Across The Board
Why building a board of trusted advisors can bring a fresh perspective and positive change to your shop.
Each of us, whether solicited or not, has received business advice at some point in our careers. It may have been great information that significantly helped business grow, or it may have been simply unhelpful. However, there comes a time in a business’ life when it makes sense to receive outside advice in a much more formal way. I’ve created three different options for your consideration.
Option 1 – Utilize your network
It may be best for you to connect with a few trusted business associates and utilize their expertise. This could prove to be useful for every aspect of business: strategy, marketing, accounting, legal, human resources, or any other area where you could use some help. These connections could be made with personal friends with whom you’ve already developed a rapport, or alternatively, could be with someone from a business networking scenario. Regardless of how you find and establish your business connections, it’s important to take advantage of the situation by obtaining instrumental advice.
- Gathering feedback. By tapping into a network of trusted contacts, you can take advantage of feedback and advice you might otherwise be blind to. Third-party perspectives can be very useful because they’re often objective and will typically offer a different point of view.
- Honest information. Depending on the relationship you have with your business associates, you’ll hopefully receive honest, perhaps even blunt, feedback. Trusted advisors shouldn’t have a hidden agenda or be concerned about office politics. Honest, straightforward advice is really what you need.
- Cost advantages. One of the most appealing aspects of this simple approach is it will typically not result in any significant expense to your business. It may cost you a nice lunch or some tickets to a ball game, but more often than not you can receive and offer feedback for free.
- Missing accountability. This may be misconstrued as an argument that sometimes “you get what you pay for,” but that’s not my intent. While an informal networking relationship with other business associates has the potential of providing very useful information, these types of advisors typically won’t have anything personally invested in the process. Unlike a formal board of advisors or a board of directors, informal advisors don’t really have accountability for their feedback or advice. That doesn’t mean their feedback is devalued. It merely means they may offer feedback or advice without any feeling of accountability for the consequences.
Option 2 – Formulate a board of advisors
Establishing a formal board of advisors is a significant upgrade from your friends or a casual group of business contacts. A board of advisors should be structured similarly to a board of directors with as much diversity (in terms of individual expertise) as possible. Your board of advisors should consist of people interested in your business who won’t necessarily just tell you what you want to hear. If certain aspects of your business need to be criticized, they won’t hold back. On the other hand, if your business is performing well in other areas, it’s nice to have encouragement and confirmation from an objective group of business professionals.
- A formal platform for feedback. A board of advisors provides a more formal approach to gathering important feedback. Your board of advisors should meet regularly, whether it be monthly, quarterly or even annually. While I would certainly recommend meeting more often than once a year, the frequency of your meetings should be based on how much interaction and input you’ll want from your advisory board. Some of your advisors may have experience serving on other boards and could offer advice on how often the board should meet and how the meetings should function.
- Access to a variety of expertise. A formal board of advisors gives you the opportunity to find skill in several areas. These may include strategic, legal, finance, operations, marketing, human resources, or other areas you may need. Choose your advisors carefully so you can establish a board that complements your company’s weaknesses. A strong, diversified board of advisors can become an extremely valuable asset in growing your business
- No direct control over your company. Although your board of advisors can provide a tremendous amount of advice and feedback to you as a business manager, they ultimately have no control over your company. You have the choice to either follow or ignore their counsel. This is an important distinction between a board of advisors and a board of directors.
- Be prepared for tough conversations. If you choose the right kind of advisory board, chances are you’ll be asked some rather challenging questions and receive some feedback that’s difficult to hear. But this type of advice is exactly why you should build the board in the first place. If you aren’t prepared to hear constructive criticism about your business, you’re wasting your time with an advisory board.
- Be willing to pay. A quality board of advisors should be compensated for their time and expertise. There isn’t a magical number in terms of compensation for your advisors – just make sure they feel appreciated.
Option 3 – Creating a board of directors
The decision to implement a board of directors is very important and should be weighed carefully. This past year, our own business, Signs.com, went through some significant changes in terms of management, strategy, and direction. Over the past several years, we’ve debated whether to form a board of advisors or a board of directors. We felt like either choice would be an asset to our company. Ultimately, we decided we would form a board of directors to help us manage our strategic direction and future decisions. As recommended above, we invited a diverse group to join our board; each member provides expertise in a variety of ways. Although having a board of directors to oversee our business operations has had its challenges, our decision to engage with them has proven to be a significant benefit to our company.
- The advantage of group expertise. The greatest benefit is the help you’ll receive from your board members when faced with difficult decisions. The right board will be able to assist you with some of the challenging, strategic decisions you may be currently facing.
- Hold yourself accountable. By implementing a board of directors, by default you’ll be held accountable for your actions. Without either a board of advisors or a board of directors, you’ll have to hold yourself accountable. Knowing you’ll report to a board of directors can make you think long and hard about some of the important decisions, which is a good thing.
- Legitimize your business. Frankly, it makes your business more professional. Bankers, attorneys, accountants, suppliers, officers, and even competitors will respect your shop even more.
- Managing your board can be difficult. When you choose highly qualified people to serve, you will inevitably deal with high levels of self-confidence and even ego. This isn’t necessarily a bad thing, but it can create some challenges. Often, a few board members will be more outspoken than others and can dominate. You have to be aware of those situations and manage them. Additionally, your board may tend to micromanage some aspects of your business. This dynamic can be addressed when forming the board and determining their level of involvement.
- Legal and financial ramifications. A formal board of directors can have some corporate, legal liability attached to it, so you’ll need to set up indemnification clauses in your corporate by-laws to indemnify your board members for officer and/or owner liabilities. Make sure you engage with an attorney to help create these documents. Like a board of advisors, your board of directors will also need to be compensated. Do some research here to get an indication of what makes sense for your company.
Choosing to engage with trusted associates to build a network of more informal business advisors may be perfect for your organization. On the other hand, if you formulate a board of advisors or a board of directors, you’ve inherently involved more people with your business, which can be intimidating. And yet, it may be exactly what your business needs.
Remember, you ultimately control your company and the direction you’re going. If you formulate a board of advisors or a board of directors and things don’t work out, you can always make a change. You will always have the right to switch out board members and replace them if a situation arises. I suggest rotating members every three to five years to get some fresh perspective on your business. Engaging advisors to help your business is an optimal way to ensure your company’s success in the future.
Marty McGhie is CEO/partner of Signs.com, an online provider of custom signage based in Salt Lake City. You can find him on Twitter @Marty_McGhie.