7 Pointers for Making the Most of an Advisory Board
Forming an advisory board can be a great way for a privately held small or mid-sized company—or even a public company—to tap into trends the CEO doesn’t know about, to rely on proven expertise to extend the enterprise in new ways, and even to line up potential future investors, directors or employees.
“Boards of advisors are one of the most effective and least expensive ways for a business owner to receive excellent, unbiased advice on how to make his company operate more effectively,” said Paul Sessions, director of the University of New Haven Family Business Center.
Bill Sanders, managing director of Roebling Strauss, an operational-strategy consultant in the San Francisco Bay Area, said that “there are three good reasons to form an advisory board: to prevent breathing your own exhaust and to keep an outside perspective; to provide outside accountability for the commitments you make; and to help you grow the business through introductions and access.”
But what kind of advisory board a company chief wants to put together can depend on a number of factors, including where the company is in its development, the experience level of its management team, its financial strategy and its growth objectives and methods.
“No one size fits all” when it comes to advisory boards, said Holt Foster, managing partner of the corporate securities group for Thompson & Knight, a law firm in Dallas. “They can be exclusively symbolic, to try to give some credit to a startup or a new company or young management that hasn’t developed chops yet.
“On the other hand, when you’re trying to raise money, it can be good to have some established gray hair, or industry leaders, on an advisory board so the penumbra of the team shines on actual management.”
Here are some ideas for getting the most from advisory boards, provided by company owners and business advisors:
1. Pick the right time. When Jump Ramp Games, a New York City-based digital-gamification outfit, was a startup three years ago, it didn’t need an advisory board, said Co-CEO Tony Vartanian. “But now we’re at an inflection point where we are starting one,” he said. “Can they help us get to the next level or give us insight into a particular category that they’ve been in?”
2. Look for pushback. Shelly Sun, CEO of BrightStar Care, an in-home health-care agency headquartered in Chicago, has had three different advisory boards over the last decade or so. “The purpose for me is about strengthening the CEO, about having someone challenge my ideas,” she said. “Companies like mine that are majority-owned or wholly-owned by the CEO don’t have that kind of challenge by anyone else. Employees aren’t going to challenge me like that. There is nowhere else to go to get that level of honest feedback.”
Added Sanders: “To maximize the results, you must be willing to be both vulnerable and transparent. The right answers are worthless unless the board is weighing in on the right questions with accurate and complete information.”
3. Tap into their Rolodexes. Well, now they’re smartphone contact lists, but you get the idea. Advisory board recruits should be people who “bring expansive Rolodexes,” Foster said.
4. Value diversity. Sanders said that “the best advisory boards are diverse in terms of industry, experience, and perspectives. The great value in diversity is in not just hearing the different perspectives, but in the mastermind approach that sharpens everyone’s thinking and yields new approaches and solutions that we can’t generate alone or even with disparate advice from individuals.”
5. Bring on new expertise and experience. For example, if a company is doing lots of acquisitions, or “needs to be on the edge of technology,” Holt said, “you can put on your board different experts from which to draw, almost like a backstop but without the controls.”
One of the main contributions of the current advisory board of BrightStar is to help Sun develop a strategy for international expansion, an area where she has no personal experience. “One advisory board member knows the Australian marketplace well enough to have helped set up 28 meetings in five days for me,” Sun said. She also plans to tap into board members’ experience for capitalizing the company and doing its first national TV advertising.
6. Welcome to investors. For a small company, Holt said, inviting investors to an advisory board “lends more credibility” to the company in the eyes of other investors. “Obviously, they’ve vetted the company and given it a stamp of approval, and that makes other investors’ analysis of whether to invest a lot easier.”
7. Make it a two-way street. The chief must “provide value back” to advisory-board members, Sanders said. For larger enterprises, this can take the form of actual compensation. For smaller organizations, consider “reverse advisory services, referrals and the quality of the other board members that they get to associate within the process.”
Advisors “get to peer into a category and space that they don’t necessarily have transparency into,” noted Alex Betancur, co-CEO of Jump Ramp Games.
An advisory board could be the missing link in your strategy.