaries? What methods have you developed to establish clear boundaries with business owners?

The key to a successful NED-SME partnership lies in proactive communication, clear documentation, and the wisdom to balance challenge with support as trust develops over time.