It’s lonely at the top! Countless times business owners have said: “I have no one to talk to.” If the owner discusses their business with others, it is often ad hoc rather than regular, organized discussions. In addition, the owner may not feel comfortable having strategic discussions with their employees.
So what is an owner to do? How about organizing an active board of advisors?
The dilemma for the business owner with this recommendation is that they have generally not been accountable to anyone. It can be a difficult adjustment for the owner to suddenly have a group of successful business people critique every aspect of their business and provide input in a (hopefully) diplomatic fashion.
Here are some suggestions to make a Board of Advisors a valuable tool for the owner:
Make it Legitimate – Network and search for potential board members with varying backgrounds and experiences that can make an impact on the business. Do not include on the board only friends and family, “yes men/women,” and those that will tell the owner only what they want to hear.
Include Individuals with Varying Experiences, Disciplines, and Relationships – After all, the point of the board is to include individuals with complementary skill sets to provide a breadth of advice to the owner and complementary relationships to be able to make valuable introductions.
Take it Seriously – If the owner does not take it seriously, the board members will not take it seriously. Taking it seriously can mean creating a schedule of meetings, preparing for each meeting, distributing information in advance of each meeting so that members can come to the meeting prepared, being receptive to an open dialogue that includes criticism, and keeping the board members informed between meetings
Be Accountable to the Board – While a board of advisors differs significantly from a board of directors and the owner can “fire” board members at any time, the owner must have some level of accountability to the board in order for it to be effective. If the board asks the owner to research a topic or consider a strategy for the next meeting, the owner should do it, otherwise the board members may feel that their efforts are not being taken seriously by the owner.
Incentivize the Board Members – The board members want the owner to take the board seriously. Similarly the owner wants the board members to take their involvement on the board seriously. The best way to incentivize board members to take their board position seriously is to pay them for their participation. Payment can include an annual fee, equity incentives such as stock options or profits interests, or a combination of both. The cost associated with incentivizing board members should be considered an investment that will result in an increase in revenue and earnings and an increase in business value.
Another incentive could be a board retreat at a golf resort or spa. The retreat could include both business and pleasure and include spouses for the social activities. Payment by the company for the members’ expenses is effectively “payment-in-kind.”
How should the owner assemble a Board of Advisors?
The first step is to identify the type of individuals that the owner would like to include on the board. Based on the member profile, the owner may already know some individuals that would be a great fit for the board. Those individuals may also be able to suggest other candidates. Retired business people could be a great source of board members as well. They have significant experience, expertise, and relationships but are at a point in their life that they would prefer to provide advice rather than operate a company. Finally, the business department of local colleges may be able to suggest some individuals that could be good board members. Once the list of candidates is assembled, the owner should interview the candidates to confirm that they have the experience and interest to meet the board’s objectives, they would be complementary to the board, and they would take their involvement seriously.
In conclusion, while the owner may not have ever considered organizing a board of advisors or may have had concerns about organizing a board of advisors, a well formulated board of advisors can be a terrific sounding board, offer new and innovative ideas, provide varying perspectives based on their business careers and experiences, and overall be highly additive to the owner and their company.
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