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.
The U.S. Small Business Administration is searching for participants in this year’s Emerging 200 Program.
The goal of the SBA Emerging 200 initiative is to identify 200 inner-city businesses across the country that show a high potential for growth—and to provide them the network, resources and motivation required to build a sustainable business of size and scale. The initiative will run executive training series in a number of urban areas and Native American communities during the 2010 cycle.
This initiative is a jobs and growth stimulation effort targeting promising inner-city small businesses. It focuses on small, poised-for-growth inner-city companies with potential for job creation. The six month intensive and comprehensive curriculum focuses on winning local strategies and attracting capital to fuel growth. In addition to 40 hours of class instruction, this includes 14 hours of mentoring.
The program is free of charge and will run from April, 2010 to November, 2010. All that is required on the part of the small business is a time commitment (60- 80 hours total) by the senior executive of the firm and a desire to take your business to the next level.
Small business owners interested in the E200 program are encouraged to contact their closest local office and/or the Emerging 200 Program at e200@sba.gov.
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
