High-quality independent advice can have a significant positive impact on a business, yet Business Development Bank of Canada’s 2014 study of Canadian small and medium-sized businesses found that 76% have neither an advisory board nor a board of directors.
Do I need a board?
Yes. Companies that created an advisory board saw their sales grow almost three times faster in the following three years than in the previous three years. The president’s job can be a lonely one, and a sounding board for strategic decision-making – one that deeply understands the unique challenges you face – will allow you to develop more robust solutions and strengthen your conviction to follow through on your strategic plans.
What does a board do?
An advisory board’s primary function is to represent the interests of the shareholders. If you own the business, that means your interests. Sometimes, however, your president hat and your ownership hat can get confused, particularly when tough choices are before you. Boards also help set strategic direction and hold management accountable to its plans.
Typically, an advisory board meets three to four times per year to review the company’s performance and assist with setting the strategic direction. The board also holds the president accountable for progress and provides feedback to improve overall performance.
How a board of directors and an advisory board differ
A board of directors has fiduciary duty to the shareholders. That means the members can be held personally liable for the decisions they make and the direction the firm takes. An advisory board, on the other hand, can operate very much like a board of directors but without risk to the members, and without the legal authority to hold management accountable for what happens to the business.
How to find good people
Before you try to find them, figure out who you need. You likely have a lot of experience in your own industry, so look outside of your industry for board members. Need help with marketing strategy? How about a great marketer? Employee relations a challenge? How about an HR expert?
Financial expertise, experience evaluating the leadership of the company and legal advisers are also excellent additions to any board. A member who represents the kinds of people you sell to can also provide insight.
Knowing the skill sets you’re looking for facilitates finding the best people to fill the roles. LinkedIn, trade associations, recruiters and professional advisers such as lawyers and accountants are all great sources of expertise.
Do I have to pay them?
Not always, but you should. Because you want a diverse group of members outside your immediate circle, you’ll need to entice them, and financial reward is the easiest way. It will also encourage you and your board members to treat the effort as you would a job – to show up prepared and have meaningful interactions. Let’s not forget, advice is often worth as much as you pay for it.
Why I wouldn’t want a board
There is a perception that setting up a board is too much work. This perception does not match the experience of those who have one. Eighty per cent of business owners with advisory boards say if they had to assemble one all over again, they would.
But 20% wouldn’t. The real reason companies shouldn’t set up an advisory board is that they don’t intend to heed the board’s advice. A board is not a cheering squad; it is an advisory team. If you are satisfied with the status quo, it’s not worth the time. •
Tara Landes is president of management consulting firm Bellrock (www.bellrock.ca).
