Archive for the Advisory Boards Category
As an advisory board consultant and facilitator I see companies and CEOs all the time who would benefit from having an advisory board. Often the CEO is hesitant because the financial records aren’t perfect, there is no sales or marketing plan, the marketing campaign is faltering or some other reason. About the only acceptable reasons not to start are either the CEO can’t accept constructive criticism or the company simply isn’t ready.
So how do you know when it’s time? Consider the twelve questions:
- Is there is insufficient depth to the senior management team?
- Do you meet with your attorney and accountant only on an as needed basis but need broader advice?
- Do you often ask friends and family for advice?
- Does the vision for the company call for rapid growth but you don’t have a strategy developed or a tactical plan?
- Has the company outgrown the existing infrastructure and you aren’t sure where and how to proceed?
- Does the company’s growth depend on expanding the roles of various functional areas but the cash flow won’t support hiring full-time staff?
- Do you belong to a CEO forum group but need the focus to be more on your company?
- Are you thinking of bringing family into the business and don’t want to upset loyal employees?
- Do you need to develop an exit strategy and/or succession plan?
- Do the senior managers need guidance and assistance but the company can’t afford consulting fees?
- Are you thinking of forming a legal board of directors?
- Do you sit on an advisory board and see how much value it brings to that company and the management team?
If you answer yes to 9 or more, then you are ready to start forming an advisory board. 8 or less yes answers and you are either still in the considering stage or it’s not time yet.
Want to know more about establishing an advisory board? Check out the Advisory Board Kit.
This is a common question, what is the difference between an advisory board and a board of directors. Here are the five primary differences.
- Are you liable? Directors are voted on to the board by the stockholders and are held liable for their decisions. Advisors are appointed by the CEO. Advisors don’t make decisions they advise so generally they have no liability.
- Do you decide or recommend? Directors decide, advisors recommend. The CEO must follow the decision of the directors while he can ignore the recommendations of the advisors.
- Who do you work for? A director “works for” the stockholders” while an advisor “works for” the CEO.
- Who hires & fires the CEO? One of the responsibilities of the directors is the hiring, evaluating and if necessary firing the CEO. The advisors have no such responsibility. Advisors may provide feedback on the CEO’s performance but it has no impact on whether the CEO keeps his job.
- Who can the CEO fire? Much as I am sure a CEO may wish from time to time, he can’t fire his directors. Only the stockholders can. Advisors can be fired at any time by the CEO, the person who hired them.
Want to know more about establishing an advisory board? Check out the Advisory Board Kit.
I won’t kid you, establishing an advisory board takes time and effort if you want to do it right. I use a multi-step process. If you haven’t recently completed any business or strategic planning I would recommend you plan to complete all the steps.
How long it really takes is completely up to you. Exhibit 19 in the Advisory Board Kit is a chart detailing the steps and the time line for completing each. I summarize it here:
Month One:
- Develop company vision
- Complete SWOT* analysis
- Identify skills & talents needed
- Develop the advisor profile
Month Two:
- Set advisor compensation
- Create the statement of roles & responsibilities
- Develop the advisor pitch
- Identify information to give prospective advisors
- Identify & prequalify prospective advisors
- Interview prospective advisors
- Check references
Months Three & Four:
- Continue to interview prospective advisors
- Continue to check references
- Pitch the prospective advisors
- Invite the prospective advisors to serve
- Orient the advisors
- Plan the meeting
- Run the meeting
In a perfect world expect the process to take 90 to 120 days. At the end of that time you will have a board comprised of people you really want to take advice from and be accountable to.
Want to learn more? Then check out the Advisory Board Kit: A Comprehensive Guide to Establishing an Advisory Board. The book and related programs are now available.
*Strengths, Weaknesses, Opportunities & Threats
