Creating and Managing an Advisory Board
by Margot Fraser and Lisa Lorimer
We love to hear stories from entrepreneurs who went against the grain; who trusted their instincts instead of listening to conventional wisdom; who believed their vision of what was possible, found a niche, explored fresh ways of connecting with their customers, and figured out how to stay ahead of the curve.
During the early times of idealism and excitement, most of these entrepreneurs did everything themselves. They made the sales calls, developed the products, provided the services, wrote the checks, answered the phone, and swept the floor. This is an important part of the life cycle of a business. But if we remain in this mode, our companies will be only as strong as a single leader.
To make our businesses sustainable enough to grow and create livable work for all stakeholders, the way we operate needs to shift at some point. As this shift happens, we become more knowledgeable about our industry; we begin to make use of conventional wisdom; and we need to ask for help and to know when to delegate and when to hire people who know more than we do.
What has helped us during the tough times? Honestly, getting help. In particular, an advisory board can be a lifeline. This is a place to talk about your business, share your challenges, discuss your numbers, seek out new revenue streams, talk through problems with key employees, and figure out the next steps.
It’s a place to lift your head up, away from those feet that are stomping out the daily fires.
Advisory Board Basics
There are no hard and fast rules about advisory boards, but some of the basics are:
Advisory board members are consultants to the CEO selected by the CEO.
Members represent a variety of functional expertise and experiences.
An advisory board provides people you can talk to (leading a values-based business is lonely).
The advisory board has no fiduciary responsibility.
It can be as large or small a group as you want it to be.
It can be formal or informal.
The goal of an advisory board is to help the CEO do a better job and be a better leader in creating a sustainable, healthy company.
Ten Tips for Forming Your Advisory Board
1. Search out people who know more than you do. Most entrepreneurs are either experts in a functional area or generalists (which is to say they aren’t experts at anything). It is important to know what you don’t know and then surround yourself with people who know more than you do in areas critical for achieving success in all your bottom lines.
2. Find people who can stand up to you. People who work for you are inclined to agree with you. Even members of your board of directors are likely to be friends who know you well. For an advisory board to be effective, you need honest feedback, so it is important to get people who are willing to say, “That’s an interesting idea, but have you thought about it this way?”
3. Don’t be afraid to ask anybody. Most of us are inclined to ask only people we know well to be on an advisory board. But the key is to identify the areas where you need the most support and find people who are best able to give that support to you. You will probably be surprised by how many people are willing to help. (They may realize, even at the outset, that they too can learn a ton from the other smart people around the table.)
4. Be prepared to have regular meetings, with one or two email updates between them. It helps to have a formal meeting structure that reinforces the seriousness of the board. Prepare for advisory board meetings as you would for regular board of directors meetings. At least a week in advance, send the advisory board members an agenda, a report identifying current issues, and recent financial statements. If you do this, the advisory board members will take their work more seriously, and you will get better and more meaningful feedback.
5. Feed them (and water them and caffeinate them). These people are spending their precious time with you, focusing on your business, so treat them well. That shows respect for their role and their advice.
6. Pay them. Paying your advisory board members shows that you value the advice you are asking for and that their effort and input are important. Payment also helps you take meeting preparation more seriously. Your focus and the board’s focus improve when you show you are serious by paying for the members’ time.
Payments don’t have to be big. Some people pay $100 or $250 or $500 per meeting. Do what fits with the size of your business and the status of your cash flow.
7. Have part of the meeting at your company, but then leave. The advisory board needs to stay connected to your business—your physical space, your employees, and so on. But only part of your meeting time should be spent at the company because (you know it’s true) you will be interrupted. Get an off-site meeting room where you can shut the door. Often you can get one inexpensively at a restaurant, your bank, your lawyer’s office, or even your local library.
8. Set aside your ego and tell the truth. Advisory board meetings offer a time to really listen to the smart people you have assembled. Don’t be defensive; these folks are here to help you. They are people with shoulders to cry on, people to complain to, and people from whom you can get help to become a better CEO and get the best advice to grow your company to the next level.
Don’t be afraid to try out new ideas with them. It’s better to practice with the advisory board than to stumble in front of your banker or a major customer.
9. Spend time assessing what is working with the board and what is not. After each meeting, conduct a critical review: Did you get good feedback on the issues raised? Did everyone participate? Did the format work? What could you have done better to make the time more productive? How could you make the next meeting more effective?
10. Don’t be afraid to change the composition of your advisory board as your needs change. After all, everything changes, including your business and you. What was once appropriate may not be appropriate now, and you may need to replace various members or the board as a whole.
If you do decide the advisory board makeup needs to change, deliver a nice speech and a long toast to departing members, acknowledge all that you and they have accomplished together—and then bring in the new people.
Margaret Fraser is the founder, former CEO, president, and majority shareholder of Birkenstock USA. Lisa Lorimer was CEO, president, and majority owner of Vermont Bread Company. This article is derived from their new book, Dealing with the Tough Stuff: Practical Wisdom for Running a Values-Driven Business (Berrett-Koehler Publishers, Inc.). To learn more or to order the book, visit bkconnection.com.
Sample Advisory Board Agenda
What has worked in other companies is keeping meetings loose but structured. Bring key staff members in to do presentations; it gives them practice and lets the board assess the team. Leave enough time to have significant discussions. And stick to the schedule, which might look something like this:
Advisory Board Meeting, February XX, 2010
3:00–3:30Tour office to see projects in process (editor-in-chief or production director)
3:30–4:00Review new marketing materials (vice president of marketing)
4:00–4:30Go over the numbers (controller)
4:30–5:00Check in on issues raised at last meeting, and frame the “big questions” from today’s meeting (CEO)
5:00–5:30Move to private dining room at [local venue]
5:30–8:00Dinner and discussion
Attachments to the agenda should include:
key production numbers and other pulse points measured by the company
a brain-dump memo from the CEO, including updates on issues, problems, projects, or opportunities, with questions and concerns flagged
As you think about who might be a good fit for your new advisory board, focus on questions such as:
? What skills could complement yours to take your organization to the next level?
? Whom do you admire who can push you to think more deeply about:
growing your revenue
marketing differently, from a new perspective
finding new opportunities, another revenue stream
developing a more sustainable organization
owning your numbers and understanding them (all of them)
creating a new rhythm within your organization to facilitate better communication
reducing your carbon or water use footprint even more
managing people better
taking better care of yourself
creating more value in your company
? Think of people who:
run a company that is bigger than yours
run a similar or smaller organization that does some things better than you do
have a specific area of expertise (for example, accounting, legal, social responsibility, marketing, human resources)
have recently retired within your industry
Mix it up! Get a diverse group around your table. Think about various age groups, lengths of time in business, types of organizations, genders, races, political points of view, and so on.
Now list the names of five people and make a commitment to invite each one to become a member of your advisory board—by a specific date.