Advisory Boards: Are you getting the right advice?

Below is an article that Debra Chantry, Our Principal & Business Coach, wrote the following article for The Icehouse…   Debra Chantry, Business Coach and Mentor at The Icehouse, sheds light on the importance of an Advisory Board – How an Advisory Board can impact your business, how your business can tell whether your Advisory Board is cutting the mustard, and what can happen businesses who choose to fly solo.     An Advisory Board is like having a Business Coach or Mentor, on steroids. Rather than one experienced person to help you with accountability and acting as a sounding board, you can have two or three that not only provide you with big picture thinking but the diversity that a single coach or mentor cannot offer.                                                                                                                              The whole purpose of an Advisory Board is to drive a business forward – but when should a business start a Board? A formal Board of Directors usually comes once there are multiple shareholders in a company. Those who make up the Board of Directors are more often than not appointed by the shareholders to legally manage, direct and supervise the company.   However, there is a middle step for startups & SME businesses and that’s an Advisory Board. An Advisory Board is more often than not set up by the Owner/ Manager of the business, with these Boards existing to provide defined advice and information in an informal and flexible manner. There may be a number of reasons why your business or startup may be seeking out governance in the form of an Advisory Board:  
  • Others can help your success by providing valuable business insight and oversight.
  • A specific area of interest, e.g. entry into new market requires specialist advice.
  • You are looking for early stage market validation.
  • The flexibility of engagement appeals to you.
  • You need help with succession planning and/or to become investment ready.
  • You want your business to become more professional.
  So therefore, if you meet any of the above criteria, and you are willing to share information then no matter what your size or your stage of growth, you are ready for an Advisory Board.   With the purpose of an Advisory Board being to drive growth or the business itself forward, it’s important to be very selective when choosing your members. They will often not only have experience and knowledge but also the networks and connections that can help your business to fast track. To ensure you get the right advice, you want members that encourage open and robust discussion of ideas – hence why family and friends are a strict ‘no-go’ zone.   The key question is: will my prospective board member add value to my company?   To be able to answer this question, the power of hindsight is essential. Knowing that a strong Advisory Board should have a diverse set of members that either have experience, knowledge, or networks and connections that can move the business forward is one of the first steps. Diversity means bringing the full breadth of relevant skills and experience from across all of the fronts the business has to operate in.    A strong Advisory Board will also be adding value to your business. They will be reading the reports in advance, contributing positively to the discussions within the meeting, challenging assumptions, offering knowledge and their experiences, and following up with the action points following the meetings. If they’re not doing this, then it’s time to fire them and move on. Fortunately there are few legal headaches around an Advisory Board – they’re designed to be flexible so that you can change them as the business needs change. The sooner you can exit and replace poorly performing members, the better.   An Advisory Board may be published/associated with the business i.e.: they feature on the company website or in materials such as business plans for fundraising. Therefore, it’s important that you not only background check the Advisory Board Member before they come on board but you also set the ground rules around what is expected and whether or not they can engage with the media on behalf of the company. If the Advisory Board member has anything in their past or has a tendency to be ‘loose lipped’ with the media, then what they have done or what they say can have an impact, both positive and negative on the business. Just like employees, they are essentially an extension of your company brand. Without giving specific examples, you can imagine what an Advisory Board member, associated with your company, creating bad press can do for your business reputation!   Although it is not crucial for a business to have an Advisory Board, it certainly helps to fast track your business while keeping you and your team focused. Much like having your own personal business coach, Advisory Boards can really help with acceleration, avoiding common pitfalls in your market, opening doors to influential people, and establishing the bigger picture.   When you’re trying to really grow your business, flying solo can feel very lonely as well as dangerous. You want advisors that have experience in an industry that is relevant to your business and who have operated in a larger and more complex organisation. You often can’t see the wood from the trees or you are blinkered in your thinking because you are too close to the business. Sometimes this can lead to small issues, other times they can lead to you wasting valuable time, money and resources.   Looking to someone to walk with you, inspire you, champion you and celebrate success with you can make the journey seem a lot less lonely. If an advisor is not the wings to help you fly, then its deadweight.    

12 Point Advice on Start Up Advisory Boards

I recently had a lively discussion with Yolanda Wardowski from the Avalon Group on the subject of Advisory Boards. This helped me frame some more specific thoughts which I am sharing in this post. I came up with 12 observations. What did I miss? What don’t you agree with? All comments appreciated!

The Big Picture

1. In my view Advisory Boards can give start ups great advice and access as well as being a resource that is always “there for you”. But, in the vein of “take advice, don’t follow advice”, a CEO needs to balance the input they get from their Advisory Board with their own expertise and the confidence they have in their own and their team’s abilities. Bottom line you don’t want to be (or be seen to be) too reliant on your Advisory Board.

Advisory Board Basics

2. You can have an Advisory Board at any stage. 
They can add value for the smallest start up through to large public companies.

3. The Board part of the title is a misnomer! This is because Advisory Boards rarely meet … as a Board. Rather they are mostly all one on one bilateral relationships with the CEO. Communications tend to be ad hoc with perhaps monthly preset check-in calls but with a verbal understanding (very early stage) transitioning to written expectations of time expended (later stage.)

Structure and Benefits

4. Cosmetic Advisory Boards are a very bad idea. By this I mean lots of names of “important” people on your website … but where the reality is these folks do very little for you. Needless to say if investors (or actual/potential customers in a B2B context) ask to talk to Advisory Board members as part of due diligence, and it becomes clear they have no meaningful role, that sends a bad signal. This is especially the case if you put those names in a pitch you deliver to investors. By represented them as being part of your team … if fact they aren’t … well, let’s just say you were being “economical with the truth”. So have a functioning Advisory Board, or don’t have one at all.
 
5. A CEO/company that who establishes a strong functioning Advisory Board has multiple wins.  First and most obviously you get advice from folks who are consistently involved and add value so in areas that are key to the CEO and the business. But this also sends positive signals to potential investors to the effect that, in addition to that valuable advice: a) You can identify and engage with experienced individuals relevant to your business (so says something about your people skills and judgement) b) The fact that those people are willing to commit time to support you and your business is a form of social validation of itself.
6. A well constructed Advisory Board is composed of people with diverse skills/experience that are relevant to the CEO/founding team. Meaning they can support the company’s progress in clearly defined areas. e.g. finance, customer acquisition, marketing, scaling, technology etc etc. or who have broader experience e.g. a former CEO in the space who has scaling experience. (How do you find these wonderful people? And how do you work out where an Advisor best fits the companies needs and the CEO/Founders strengths and weaknesses? I don’t address those issues here – that is another couple of posts on their own!)7. Better to have 3-6 strong engaged players than 7+ not very engaged people. Start Ups are time starved so work with a small number of committed partners who can give you time and add value. Avoid everyone else! And by having too many members a CEO will make declining engagement a self fulfilling prophecy, simply because she/he will not have the time to interact with all the Advisors at a meaningful level.
8. Whatever role they fill Advisory Board members should expect, and be used, for their full network. Use each Advisory Board member to the full. So the person who has a clear role as your financial expert say could well have valuable connections to the media, to other domain experts or whatever. One thing to be wary of – having a known active investors as an advisor but who is not him/herself an investor in your company. That can send a bad signal too for obvious reasons, although not in my view where that individual’s personal investing is clearly focused on another area of domain knowledge or expertise.

Formal vs Informal

9. At the early seed stage, so at and shortly after friends and family financing, these Boards are usually pretty informal. This means Advisor relationships are based on a verbal understanding of time commitment and responsibilities. I see no issue with this – avoid red tape at all costs!
10. Heading to the A stage and beyond they become more formal. This make sense too in my view. As the business develops having written Advisory Board contracts is the way to go. (Law firms can provide standard versions so this is not a big deal.) The contracts should have specified time commitments (at a minimum) and can include written details of what each Advisory Board member is expected to contribute.

Compensation

11. Advisory Board positions are typically not compensated at the very early stage. This speaks to the informality mentioned above. These are willing supporters who do it for one reason – they have faith in and want to support the founding team.
12. At the Advisory Board contract stage stage compensation starts to make sense. As the business expands adding professionalism in all areas is a must. Advisory Board compensation is a matter of agreement but I start from the position that early stage full Board members (who are not founders/VCs) typically get 1% of equity through options vesting over 3-4 years. An Advisory Board member will have less time commitment and no fiduciary responsibility. So, logically, should be paid less. How much less? Something like 0.10%/year seems fair. Maybe more depending on contribution. Again this is a matter of agreement and also the magnitude of the expected benefit to the company. Note that this is not a fee for “showing up” or answering the email/phone from time to time. Optimally this compensation should be tied to specific deliverables and with the options being granted on appointment but not vesting until a later date. (One year out say.) And typically, no cash component … other that for reasonable expense reimbursement. Advisory Board members are best remunerated through direct connection to the value creation process.
With thanks to – http://adamquinton.blogspot.co.nz/2013/08/12-point-advice-on-start-up-advisory.html

How An Advisory Board Can Grow Your Business…

Entrepreneurs don’t have to go it alone. They can put together an advisory board for their business made up of people who can provide insight into marketplace trends, gauge future trends, make introductions to customers, facilitate funding, and suggest alliances.

 

Building a top notch advisory board is one way that Lisa Xu, CEO, NopSec is ensuring the success of the company she leads. NopSec identifies and fixes IT security vulnerabilities. In other words NopSec makes sure corporate computer systems can’t be hacked and if they are, the vulnerability is fixed quickly. She specializes in the financial services industry, which requires computer systems that are extra secure.

 

Xu  is thoughtful and strategic about asking people to be on the NopSec board of advisors and in how she uses the board.

 

1.) Choose the right people.

When forming an advisory board, determine the skills you are seeking. Xu knew the types of people she wanted on her board: potential customers, partners, and companies that might want to purchase her company down the road. She wanted industry experts, investors, and people who would make introductions to all of the above. She also wanted experts in technology, sales and marketing, finance, and the financial services industry.

 

Choosing among candidates wasn’t just about resumes and lists of accomplishments. Only by getting to know a potential advisor in advance could Xu determine if a candidate could provide actionable insights and if she had chemistry with the person.

 

She met one advisor, Adam Quinton, at an event. They then met for coffee. His value became readily apparent — potential investor as well as introductions to other investors, customers, media, and other entrepreneurs. Other advisors represent companies including CA, Cablevision, Dell, and SecureWorks. These companies can be customers or strategic partners.

 

2.) Set expectations.

When inviting a candidate to join your advisory board, you should lay down the ground rules about what is expected in terms of time, responsibilities, and term of office, advises Xu.

 

Xu is both formal and flexible about the relationship. A formal agreement, between NopSec and the advisor details what is expected and what the compensation is. However, the agreement is flexible. After all, startups do pivot. When priorities or workflow change, the agreement changes.

 

3.) Engage the board by making the work interesting and mutually beneficial.

The compensation for the advisors isn’t only financial. They also benefit from networking, sharing, learning, and shaping something that has enormous potential. Xu wants the Nopsec board to be emotionally invested and proud to be building something with great potential. She also wants to make sure that the board enjoys the experience and has fun.

 

The advisory board meets quarterly, but Xu schedules individual meet-ups with board members. She does her homework and knows exactly what she can expect from each. She finds LinkedIn a great tool for researching which advisors can introduce her to an opportunity.

 

4.) Incentivise your board.

Depending on whom you are asking and how involved you need them to be, compensation can vary from just providing food at meetings  to covering expenses to stock options to cash payments to a combination of all four. Xu gives options, but board members have other motivations. It’s a chance for them to give back, feel appreciated, and get recognized. It’s a great chance to network and learn. Advisors don’t do all the giving.

 

For more advice about advisory boards, see what Quinton has to say.

 

What could an advisory board do for your business?

 

With thanks to – http://www.forbes.com/sites/geristengel/2013/08/07/how-an-advisory-board-can-grow-your-business/

Why Start-Ups need Advisory Boards…

An outside perspective is critical to building the future of any business, big or small.

 

As we built our business from a bedroom start-up to an Inc. 500 company, our priorities were creating a differentiated offer to our customers, building a world-class team, and managing cash flow to keep us afloat as the business grew.

 

The last thing on our minds was building an advisory board.

 

Advisory boards, we reasoned, was something that big, slow-growth companies have. We could get around to creating one after we took care of the more important business at hand.

 

We were wrong. Every company can benefit from a well-structured advisory board. External advisors bring networking opportunities and much-needed advice, but most importantly they bring something that is priceless to any successful business: an outside perspective.

 

One of our clients is a large, publicly-traded technology company, with a highly profitable business. They are no stranger to rapid growth, with revenues having risen from less than $100 million in 2002 to more than $1 billion last year. But guess what: they need an advisory board!

 

They have a business model that will be stable for years to come, but given the evolution of cloud computing, they also have some major opportunities for reinvention. As is true of many fast-growth companies, they are fraught with the innovator’s dilemma and have a strong incentive to stick close to their core business–a strategy that conflicts with the new paradigm and market opportunities offered by the cloud.

 

This is the problem when management teams that have incentives to maximize the core business are also expected to create a disruptive technology in a new space. For our client, winning in the cloud space will likely require strategic acquisitions and solid R&D investments. But to do this in a new paradigm, they need an outsider’s perspective. Specifically, they need a view that is removed from their core business.

 

A well-structured advisory board would provide this perspective. An advisory board can make critical contacts with CEOs of potential acquisitions and get real-time market knowledge of the start-ups that are currently working toward disrupting their core business. The right advisors will think about market transition as a start-up rather than an established company.

 

Our company is in the same boat. Seven years after founding the firm, we are finally getting around to building an advisory board. In fact, when we mentioned it to one client last week, he said, “I thought I was already a member of your advisory board.” That was a sign that we are behind the eight-ball. We need to move our company to the next plateau. And an advisory board will be critical to getting us there.

 

How have you used an advisory board to help your company achieve growth?  Share your thoughts and questions with us at karlandbill@avondalestrategicpartners.com.

 

Reproduced from: http://www.inc.com/karl-and-bill/why-you-need-an-advisory-board.html

Advisory Board Guidelines

What is an Advisory Board (Or Group)?

An advisory board or group (nomenclature interchangeable) is a collection of individuals who bring unique knowledge and skills that complement those of the formal head or board of an organisation, in this case you. The advisory group can help run an organisation by making recommendations or providing key contacts, information, knowledge, skills, or materials to your organisation that you might not have access to independently. Additionally, an advisory group can further aid an organisation by the members bringing their status or clout with them to enhance the reputation and reach of that organisation (while also benefiting themselves by adding to their own reputations.) However, they do not have the formal authority to make any direct business decisions.

In general, a three to five person advisory board should meet smaller organisations’ needs.

When should an Advisory Board be formed?

Any organisation should look to form an advisory board when its tasks become too complex or too demanding for the formal head or board of an organisation.

How does one form an Advisory Board?

Determine an objective: The most successful advisory boards are formed with a specific goal in mind. Therefore, when forming a board and company or organisation should make sure to think about what supportive roles it wants these advisers to play. This in turn will help the company decide who it wants to be on the board: Is the company looking for diverse representation of industries, age or gender? Is it looking to stay with people familiar to the company or work with new faces? A combination of these? And so on.

Look for “challengers”: A good advisory board will not be comprised of uninvolved or uninterested “yes” men and women. On the contrary, an advisory group should challenge the head(s) of an organisation to think differently about his or her company’s trajectory. To do this effectively, a board will need to have people that have skill sets different than those already in place.

Use networks: In addition to looking for people whose skills differ from the existing company or organisation management, the company should look for people who run in different circles as they can bring new resources with them. That having been said, regardless of his or her background an advisory board member should be willing to participate and interested in your program, otherwise they won’t do or bring very much, despite his or her potential.

Offer compensation: Advisory board members can be compensated in different ways, ranging from a nice meal once a quarter to annual stipends.

Create a contract: Although more informal than boards of directors, advisory boards should still be governed by some form of written agreement. This could include having members sign a nondisclosure agreement, drafting a charter that outlines a board’s responsibilities, and an agreement on logistics, i.e meeting frequency, expected time commitment, and compensation, if any.

Advisory boards and their respective rules and roles will differ depending on the size of their partnered organisation. For example, larger companies may want to have larger advisory boards and smaller or start up organisations should not worry about compensation from the outset. Therefore, parts of the board-forming process are adaptable to your organisation and its needs.

Ventell provides Advisory Boards to Owner-Managed businesses – ask us how we can help your business grow profitably? Or got our Business Advisory Board page.

 

With thanks to – http://dowelldogood.net/?p=663

Ten Tips to Creating an Effective Advisory Board

You don’t need to navigate unfamiliar waters alone. Put together a good board of advisers, and you’ll create a powerful asset that can make a huge difference when you need to get objective advice, scout the marketplace, gauge future trends, seek new strategic positions, have introductions made or build repeat customers.

 

Unlike corporate boards, advisory boards have no fiduciary responsibility and their advice is non-binding. Some are hands-on, meeting monthly or more, even getting involved in the daily grind. Others meet quarterly, with an eye to the big picture. Many consist solely of interested outsiders, but a good number include investors as well. What all such boards share is this: They advise, evaluate and play devil’s advocate.  Here are ten rules of thumb to follow when building an effective advisory board.

 

1.         Determine the Objective of Your Advisory Board: 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 timely knowledge about trends and competitors, as well as identifying upcoming political, legislative and regulatory developments. They can help you enter new businesses and look at your own operations with an open mind. Advisory boards can also be made up of customers and prospects who provide insights into product development and marketing issues.

2.         Choose the Right People:  Of course, when forming a board you need to understand its purpose, but you also need to know what specific skills to seek. In general, look for diverse skills, expertise and experience. You want members to be problem solvers who are quick studies, have strong communications skills and are open minded.

Big names can be a bonus … but not always: Getting a heavyweight on your board of advisers can give you credibility, but it’s also important to have members who are going to spend the time to give you thoughtful advice or are well connected and willing to make introductions.

 

3.         Set Expectations: When inviting a prospective member to join your advisory board, you should lay down the ground rules about what is expected in terms of time, responsibilities and term of office. 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 that they will be asked to sign a confidentiality agreement.

4.         Compensate Your Advisory Board: Depending on whom you are asking and how involved you need them to be, compensation can vary from just providing food to covering expenses to stock options to cash payments to a combination of the four. Keep in mind that your members will likely benefit themselves in a variety of ways. Being on your board will expose them to ideas and perspectives they may have otherwise missed. It will also expand their own networks and provide them with a way of giving back.

5.         Get the Most Out of Advisory Board Meetings: Prepare for meetings well in advance. Choose a site that is comfortable and free of distractions. Careful thought should be given to developing the agenda and managing the meeting. Solicit input for the agenda, and distribute important information ahead of time. Run the session as you would any professional meeting, and follow it with an action plan. The facilitator should know which experts to draw out and how to stimulate a dialogue. He or she should be result-oriented, as ideas without action aren’t worth much. The minutes should be written up and circulated to top management. The notes should include recommendations on key issues.

6.         Ask for Honesty: An advisory board must be open and frank, so don’t be offended if you hear things you don’t like. Your board will also suggest ways of correcting the problems they identify.If appropriate, encourage members to tell you about their mistakes so you can avoid making the same ones. You can learn a lot by finding out what other people did wrong.

7.         Consider Alternative Feedback Methods: Getting the entire board together on a regular basis may not be possible. Instead, meet or have conference calls with specific members about topics relevant to their expertise as needed. E-mail is a great way to reach everyone and have them respond to you at their convenience. Respect your Board’s Contributions:  Don’t abuse or waste their time. Listen to what the board says. Sometimes, a business executive is so close to an issue, you can’t see the forest for the trees. But remember: This isn’t a corporate board, so you don’t have to do everything they suggest. Ask yourself, “Does this work for my company? Am I comfortable with that?” Then make a decision.

9.         Keep Board Members Informed:  Once they’re on the board, keep members excited about your business by giving them updates at times when you aren’t soliciting their advice. The fact that they’ve agreed to be on your board means they care about your company, so keeping up-to-date will help them be of greater value to you. Remember that these people are evangelists for the company.

10.       Fire Bad Board Members: 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.

Prepared by:

 

Geri Stengel, president of Stengel Solutions, a business strategist.  She can be reached at 212-362-3088 or E-mail

 

Copyright © 2003 Stengel Solutions. All Rights Reserved.

Why You Should Have A Small Business Advisory Board

Small businesses face a variety of challenges.

There are tasks to complete, systems to build and margins to optimise.

For new business owners it can be very beneficial to create a small business advisory board. Many owners and managers do this because they recognise that they might do well on their own, but are likely to do much better with help from experienced individuals.

Here is an overview of how a small business advisory board can help your business.

Direction and Mentorship

The biggest benefit to a small business from an advisory board is direction. Small business owners often get caught up in the daily tasks required to serve clients.

This leaves little time to focus on the business.

An advisory board can be there for your small business to provide direction for the business. The board can also provide mentorship and advice on common business decisions.

The folks that occupy advisory boards are often business owners themselves with experience dealing with the situations new entrepreneurs will face.

Someone To Push You

It’s also good to have someone to push you. Small businesses are often solo ventures or small groups of individuals. Again, it’s easy to get caught up in the regular day-to-day work leaving no time for focus on the business.

While you’re likely self-motivated it’s good to have an advisory board to push you. One of the things a board can help with is budgeting and setting goals.

They will also be there to ask questions and push you when it comes time to review your budget.

Compensation

Compensation is a good idea for anyone involved in your business. It can range from providing for any expenses incurred as a result of meetings or communication to full investment options.

Paying your advisory board gives them an additional incentive to see your business succeed.

In most cases, the members of your board will want to see your succeed regardless, but making sure they’re invested in the outcome is good for you and it can be good for them as well.

Finding Your Advisory Board

Your business network is a great place to start in looking for advisors. You can reach out to people you know and respect in real life and maybe some you’ve met on networks like LinkedIn.

It can be a good idea to look outside your group of “friends” for mentors. They can bring a different approach to the relationship and not feel like they need to tell you what you want to hear.

One possible source for this kind of advisor is your client base. If you serve business owners with your small business, you likely deal with some successful people that could provide you with great direction and mentorship.

You could also ask the people in your network if they have any recommendations for people that would make good advisory board members. You don’t have to know the people directly at first.

You can develop the relationship to see if you trust them. From there the relationship will revolve around the interest in your business and that’s a good place for an advisory board relationship to begin.

Conclusion

Owning and operating a small business has many advantages. You’re free to work on your own and you’re in charge of your professional fate.

But it’s difficult to find success completely on your own. The best entrepreneurs in history have often had assistance.

Consider adding an advisory board to your small business. It can help you in a variety of ways that all would lead to the growth and success of your company.

 

With thanks to: http://getquaderno.com/blog/why-you-should-have-a-small-business-advisory-board/

Does a SME need a board?

As members of Springboard, Appoint Better Boards & Women on Boards, this article from stuff resonates with us – couldn’t have said it better ourselves 🙂 – http://www.stuff.co.nz/business/small-business/8629699/Does-a-SME-need-a-board?goback=%2Egde_4174358_member_238017102

 

When should a small business make the jump to having a board of directors?

 

Anytime, unless you’re not going to listen to what they have to say, according to one Kiwi governance adviser.

 

Simon Telfer, managing director of Stimulus strategy and governance consultancy, said small to medium businesses (SMEs) could draw huge benefits from having a formal board, but only if they were prepared to share decision-making and be challenged by an independent person outside the business.

 

“If they’re not, it’s a waste of everybody’s time,” Telfer said.

 

But if they were, a board could give and SME great advantages and help in growing to the next level.

 

Telfer has created the website www.appointbetterboards.co.nz to match small businesses with the right directors and advisers.

 

Many New Zealand businesses still held to the pioneering spirit and the belief they should be doing everything themselves, he said. Others were put off by the perception that taking on a board of directors was complicated and costly.

 

“It’s important to remember it’s a continuum,” he said.

 

“Most people think of a board of directors and think a large number of people, and a very structured process with a high cost.

 

“Maybe that’s something to aim for eventually but you can start with a mentor, then call them an adviser. Then get two advisers and turn it into an advisory board. Then formalise one of those individuals into an independent director, who would be legally responsible for the business and registered at the companies office. Then you’d get other directors and form a board.

 

“It doesn’t have to be all or nothing,” he said.

 

Telfer created Appoint Better Boards because many small business owners liked the idea of a board but were often at a loss on where to go to find the right people.

 

Giving up even a modicum of control was not easy for some of these business owners and they were cautious about finding people who would be the right fit for them.

 

First port of call was often the business’ lawyers and accountants, which rarely worked, Telfer said.

 

“They’re trained to mitigate risk, which doesn’t lend them to focussing on strategy and growth,” he said.

 

“Plus once you have the client relationship it’s very hard to change it and to start to challenge and critique.”

 

In most cases friends and family did not work as directors because they did not have real independence and objectivity, he said.

 

The key to a good board, or adviser was a balance of those with some experience in your industry and those new to your industry who could provide a fresh perspective.

 

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The other key element, Telfer said was diversity of thinking.

 

“You want people who all think slightly differently,” he said.

 

“We place a lot of women and young people on boards because we think that’s a proxy for diverse thinking.”

 

NZ Women on Boards (NZWOB) CEO, Lesley Whyte said women added real value to boards because they tended to think differently to men and have fresh perspectives and ways of challenging convention.

 

Diversity in terms of expertise was also vital.

 

“It means you get all the styles of thinking and expertise, whether it’s finance or marketing or digital media,” she said.

 

But she added it was important for business owners with boards to still do their own due diligence. “One thing that’s come out of the collapse of financial institutions is that you can’t rely solely on the advice of the person who’s an expert in something,” Whyte said.

 

“Do your own due diligence and make sure you have your own understanding of the situation.”

 

One business making the most of having formal independent advisers is Auckland company Rubbish Direct. The waste management company took on an independent adviser nine months ago, with assistance from Appoint Better Boards, when it became apparent there was a gap in its strategic planning and governance.

 

Joint-owner Rodger Howie said having grown the business from nothing, he and his partner realised they would need expert advice and help to take it to the next level.

 

“We are believers in surrounding ourselves with people who know more than us,” Howie said.

 

“And we saw a need for professional expertise in governance if we were going to get the business to where we want it to be.

 

“We wanted to put the structure in place now for what we want the business to be in three or four years. We needed a strategic plan for getting there.”

 

Howie said the company’s adviser had helped “with that front-end vision stuff” and now the company had taken on a second adviser to help build a sales and marketing plan.

 

“We want to grow fairly quickly and we need to do it through sales, so we need a professional sales team – and a plan,” Howie said.

 

“He’s already given us a much clearer picture of what we need from our sales process, what our KPIs are and how we get to where we want to go.”

 

The company had just signed a “milestone” new account which would boost growth, he said.

 

– © Fairfax NZ News

Private companies can benefit from a board of directors

All public companies, and many private companies, have a board of directors. A board of directors, from a legal perspective, is a group of individuals elected by the shareholders of a company to oversee the company on their behalf. They, in turn, delegate much of their authority to management. This delegation gives management the legal authority to perform many of its essential functions (signing contracts, for instance).

While publicly traded companies must have a board of directors, in many cases private companies can benefit from putting a board in place. And, in many cases, outside investors in private companies will insist on the creation of a board of directors as a mechanism for overseeing their investment.

Shareholders of smaller, private companies may be wondering what benefit there might be to having a board of directors. Some of them are:

1. A strong board of directors can add substantial value through their relationships.

A board will usually be comprised of senior executives with substantive experience, and many years of relationships with a wide variety of contacts. These relationships, if brought to bear on behalf of the companies they serve, can add a lot of value in many ways. Typical examples might be board members bringing manufacturing capacity, market opportunities and financing sources to the companies they support.

2. A board composed of qualified outsiders can bring a very useful perspective to bear on behalf of the company.

A strong board of directors brings a valuable perspective to the table. It often can spot problems that are not immediately obvious to management, and can point to solutions that are not easily seen by the folks in the trenches at the company. It can be helpful, perhaps critical, to have an experienced hand providing high-level guidance at certain key junctures in a company’s life.

3. Management is held accountable to an outside party.

While this may not always be pleasant for management, this accountability can provide motivation for management to prioritize appropriately. The board has a fiduciary duty to the shareholders to ensure that the company is being managed to the shareholders’ benefit. This means that they will be highly motivated to ensure that management keeps moving the company in the correct direction, as mandated by the board. The prospect of an imminent board meeting to report progress on the sales plan, for example, can have a wonderful impact on the sales team’s focus.

4. Having professional “best of breed” governance practices in place can only add value to the company.

With appropriate board governance in place, management must provide justification for its actions. Because a board of directors has the fiduciary duty to oversee the activities of the company, there is less chance of a “skeleton in the closet” since company initiatives have been justified before a board, and approved by them. There is an intangible benefit to being able to point to doing things the “right way,” which can make a prospective investor much more comfortable with the company.

These are a few benefits of putting in place appropriate governance structures such as a board of directors. If done correctly, the result will be a more effectively run company, and a more profitable company, with management’s efforts being more tightly focused on those matters that will propel the company to the next level.

http://www.bizjournals.com/eastbay/stories/2008/03/03/smallb3.html

7 Great Reasons to have an Advisory Board

The following article was sourced through Google and we think it succinctly gives you the main reasons to consider an Advisory Board.

We do however believe that Advisory Board Members should be paid a small fee to attend meetings, if they are more regular than twice per year. This forms a commitment to attend, and also to do the required research and reading before attending the meeting.

And although you should think of your Advisory Board Members as Mentors, if you want more regular mentoring sessions, you should take on a dedicated Business Mentor.

Advisory Boards: Seven Great Reasons to Have One

by Anita Campbell

Have you ever thought about setting up an Advisory Board?

It can be one of the best moves you make for your business. And it is easier than you think — costing little or nothing.

Here are seven great reasons to set one up today.

1. Expertise you can’t buy

Advisory Board members can bring skill sets that are totally out of reach for many small businesses.

Take the example of an Advisory Board for a small technology company. The Advisors are:

  • A finance manager with Fortune 500 experience
  • A retired CEO
  • The CTO of a midsized technology company
  • A university professor

Imagine what it would cost to hire this level of skill, experience, and knowledge. A carefully chosen Advisory Board can give you access to such people for a tiny fraction of that cost — or no cost. Most of the time, the only expense comes from convening meetings.

However, you don’t have to wait for a meeting. When you have an Advisory Board, good advice is just a phone call or email away.

2. Business contacts when you need them

Choose Advisory Board members with diverse backgrounds, and their Rolodexes will become one of your most valuable assets.

Looking for potential customers, sympathetic bankers, well-heeled investors, or even talented new employees? Sometimes a brief introduction by an Advisor is all it takes to open doors that you thought were closed — or that you never knew existed.

Advisory Board members are sincerely interested in your success. They want to introduce you to anyone they feel might help grow your business.

3. The benefits of a Board of Directors without the hassles

Some business owners think an Advisory Board is the same as a Board of Directors. Yet, the two are very different.

An Advisory Board is exactly what the name suggests: it is there simply to advise. This means you reap the benefits of your advisors, without all the formalities, intrusiveness and expense of a Board of Directors.

  • Advisory Board members have no formal authority or power within your company, unlike Directors.
  • An Advisory Board does not have the same legal responsibilities (fiduciary duties) as a Board of Directors. That means you won’t need to pay the high fees and provide Directors Insurance coverage to protect them from liability exposure.
  • You need not reveal your business’s most intimate financial details to Advisory Board members. Unlike with Directors, it’s your choice how much information to share with Advisors.
  • You need not observe legal formalities for meetings, such as voting, quorums, etc. With a Board of Directors, such legalities are mandatory.

4. Simple and inexpensive to set up and operate

Advisory Boards are relatively simple and inexpensive to set up.

They can be as informal as a breakfast meeting twice a year. Or they can be slightly more structured, with regular working meetings once a quarter complete with agendas. The level of formality and structure is up to you.

What are the costs? Most Advisory Boards serve for free. Business owners typically call upon friends and colleagues who are willing to help out — and flattered to be asked.

However, it is customary to reimburse Advisors for long distance travel or out-of-pocket expenses. At the very least, expect to foot the bill for complimentary breakfasts and lunches.

5. Grow your business faster

An Advisory Board is a great way to signal to the world your intent to grow your business. Few actions say as much about your commitment. Only companies that are serious about growth take the time and effort to organize an Advisory Board.

When assembling your Board, pick Advisors who can help you develop growth strategies. Individuals whose judgment you respect and who have strategic thinking ability are what you need on an Advisory Board.

6. A personal sounding board

Advisory Boards can serve as a sounding board for new ideas — or for solving weighty problems.

One of the best things about Advisory Board members is that they are willing, informed listeners. Sometimes, simply being able to talk to someone you trust is all it takes.

Your Advisors may well have dealt with the same issues in the past. They may be able to lead you to creative solutions so simple that you’ve overlooked them. They have probably “been there, done that.” You gain the benefit of their hard learned lessons without having to go through the same pain yourself.

7. Mentoring

Let’s face it: The top is a lonely place. Business owners often have few ways to get support and guidance.

Your employees expect you to have all the answers. But to whom do you turn when you need help with those answers?

That’s where an Advisory Board can make all the difference.

Think of your Advisors as mentors. Mentors help coach you to become a more effective leader. They inspire you to greater leadership heights through their own positive examples. They help you get through the tough times. They support and encourage.

Advisors can bring out the best in you.

So what are you waiting for? Get started on that Advisory Board!

About the Author:

Anita Campbell is a former senior Corporate executive and serial entrepreneur who has launched several small businesses. Want to get your business to the next level? Check out Anita’s Small Business Trends weblog.

Copyright © 2004, Anita Campbell All rights reserved.