It's a scenario many private business owners face: You're in desperate need of some fresh ideas, but bringing outsiders onto your board of directors would force you to give up some control of your firm and could drive up your expenses.
Many companies are finding that an advisory board may be the answer.
An advisory board is a group of outside experts who can contribute to the development of your business and also help you grow as a leader. This board can complement or be an alternative to a formal board of directors, thus allowing you to keep family members or other key stakeholders on your board of directors while still adding diversity of opinion. Members of an advisory board typically don't have a financial stake in the business, and because they're not on the board of directors, they are also usually exempt from the fiduciary obligations that board members have.
Finding the right advisory board, keeping its members engaged, and understanding when its suggestions are best implemented can be difficult. These six tactics may help you create and operate a high-performing advisory board.
1. Set expectations
A board prospectus is a helpful exercise when considering the purpose of the board, who will be on it, how they will serve — and why a member might want to join. Setting a maximum amount of time someone can serve on an advisory board helps assure you're bringing in new people with new ideas on a regular basis. It also reduces burnout and allows prospective advisory board members to be confident they won't be locked into a never-ending commitment. Be sure to make terms long enough, however, that members of your advisory board develop a keen understanding of your firm.
2. Get expertise you lack
Full-time employees with decades of experience can be expensive and may drive your business costs up. But you may be able to recruit that same type of expertise for your advisory board at a fraction of the cost. When looking for board members, families often focus on those with expertise in finance and investments, familiarity with family enterprises, and an understanding of the company's current goals. Many businesses do offer advisory board members compensation as a way of rewarding them for their service to the company. Get creative — don't just compensate board members for their time, but also provide them with access to co-investing, events, etc.
3. Use your network
One of the functions of an advisory board is to expand your network and increase your organization's credibility. When considering possible advisors, utilizing professional networking organizations such as Vistage or YPO (Young Presidents Organization) may be an avenue; however, avoid limiting your consideration set to current connections. Asking some of your friends to recommend leaders they know and trust in their networks can help increase independence and diversity of thought.
4. Create formality
Treat your advisory board the same way you treat your board of directors — establish a regular meeting schedule and have a set agenda for each meeting. Consider assigning tasks to advisory board members or sending them key financials prior to the meeting so members can come ready to work and contribute.
5. Listen, take action, and report back
Help your advisory board members feel like their ideas are being heard and implemented by reporting regularly to them on your company's progress and pointing out how their ideas are impacting your business. A quick way to frustrate an advisory board is to ask for members' time and opinions and then do nothing.
6. Make it fun
The main focus of an advisory board should be to find ways to improve the effectiveness of your business, but it's also important to mix in some fun. Some best practices for creating camaraderie on a board are to plan some non-work activities as a part of the day when the board meets. If your budget allows it, spring for an off-site getaway and even consider inviting spouses or significant others. This can be a great way to "win over" a partner who is sacrificing their personal time to participate on your advisory board.
This story was adapted from a Family Dynamics Update written by David Specht, Family Dynamics National Development Manager, Wells Fargo Private Bank.