As startups grow, they must undergo many changes in order to continue building their strengths. For instance, as individual departments expand, middle managers will need to be appointed. In the same vein, as running the company at an executive level becomes too big of an undertaking for the founder to handle alone, he or she must engage in executive search and recruitment efforts to bring on new members of the C-suite.
Over the course of this growth, it’s inevitable that some elements of transitioning from a small enterprise mentality to a big business approach will get overlooked. According to technology executive and entrepreneur Larry Putterman, addressing the need to create an advisory board is a common oversight at this juncture.
In a blog post on his website, Putterman listed several common reasons why some entrepreneurs fail to set up advisory boards for their organizations, including ignorance (i.e. they don’t know how to set up advisory boards or solicit advisors), doubt (they question the value proposition associated with having an advisory board), unwillingness to delegate responsibilities and a lack of time to get everything in order.
Avoid platitudes, embrace new perspectives
Writing for Forbes, Paul B. Brown put many entrepreneurs’ feelings about advisory boards into words by quoting an old rant of his.
“I should have an advisory board? Really,” he wrote, “I am putting in 90 hours a week trying to make this company, my company, a success and you want me to bring in a bunch of people who don’t know my business and pay them to give me platitudes? Really? No thanks.”
However, he noted, the perception of advisory boards being filled with “dilettantes or retired business people with nothing else to do who prattle on saying nothing original” doesn’t have to be the reality. If properly structured and staffed, advisory boards can offer a new perspective, provide momentum to try new things, act as sounding boards for problems being faced by the company and give honest, objective feedback.
Moreover, Putterman added, advisory board members present advice that is non-binding, and they can prove invaluable in terms of offering marketing guidance, gauging future trends, finding investors and more.
Building the best advisory board
So, how can business owners go about putting together an effective and helpful advisory board? Putterman offered the following nine tips:
1) Figure out whether the advisory board needs to be targeted or general, then formulate specific needs and objectives accordingly.
2) Recruit advisory board members with a wide range of different backgrounds, skills and experience.
3) Make sure prospective members understand what will be expected of them.
4) Determine how advisory board members will be compensated (i.e. cash, stock options, equity).
5) Begin by gathering three or four advisory board members, then expand accordingly.
6) Structure meetings as much as possible by sticking to an agenda, setting goals and taking minutes.
7) Encourage honest feedback from the advisory board – even when it may be hard to hear.
8) Take the advisory board’s advice under consideration, regardless of whether it actually ends up being used.
9) Don’t be afraid to fire and replace advisory board members when necessary.
Brown offered further guidance, advising company owners to:
– onboard people whose work speaks for themselves; they should be intelligent, creative, dynamic problem-solvers with a history of getting things done, and done well
– avoid appointing the company’s accountants, bankers, lawyers or any other employees, as this will present a conflict of interest that’s likely to compromise the objectivity of the advisory board
– strive for diversity between advisory board members in terms of age, geographic location, gender, temperament, industry background and more
He went on to recommend that advisory boards meet quarterly.
“More frequently and the board gets caught up in the day-to-day running of the place, and less frequently gives too much time for small issues to become big ones,” he pointed out.
That being said, he warned, the advisory board shouldn’t only meet to talk business. Rather, companies should deploy team-building exercises for advisory board members just as they would for employees. Ultimately, the advisory board will function more effectively if the people who sit on it function as a team.
If properly structured, advisory boards can end up benefiting companies enormously, despite owners’ misgivings.
About Caldwell Partners
Caldwell Partners is a leading international provider of executive search and has been for 50 years. As one of the world’s most trusted advisors in executive search, the firm has a sterling reputation built on successful searches for boards, chief and senior executives, and selected functional experts. With offices and partners across North America and in London, the firm takes pride in delivering an unmatched level of service and expertise to its clients.