8 Tips to Create an Effective Advisory Board
Entrepreneurs don’t need to go it alone. Assemble a top-notch board of advisers, and you’ll create a powerful asset with potential to make a huge difference in your business. Board members can provide advice, inform you of current and future marketplace trends, facilitate funding, recruit talent or suggest alliances.
The great thing is, you’re in the driver’s seat. Member selection is up to you and can include industry or subject matter experts, customers, prospective clients and investors. You dictate how often you meet: monthly, quarterly or otherwise, determined by how hands-on you want your board to be. Common to all boards is that they evaluate, offer constructive advice and play the devil’s advocate.
Here are eight rules of thumb to follow when building an effective advisory board.
1) Pinpoint the objective of your advisory board: Is it to address general concerns? Or is it to focus on specific markets, industries, or particular issues such as entering global markets or adopting the latest technology? Members, with their vast experiences, will expand your knowledge of trends and competitors, as well as identify political, legislative and regulatory developments on the horizon. Repeat and prospective customers can provide insights into product development and marketing issues. Your advisory members will come to the table with open and objective minds to analyze your established operation or potential involvement in new territory.
2) Choose the right people: When forming a board, you need to understand its purpose, but you also need to define what specific skills you seek. People with diverse skills, expertise and experience are immense assets. You want members to be problem solvers who are quick studies, have strong communications skills and are open minded.
Captains of the industry – are they the best choice? An advantage to linking up with big names is increasing your credibility. However, members committed to spending the time to give you thoughtful advice, or who are well connected and willing to make introductions are also invaluable. After initial contact with a prospective member, a follow-up meeting in a casual setting often gives more confidence to the decision. See how Lisa Xu, CEO of NopSec, chose her advisers.
3) Voice your expectations: When inviting a prospective member to join your advisory board, specify the areas in which you are seeking help and avoid ambiguity. Be sure to set clear ground rules about what is expected in terms of time, responsibilities, and length of commitment. If privacy and security issues arise, members should be notified and asked to sign a confidentiality agreement.
4) Compensate your advisory board: Depending on the individuals and their level of involvement, compensation might include providing food, covering expenses, providing stock options and cash payments, or a combination of the four. However, keep in mind that membership on your board will likely benefit them in a variety of ways. As board members, they will be exposed to ideas and perspectives they may have missed out on otherwise. Their own networks will grow, providing them with an opportunity to give back.
5) Consider alternative routes of communication: Routinely scheduled advisory board meetings may not make sense logistically. It may be more efficient to meet or have conference calls as needed with specific members about topics relevant to their expertise. When face-to-face contact is not necessary, e-mail is a great way to reach everyone and have them respond to you at their convenience.
6) Respect your board’s contributions: Be respectful of the time they are spending with you and by all means, don’t abuse or waste it. Listen to what the board says. Sometimes as a business executive, you are so close to an issue that your objectivity is compromised. But remember, this isn’t a corporate board, so you can pick and choose from their suggestions! Step back and evaluate. Ask yourself: Does this work for my company? Am I comfortable with that? Then decide.
7) Good board members need to stay informed: Good board members will want to stay in tune with your business, so rally their excitement 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 them current will increase their value to you. Remember that these people are evangelists for the company.
8) Poor board members should be fired: If you realize you’ve made a less than stellar choice, dismiss him or her. Unlike a board of directors, advisers can be replaced without a lot of legal headaches. Your board should evolve to meet your needs.