I was asked by a friend to help his team think through how to create an Advisory Board. Here goes:
– Don’t ask friends, customers or vendors (bankers, CPA’s, suppliers) to serve as Board members — you already have access to their opinions but it may not be easy for them, or in their best interest to be brutally open and honest with you.
– Clearly define what you want out of an Advisory Board member in terms of time commitment and interaction (i.e., face-to-face meetings vs phone calls, monthly or quarterly, etc).
– Clearly define how formal or informal you expect the interaction with the Board to be (i.e., highly structured meetings vs informal team dialog/rap sessions).
– Identify what functional or experiential areas your team is light on now, or may be light on relative to future growth areas, and use to Board candidate identification process to help address this.
– Make sure you have internal consensus on whom the Board is supposed to advise (helping the CEO is very different from helping the entire leadership team).
– Think through carefully how much “insider” business facts you’re really willing to share with the Board (high level generalities will appeal to certain potential Board members while being a complete turnoff to others — ditto for the other extreme sharing of deep strategic, financial and operational details).
– Reflect on what type of folks, behaviors and temperament your leadership team respects and listens to — and those that they don’t. Target potential Board members that fit this influence profile.
– Be honest with yourselves about what you want back from Board members in the way of feedback and dialogue (e.g., general sounding board vs hard challenges to critical thinking).
– Unless you’re running a non-profit, you should expect to compensate your Advisory Board members. Obviously what you expect of them drives what “compensation” means. Usually stock not cash – something like $15,000 – $50,000/year. Of course you’ll also be expected to cover all out-of-pocket expenses. Wait — why won’t Advisory Board members want to work for “free”? The deal is people and businesses don’t value what they get for free — and great candidates already know that and will be wary to sign on to a “no skin in the game” experiment.
– Decide at the outset an initial term for the Advisory Board members — a good starting point might be 2 years.
The reality is that it’s really hard to get a high quality Advisory Board built and working — partly because your Company isn’t used to caring a whole lot about what outsiders want and think — partly because great potential Advisory Board members are already successful, and busy, and not looking for any new hobbies — and partly because making a Board work effectively takes lots of scheduling, preparation, document sharing, time and dialog. That said — great Advisory Boards do get created every day and can be very effective in helping companies and their leaders navigate growth.