Many companies create advisory boards with great intentions. Unfortunately, they don’t always do the best job and the board becomes a chore for everyone involved or is abandoned out of apathy and frustration. Having a clear purpose for you and your members and a plan for building and managing your board can greatly increase your chances of success and having a powerful impact on your business.
As a successful entrepreneur, former Inc 500 CEO, and, currently, an executive coach, I’ve been asked to serve on several advisory boards over the years. Some had been successful and allowed me to have significant impact on the business. Others have been a waste of my time and the companies’ money. Today, I often help business put together advisory boards and help recruit members. Here are several recommended considerations that can help drive success.
Know the Difference between a Board of Advisors and a Board of Directors
People often get these confused. Generally, a board of directors has some sort of fiduciary responsibility to investors and/or shareholders in a company. They are there to protect the folks they represent and generally have voting rights in high-level decisions and have some control over management. Boards of advisors do not have this type of responsibility and power.
Advisors are there to provide insights, resources, opinions, and perspectives to leadership and management. Making sure you and your board understand this is an important first step. Confusing these can mean that you’re using your advisory board in the wrong way. It can also mean that you’re not getting the right people or the people you want on your board because they are turned off out of concern for legal risk (board or directors usually, or at least should, be insured and protected/indemnified against litigation liability).
Decide What You Want Out of an Advisory Board
Advisory boards can serve many purposes. Some boards provide information about industry or markets, other boards know about operations and management, and others provide access to key resources and external credibilities. These are different purposes. Being clear with yourself so you can be clear with board members is important. What you choose as a focus depends on you and your business.
I usually suggest leaders to identify where they are weakest and where a board could have the most impact and focus on that intersection. Look at your current strengths and weaknesses. If you don’t have much experience with finances and operations, focus your board on finding people with that experience in your industry. If you need access to key markets, recruit members with a reputation and large rolodex. Picking a specific focus will help you find and select members and get the most out of their involvement.
Brainstorm All the Possible Things You Can Offer Members
First, I generally suggest companies don’t offer equity for board members. It’s too complicated and leads to problems if you need to end a relationship. Further, I also suggest that you don’t focus on monetary compensation to start with. (I do suggest you cover any and all expenses and, if appropriate, a small honorarium.) Equity and money miss the opportunity to appeal to a member’s desire for more intrinsic rewards such as community, reputation, and the satisfaction of helping a meaningful cause. Don’t underestimate the value you can offer advisors. Think about things like reputation, networking, and industry insights. The more you can think out of the box on value, the more options you’ll have to recruit.
Decide How You Want to Meet and Interact with Your Board
It’s important to have a clear plan for when and how you engage your board. Generally, boards meet as a group on a regular basis. However, you might want one-on-one time with some or all advisors separately. Think about the benefits of each and what will serve you best. Timing can be anywhere from monthly to annually. Generally, I suggest quarterly meetings as that gives a nice balance between seeing your board too often and not having anything to really discuss and too infrequently and not receiving enough input on key decisions. Some boards alternate between meeting in person and via video conference to ease travel time and costs. Meeting in person at least once a year provides for more meaningful connections with, and between, board members.
Develop and publish an agenda for your board meetings. The one thing that kills a board’s enthusiasm is feeling like your time is not being used efficiently. Know what you want to discuss and what input you want from members. Provide sufficient background and details prior to the meeting with enough time for board members to review. I suggest at least two weeks in advance. You want to spend your board time discussing and working out ideas, not reading documents and presenting background materials.
Decide Who Has Involvement and a Relationship with Your Advisory Board
Some companies I work with set up an advisory board just for the owner(s) of the business. Others include several members of the management team and senior staff in board meetings. Either is fine, but it’s important to work out the logic and logistics beforehand and set expectations for both the board and the company. Consider why you have an advisory board and what you expect to get out of it. If you want to focus on operations and delivery, you probably need members of your operating team involved. If you’re more focused on long-term strategy, you might not. You can also pull in key managers to discuss specific topics. Also consider what information managers and employees will go out to employees and make this clear to board members. If minutes are being distributed, it might change what advisors are willing to say and you don’t want there to be any miscommunications.
Create an Advisory Board Agreement
Advisors should be treated like partners. And like any good partnership, the expectations, terms, and scope of the relationship should be defined and detailed in a clear document. Draft an agreement you can give to potential advisors once they express interest in serving. Be willing to make changes, but offer initial details so a member can see expectations and the relationship you’re envisioning. Be sure to include things like time commitments, meeting logistics, expected preparation work, and what you expect with respect to phone calls and emails between meetings. Other things to consider are terms regarding confidentiality, non-disclosure and publication, non-compete, termination, and resignation.
Have a Clear Term Limit and Renewal Provisions
I strongly recommend that you have a term limit for all advisory board members. This will ensure you have a means of keeping your board fresh and engaged. Generally, I suggest one to two year terms with any optional explicit renewal provision. This makes it easy to retire board members who either turn out not to be a good fit or fade over time. It also allows you to change the focus of your board as the company grows and the needs change. I also feel that advisory boards benefit from new blood. Fresh ideas and perspectives from people who haven’t been steeped in the history can be exceptionally valuable.
Strike a Balance between Commonality and Diversity
I find great boards have a well-crafted balance between commonality and diversity. Too much commonality and you risk group think and anemic discussions but too much diversity and members can’t build on ideas and collaborate effectively. When targeting and recruiting board members, consider a range of factors: size of companies they’ve worked with, types of roles they’ve had, general views on their domain, etc. Read things they’ve posted and look at their profiles. Also consider personalities and communication styles and how these will affect communications and group dynamics. Don’t fall into the trap of putting together a fan club. Push yourself to create a board that will challenge you and add valuable insight and cover your blind spots.
Creating a focused plan for your advisory board can be a lot of work, but taking the time and care to do so will great improve the contribution a board can make. I’ve served on several advisory boards and it’s always clear to me when a company takes the time and care to create a good plan and a win-win relationship. They’re a pleasure to work with and leave me energized, engaged, and willing to give my all.
Bruce Eckfeldt is an entrepreneur and former Inc 500 CEO. He provides executive and team coaching and management training to startups and high-growth companies. For more information on Bruce and how he can help you and your company, visit http://www.eckfeldt.com or contact him at firstname.lastname@example.org.