Advisory boards continue to be an underutilized resource by emerging, growing and scaling businesses. Consider the following if your organization could benefit from outside guidance.
Why Consider an Advisory Board?
When structured properly, advisory boards bring valuable third-party guidance and a neutral perspective to the c-suite. Advisory board members offer real-world experience, guidance, opportunities for network building, and bring immediate credibility to an organization. Additionally – and most importantly – it is often an effective way for an entity to get support help achieving outcomes that the entity has been unable to achieve on its own. Advisory board members can’t just be people to take up leadership’s time having conversations; they must be individuals capable of helping achieve targeted goals and metrics.
How Do Advisory Boards Differ from Boards of Directors?
Advisory boards are informal resources to provide strategic guidance and input, which differs formal boards of directors that have clear oversight responsibilities and legal/fiduciary obligations. The are mentors, not decision-makers. Advisory board members require a delicate balance between structure and flexiblity. Some formality is important since it is important to get dates for events like quarterly meetings (which I recommend) on the calendars of the busy difference makers you are hoping to engage. Still, there is value in finding resources who are also willing to make themselves available on an ad hoc basis to help offer feedback on unexpected developments that may arise. If someone who can add value to your organization is hesitant about your expectations or the time commitment, start by asking if they will test the role for a defined window of 6-12 months. This is likely beneficial to your organization anyway since you want to be working with advisory board members with skill sets catered to your company’s goals and challenges – priorities that inherently change quickly in growing and scaling firms.
Should Advisory Boards be Compensated?
Compensation can be a tricky subject when it comes to advisory boards. Some will tell you that compensation is a must and that “you get what you pay for”. I disagree, and say, “not necessarily”. Advisory board members may or may not expect to be paid for their time, and I know from firsthand experience that there are exceptional leaders out there who truly enjoy volunteering their time a fellow entrepreneur or innovative leader get to the next level. At a minimum, I recommend to my clients not to consider any form of compensation (either direct fees or equity considerations) until that individual has proven their value, fit with your company culture and direction and overall ability to encourage positive outcomes.
How Do We Get Started?
It is a mistake to begin outreaching to potential advisory board members before you have your internal house in order. The strategic plan of the organization must be up-to-date with key objectives, goals and clearly understood by all stakeholders. If asked by a potential candidate what the priorities are, leaders must be able to clearly delineate all of the 8 Critical Topics of Strategy (Aspirations, Assets/Challenges, Competition, Acumen, Customer, Infrastructure, Analytics and Profit Centers). To simplify the introduction, those topics should be translated in a 2-3 page overview of prospectus that conveys where your organization is, where you want to go, and how you expect advisory board members to help get you there.
What Should the Advisory Board Composition Look Like?
I encourage clients to think high level and to seek our well-rounded individuals, however, if the aims are overwhelming or the targeted candidate is concerned about time commitment, it is okay to narrow down expectations to specific tasks (i.e., geographic diversification, profit margins, capital raising, etc.). Regardless of the make-up, it is most important that the advisory board, which inherently is sought after because the busy ownership or leadership needs support, has to be manageable. Start with 2-3 leaders from the outset, nothing more. Diverse guidance is important, but sometimes too much advice isn’t a good thing.
Aim High but Be Realistic
Potential leaders that can add value will care about the company they keep and those they will be interacting with to offer guidance to you and your organization. Set the bar high, while realizing you may not be able to attract the highest profile CEOs in your industries. It is most important to prioritize individuals who can help address the specific strategic objectives and challenges of the company. Engage people who have been where you are and where you want to go.
To achieve that level of targeted expertise, I encourage clients to diversify their advisory boards in terms of:
- External Participation – Neutral, third-party guidance isn’t typically maximized when family, friends, employees or other vested stakeholders are included.
- Shared Experience (Not Necessarily Like-Minded) – Seek out individuals who can challenge your mindset and address the gaps of what you don’t excel at as a leader.
- Industry Familiarity – The more targeted the objectives, the more valuable it will be to have advisory board members who have been down the path and understand the intimate challenges surrounding your product or service
- Functional Appropriateness – It follows that if you are seeking to raise capital, it will be valuable to engage leaders with backgrounds in finance, investment banking, or that have been successful at achieving funding in their own enterprises.
- Scale & Scope – Just because your organization is aiming to grow or scale, doesn’t mean that leaders from larger entities can’t bring value. The advisory board doesn’t have to mirror you exactly so long as they have been through your experiences before.
- Entrepreneurial DNA – Strike a balance between leaders, managers and entrepreneurs. The mindset, approach and appreciation is difference for each.
Where to Start the Search and What to Look For
Knowing where to start in the candidate search can be daunting, but there are a variety of channels for outreach, starting with who you already know:
- Existing Network – Evaluate your existing network of leaders. Who has the skill sets you value and aim to emulate?
- Comfort Level – Find individuals who aren’t afraid to challenge your mindset, but that you can work with diplomatically. If you can’t have frank conversations, they aren’t the right advisor.
- Think Outside the Box – Outreach to leaders you have seen celebrated for what you value most, particularly:
- Corporate Culture (i.e., leaders from organizations that earn “Best Places to Work” status or comparable)
- Mentoring (leaders acknowledged for the volunteerism, both internally and externally
- Comparable Metrics (Fastest Growing, Most Innovative, etc.)
- Thought Leadership (Individuals known for thinking outside the box and pushing the envelope)
- Influencers (Particularly individuals who are savvy with social media and might prove willing to promote your organization and build the brand)