If you are looking for a fresh perspective on family business matters, but not ready to be bound to follow the recommendations of outsiders, an advisory board may be the perfect vehicle. Unlike a fiduciary board of directors, members of an advisory board have no decision-making authority. Their role is to provide non-binding, strategic advice to the company’s owners and management team. This independent insight can be critical when confronting difficult decisions around succession, growth, diversification and other significant challenges. When forming an advisory board, be careful, proactive and well-organized.
- Select Advisors Carefully. Be diligent in selecting appropriate candidates for your advisory board. This is your chance to expand your circle of influencers. Consider avoiding those you already know well or with whom you work professionally – you are already benefitting from their insight. Ask a lot of questions and check references. Look for those with a skill set or experience that your organization may be lacking. Do they have contacts that may be helpful to your business? Do they have conflicts of interest that outweigh any benefit that they may bring to the table? Think about what is the ideal number of advisors and how the members will get along with each other.
- Set Clear Expectations. Use a written Advisory Board Agreement to detail the roles and responsibilities of advisory board members. Include your expectations around time commitment and effort. Spell out the compensation arrangement - virtually all advisory boards pay their members, but the compensation can vary widely based upon the anticipated level of involvement and the necessary level of expertise. The most common compensation arrangement is to pay a per meeting fee and reimburse reasonable expenses. Include broad confidentiality protections.
- Educate Your Advisors. Be intentional when onboarding your advisors. Prepare a notebook with key information about the business and its owners. Spend time with the advisor to bring him or her up to speed on the nature and history of the business, its special advantages and its unique challenges.
- Control the Agenda and Meetings. Proactively frame the specific issues that you want your advisors to focus on. Be laser-focused and realistic. Many advisory boards fail due to the lack of advance planning and a “shotgun” approach to the issues facing the business. Keep control of the advisor meetings. These are talented individuals with lots to contribute, but don’t let one advisor dominate the discussion or shift focus elsewhere.
- Give and Request Feedback. Much can be gained through open communication and constructive criticism. Evaluate the performance of the board and its members each year. Let members know what they are doing well and which areas need improvement. Solicit ideas on how you can improve the board’s efficiency and effectiveness and how you can do a better job. Set new goals for the coming year.