No business is too small to benefit from a strong group of advisors, but when, how and why should a company consider building a formal Advisory Board?
An Advisory Board can be thought of as a management think thank– both a sounding board and a source of ideas and honest feedback. The Advisory Board should be composed of people who have a genuine interest in the business and a desire to see it succeed. They are outside counselors acting as a strong extension to the existing leadership, and often to the board of directors. It’s time to consider forming an Advisory Board when the company’s growth warrants providing the CEO/Entrepreneur of the company, or Executive Director of a non-profit, (hereafter referred to generally as “leader”) with a formal group of allies with whom to exchange in order to increase his/her bandwidth, address business development priorities and strategic product direction, brainstorm about strategy and/or discuss pressing issues.
Recruiting members for the Advisory Board should not be done lightly. It is important for the leader to examine the opportunities and threats the company faces, and to assess what qualities would best complement his/her own strengths and weaknesses and best serve the organization’s needs. Reflect on where you need external support for operations, growth, innovation, financing, investment strategy options, go to market strategy, leadership and human resources, to name a few. Once the charter of the Advisory Board is clearly defined, it is beneficial to determine the number of people and their respective roles and key attributes. Setting high standards to attract quality people is important.
When you know what you are looking for and have defined a profile for each member it is time to look at who best fulfills each role. There need not be many people on the Advisory Board– two-to-three individuals for a small business is more than sufficient. I have been part of large advisory boards of 15+ people, and it is not easy for the leader to really and fully leverage all members on a board that big.
Very often Advisory Boards are little more than lists of great names, and in my opinion the real value is in the absolute dedication of each member, not the list. Prioritize the quality of members over the quantity of members. See if anyone in your immediate network can take on the roles that you have defined. If so, interview each potential member with clarity, and without hesitating to name the specific requests you have of them– the worst that can happen is that they say no to joining the board!
If you don’t know anyone with the profile that you have defined, reach out to your network and to your Board of Directors (if you have one) to ask if anyone knows someone who may fit. Consider retired executives and seasoned leaders, field experts and renowned specialists as well as a couple of individuals who could eventually be candidates for your Board of Directors. It is also wise to consider recruiting a stellar client and a successful business partner for your Advisory Board when you are scaling your business and need to confirm some strategic options. Remember that your Advisory Board is meant to be on your side, not against you. Surround yourself with people you can trust, who truly care about your business and do not hesitate to express diverse views through successes and tribulations.
To ensure that the leader maximizes the current and future success of the organization with its Advisory Board, it is imperative that each individual who accepts a role on the board is not overly committed. It is not uncommon for those involved to fail to fully evaluate the demands of the engagement.
Advisory board members should expect to meet with you as a group on a quarterly basis, or more than once a year, and a couple should be prepared to interact with you on a more regular basis to bounce around ideas, advise and facilitate introductions. Be prepared for each Advisory Board meeting with thorough planning, creating an agenda and distributing it ahead of time along with any necessary materials.
Remember that unlike Boards of Directors, Advisory Boards have no legal or fiduciary obligations or responsibility to the company, its owners and investors. While many Advisory Board members volunteer their time, in some circumstances they should be compensated for their attendance at each meeting, and while the fee need not be excessive, it should be fair. Finally, as with members of the Board of Directors, you should evaluate the performance of all participants on a yearly basis.
Let me leave you with a practice as you contemplate building an Advisory Board:
- Write down your strengths and the areas in which you have room for improvement as a leader
- Outline the strengths and deficits in your management team’s experience
- Note the areas that are most challenging for your company and the issues where you would welcome support
- Identify who in your network has experience in your industry (or industries that you strategically target)
- Identify who can best help you create opportunities, versus simply solving problems
- Identify who has a network that can benefit you and your company and would likely be prepared to open it up to help you
- Determine how your Advisory Board will complement your Board of Directors and enable you to evaluate potential future board members.
Be mindful to avoid confusion, and be clear regarding the boundaries between Advisory Board and Board of Directors activities. Think of “Advisory” for “advice”– niche, specific and digging deeper into a sector or addressing a problematic matter.