Business advisory boards fill a unique role in strategy and implementation, whether your company is crafting a new product line, identifying cost-cutting measures, pursuing mergers and partnerships, or changing the mix of staff skill-sets. Private equity and venture capital firms especially the ROI of applying specialized executive talent to rev-up progress at an operating company, typically through a 100-day plan.
My conversations with growing (and struggling ) businesses, investment firms, lawyers, consultants and individual executives suggest that advisory boards are powerful, long-term strategic tools if you invest in managing them well. However, many firms dont know where to find outstanding board members or relegate them to two-to-four meetings a year and a few phone calls. And, online advice about creating these boards is surprisingly generic (the highest-ranked advice-oriented links about ” strategic advisory boards, how to create” on Google are at AllBusiness.com and at Stengel Solutions).
Over several blog posts, I propose ways to use advisory boards better and interview leaders in this area.
Advisory Boards Are Not Your Usual “Boards” or “Consultants”
Strategic advisory boards are unique business support system. I define them as:
- Non-employee teams serving senior management
- With extensive experience and special expertise in sectors / functions that affect a business
- Meeting together over years, though they can and should focus on urgent business decisions over the course of several months for the best impact
They differ from:
- Boards of Directors, or fiduciary boards, which take on the responsibility and liability of being responsible for the financial well-being of a companys shareholders and for evaluating the chief executive. Boards of Directors are required for public companies, but they often are populated with influential individuals with powerful connections or access to investors, rather than industry specialists. BoDs also are expensive to staff, costing five-to six-figures per member per year, to offset the increasing amounts of time and risk fiduciary board members take on. For public companies with divisions that need strategic help, or private companies that need broader business input without being evaluated on a management hire/fire criterion, strategic advisory boards are more valuable.
- Consultancies, whose pyramid-like team structure and billing rates make them suitable for critical projects of one to several months requiring deep analysis, but less so for ongoing guidance about growth opportunities and trouble spots.
- Friends of the firm, a category in which I include advisors who arent compensated for their input. Usually these relationships are developed ad hoc, based on chance meetings or existing relationships, where the companys leader or evangelist convinces the businessperson to lend their name and be on a few phone calls in exchange for light cache. Though these individuals may receive an Advisor title on the web site, without careful selection of a group of complementary skillsets and a commitment to exploring issues at length with the firm, they usually have limited impact.
Achieving an Effective Board
High level considerations when building an effective and worthwhile strategic advisory board include:
- Compensation model. I found, through my prior business Circle of Experts, that a modest amount of cash goes a long way in getting the attention of potential advisors, and a little equity on top (a fraction of a percent) keeps their minds engaged even when not attending meetings. The total cost of many advisory boards, meeting regularly, helping with multiple decisions in detail, can be less than that of a single senior employee and less than 1-2% of equity for a start-up.
- Information sharing. Too many advisory boards meet semi-annually, and beyond that are contacted individually by phone. Thats because the companys management team has a lot on their plate and lose track of the time investment needed to support the board. Anyone who has been in a consulting field realizes how critical an understanding of a businesss culture, its operating metrics, and competitive context is to making effective decisions. Therefore, advisory boards can benefit from a light information portal where they can read a summary of relevant news and data, post ideas for discussion online immediately or in-person at the next meeting, and track results of programs.
- Evolution. For strategic advisory boards, some members will prove useful advisors over years, while others will be a best fit for specific projects. Both members and the company should explicitly discuss how their needs change and set 6 to 12 month reviews of their relationship. This makes it easier to switch to a looser stay in touch commitment , while introducing new talent.
- Facilitation. Good advisory boards are comprised of a range of personalities, experiences that interact with management to come up with new solutions. But this isnt easy. Think about staffing a consulting team where each member worked at a different firm, in a different location, put in an all members are equal starting situation. Instead, effective boards explicitly establish and regularly refine their rules of engagement, including scope of responsibility (for example, is management open to the board proposing new programs or highlighting company problems that management hasnt put on the agenda), conflict resolution (including the acceptance of vigorous debate and approaches to re recognize and address personality conflicts), meeting agendas and between-meeting time commitments. This facilitation itself takes a special skillset and experience base.
- Commitment. All of the above point to a shared commitment to exchanging information, researching opportunities, and improving process that has to occur during and between meetings. The board needs to be thought of as a strategic weapon, focused on top-of-mind questions, rather than a “nice to have on the website” marketing tool to be worth creating. In turn, some members will want to contribute even more time to your business, for example, editing a investment prospective or QAing a major implementation plan.
Next… Managing Board Dynamics
In an upcoming post on this topic, Ill be interviewing Dr. Robert Fisher, board member of the Science and Technology Corporation at University of New Mexico, Founder of the Center for Medical Democracy (a consortia of leading advisors on healthcare policy) and CEO of Fisher Leadership Strategy about his experience making boards work.