The survival and success of privately held and family owned businesses depends on many factors. One of the most significant factors is a board of advisors. Yet an American Family Business Survey reports that almost half the boards of these types of businesses meet only once or twice a year, over 60% don’t compensate directors, and a quarter of family businesses say their boards make no contribution all.
It’s very interesting and puzzling to me that so many businesses do not use an effective tool most US corporations utilize. Why do so many smart owners and entrepreneurs ignore a strategy that will give them long-term payoffs, and ensure the resilience and success of their business? They must know something that I don’t!
Advisory Board Countdown List
I’m going to use David Letterman’s famous countdown list format to make my point. Here are my top 8 reasons not to develop a board of advisors:
8. No qualified person will want to serve on my board.
There is a pool of incredible talent “out there” from experienced executives, founders who have sold their company, entrepreneurs “in-between,” and those who have “been there, done that” within and outside your industry segment. Their motivation is to help others to achieve similar results and give back. Just start the process and you will find developing an advisory board is one of the best things you can do for your business.
7. I already have plenty of advisors.
When making decisions about what is best for your business, the focus needs to be on what is best for your business- not your advisors. A board offers the opportunity to expand your circle of experts beyond your lawyer and your accountant. Using professional advisors such as your lawyer, banker or accountant as board members has its pitfalls. These advisors are already working for you and may not be as objective as you need.
6. It will take too much of my time to create a board.
Take a cue from First Things First by Stephen Covey. He categorizes our focus on whether things are important or not important, urgent or not urgent. Creating an advisory board is one of those activities that are not urgent (your company will be ok for the moment without an advisory board) but very important. Your success, your revenue, your achievements and how you journey through business challenges all measure the ROI of your time creating an advisory board.
5. Outsiders will know about my problems.
Businesses cherish privacy for many good reasons. However, outsiders often have the solution to your problems. Outsiders can take the heat about thorny issues like realistic salaries, and, perhaps, point out problems you didn’t even know you had.
4. We don’t have enough issues to discuss.
Really? How about reviewing strategy, analyzing financials that need improvement, determining feasibility for expanding into a new region or product line, operational issues, and management succession? Your board of advisors is a group of best business brains providing you with a “think tank” as you tackle issues like these. They bring different perspectives, new skills to the table, credibility that you are a serious organization, resources and contacts. They really are on your side.
3. Our decision-making will slow down.
Have you heard the expression “slow down to go fast?” Yes, I know, we all strive to make faster, better decisions. And an advisory board will focus on making better decisions, and in some instances at the expense of speed. As your company becomes larger and more complex, that may be precisely what works best.
2. If I choose the wrong people, I’m stuck.
Choosing the right people is key! First, create a simple qualification and interview process to sort out the best choices. Your current network of advisors including bankers, accountants, attorneys, friends and other professional associations can help you build a good shortlist. Then interview the top candidates to reach a decision on which you will trust to serve your business best. Second, term limits are your safety valve. The first term may be one year. After that terms can be staggered two or three years.
And the number 1 reason not to establish a board of advisors:
1. I don’t want to give up control.
Developing a board of advisors is one of the best means to maintain control, especially if your company grows and prospers. Don’t confuse advisory boards with the boards of directors at public companies. Those public company entities are governing boards. You select advisory board members. Their purpose is to provide advice. They have no liability and do not need to be insured. They work with you on a verbal agreement (although it is often documented). An advisory board provides a way for you to reach outside for a broad spectrum of knowledge and experience, while maintaining control of your business.
Keys to Board Effectiveness
If you build it, use it. You invest time and money in creating a board. You should commit to seeking and using its advice on important decisions.
Value their input, even when they disagree with you. Sometimes a board is the most valuable when it recommends against a course of action you want to take. Good board members often have already been down a similar path, and their experience and failures will help you to avoid costly mistakes.
My wish is that soon you will say, “Developing our advisory board was the best thing we could have done for our business.”
Don’t go it alone: Create an advisory board! Contact me for help in developing your advisory board.
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