Highway to Hell
I trust you're not actually on the Highway to Hell.
In my last article, I discussed Advisory Boards and outlined some scenarios where it may be beneficial to have an Advisory Board.
To recap, successful business owners are similar to a family doctor, or general practitioner; they are required to have broad knowledge across all aspects of business. Intuitive owners understand that they cannot be an expert in all areas. In cricket, all-rounders are highly valued however, they are usually defined as a batting all-rounder or a bowling all-rounder. This indicates that you cannot be a true specialist in more than one area.
Businesses face a number of situations where specialist advice could be beneficial:
A need to raise funds
A desire to build strategic partnerships
Before making major decisions such as a change in direction, entering new markets, products or expanding the business
At the time that you start to employ professional (external) managers
If you are dealing with succession issues
Shareholder challenges or disagreements
When you want to become more strategic
If you have a specific technical or functional issue
So, you find yourself facing one or more of these decisions, you understand that it would be a good idea to form an Advisory Board. Where do you start?
Firstly it is a good idea to define the focus of the advisers. Do you need assistance with a single issue, or is assistance required across a range of areas?
As an example, if you are dealing with a specific technical or functional issue, you could recruit one or more advisers for a specified period of time, specifically to provide guidance on that issue. In this instance, the adviser would typically be a specialist in that particular field. Their role would be to project manage the process to improve or fix the issue. They might have an ongoing role to review progress or monitor performance however their scope would be very narrow.
Alternatively, the scope of the Advisory Board may be much broader. Their role may be to provide mentoring and support across all areas of the business. As an example, companies that are growing rapidly often face issues in a range of areas including; staffing, management, systems/ processes, finances and more. These companies may elect to form an Advisory Board with specialists in a range of disciplines, each advising in their area of expertise.
Where do the Advisers come from?
The first requirement is that they should be external to the business. It may be appropriate to use your existing lawyer, accountant or finance specialist however it is important that they are prepared to say no if they don’t agree to a particular strategy or decision. Their decision should not be influenced by their fees.
You also want a diverse group of Advisors, each of whom is not afraid to voice an opinion. The whole aim of an Advisory Board is to introduce new and different perspectives so you want people that are different to yourself that are willing to provide the benefit of their experience.
There is debate about whether Advisers should come from your industry. My view is that this is not essential. Business issues can be the same across a variety of industries and an Advisor from another industry may have a different or better solution to a particular issue. It may be appropriate to recruit someone of good profile that has recently retired from your industry because you may be able to benefit from their credibility and profile.
So how many advisers should be on the Advisory Board?
There is no right or wrong answer to this question. Some things to consider are:
The boards focus. If it is being formed for a specific purpose, you may only need one or two members. Even if the Advisory Board is being formed for a broader purpose you could elect to initially start with one member and then grow the members over time. A key consideration is to determine which areas you will get the most benefit and ensure that you recruit advisers in these areas first.
One idea could be to have an uneven number of advisers. There could be instances whereby the group has different opinions. If the number of advisers is equal, there could simply be a deadlock.
How long should an adviser sit on the Advisory Board?
Again, there is no right or wrong answer to this question however, it is a good idea to appoint advisors for a specific term. The term might coincide with a specific project, or could be for a 12-month period, which can be renewed. It is important that the advisors maintain their contribution to the company. If they are no longer contributing for some reason, or there is no longer any need for their area of expertise, a finite term will provide an easy trigger to terminate their involvement.
How often should the group meet and how do the meetings work?
The Advisory Group should meet at least quarterly. Prior to the meeting an agenda should be issued and any information should be sent out to the group. This will ensure that all members are prepared and ready to discuss the issues. It is also a good idea to designate at least one meeting as an “AGM” and all the board members should get together for a dinner or something similar. Ideally the Advisory Board should be a high performing team, so personal relationships are a large aspect of this.
There is no doubt that the idea of forming an Advisory Board can be confronting. An effective Advisory Board will question many things and may challenge some of your ideas. An effective Advisory Board can provide a great level of support to a business owner and propel the business to a whole new level of success.