Mike Ginsberg

Year-end is a popular time for board meetings. Most leadership teams finished their strategic planning sessions in the fall, and their companies are wrapping up another year. Directors are meeting to evaluate current performance, set bonuses and review plans for growth, but they seldom influence the strategic direction of the business.

As the CEO, you’ve thought about establishing an outside advisory board to work with you and your leadership team to develop and execute a strategy. In today’s dynamic marketplace where change is the only constant, the question might be, “What are you waiting for?”

When constructed effectively, advisory boards can be an excellent way to tap into the talents of experienced and well-connected individuals on a variety of issues within a company. If done incorrectly, they can be time-consuming, distracting, unproductive and hard to unwind. The difference between success and failure comes from establishing the basic operating parameters up front, including:

Defining the key objective – Advisory boards can be general in scope or targeted to specific markets, industries or issues, such as adopting new technology or going global. They provide insight about trends and competitors, as well as legislative and regulatory developments. They can help a company enter a new market or look at current markets with an open mind. Advisory boards can be comprised of former customers and prospective new customers who provide insights into product development and marketing issues.

Hand-selecting participants – Tap into your network to find problem solvers who are quick studies, have strong communication skills and are open-minded. Recruit professionals with experience running, operating, growing and exiting from a business like yours. Industry knowledge is a plus. Recruiting big names can also be a bonus… but not always. Getting a heavyweight can give your company credibility, but it’s also important to have members who are going to spend the time giving you thoughtful advice or are well-connected and willing to make introductions.

Members need to be honest and critical, so don’t be offended if you hear things you don’t like. Yes, people disguised as advisory board members are not helpful. If you realize you’ve made a bad choice, get rid of him or her. Unlike a board of directors, advisers can be replaced without a lot of legal headaches.

Establishing the rules of engagement – Set ground rules for what is expected of each member with regards to time, responsibilities and duration of their term. Specify the areas in which you’re seeking help. If the advisory board is going to discuss issues that include private information, members should be notified they will be asked to sign a confidentiality agreement. Additionally, setting term limits might help remove unproductive board members. You should also determine compensation for the members. Depending upon whom you are recruiting and how involved you want them to be, compensation can vary from simply supplying food and covering travel expenses, to paying a small stipend and providing stock options. Members will likely benefit themselves in a variety of ways by being on your board. They will be exposed to ideas and perspectives, expand their own networks and have an opportunity to give back. These intangibles are very significant and should be factored in when establishing your board.

Determining the number of participants – The right number to start with is more than three and less than eight active participants, but the value of an advisory board is determined by the quality of its members and not by its size. Seek out participants with the necessary skills to meet the current challenges of the business. Over time, the venture’s critical business issues may change. Then the entrepreneur can add new advisers with the needed skills.

How can you get the most out of advisory board meetings? Schedule meetings well in advance and choose a location that is comfortable and free of distractions. Careful thought should be given to developing the agenda and managing the meeting. Distribute relevant information ahead of time so participants can prepare. Run the session as you would any professional meeting, and follow it with an action plan. The minutes should be written up and circulated to top management.

Establishing an advisory board is a choice, not a necessity. Advisory board members have no authority over your company whatsoever. They offer advice that you can choose to take, or not.  Preparation is the key differentiator between success and failure. When effective, an advisory board can make a CEO look very smart.