8 tips to create an advisory board that is more than a pretty face
In a recent tweet, Belgian start-up and scale-up guru @omohout stated: “There are no secrets to success. It is the result of preparation, hard work, and learning from failure”.
I would add to this: “and of being surrounded, guided and advised by the right people”.
But that is because I am a fan of Advisory Boards.
When attending the seminar De la TPE à la PME, which was held a few months ago at the Liège Science Park, the speakers gave me a good overview of the challenges very small and small and medium companies and their CEOs must deal with. David Dalla Vecchia and Serge Pampfer (from the Walloon incubators WSL and WBC) shared their useful insights on having the right investor - if any - on board and the CEO's metamorphosis from a member of the orchestra to the conductor.
Although very interesting, I felt something was missing in their speech. I was struck by the fact they did not mention the potential of an advisory board. They did highlight the importance of being able to tap into a good network and choosing the right people for the board of directors, but this is definitely not the same thing.
An official network
An advisory board is an informal group of business professionals who can help you run your business better. Let’s face it: being the CEO of a start-up or scale-up is a difficult task. And that's exactly why it's important to be surrounded by a group of trusted advisors, people who will provide objective advice, identify future trends, introduce you, (re)define the marketplace, or simply serve as a sounding board. In any case, their role should be to advise, evaluate and play the devil’s advocate.
A non-official management organ
For every advisory board it is of the utmost importance to have up front objectives. Your expectations of the advisory board, its role and organisational structure (e.g. meetings with all members versus separate individual meetings), the duration of the members' term of office, and whether membership is compensated should all be clear from the outset. Advisory board members should also realise they aren`t expected to play an active managerial role or assume liability for the company on any advice they offer.
Therefore it is not an official management organ like a board of directors, but a properly thought-through advisory board contributes significantly to the success of every start-up or scale-up.
A large part of the success of the advisory board depends on the composition of that board, which in his turn depends on the stipulated objectives. That means good candidates can be found among successful entrepreneurs from other industries, professional service providers such as management, financial or legal consultants or even a digital twenty-something. In any case, you want people who can help you look at your business with a fresh eye.
When choosing between several candidates with such an eye, I think the most important thing is to go for the ones who are prepared to invest time and energy in you and your company, in exchange for, at best, a free meal.
A good argument to convince them to jump on board is that they in turn will be able to expand their professional network, which could lead to new business opportunities. Also, serving on your advisory board will give them a fresh perspective and expose them to new ideas and energetic people.
What if you only have a limited network or know only people in one industry ? In that case, I would suggest first tapping into your (LinkedIn) network and asking people you trust to introduce you. You will be surprised by the positive effects such an introduction can create. And if you’re really bold, don't hesitate to aim high and ask the most successful people you know. In the worst-case scenario, they’ll just be flattered but say no. And in the meanwhile, you’ve pitched them your business idea.
Not a start-up exclusive
Apart from its size, its meeting frequency or compensation issues, the most important thing about an advisory board, is to make sure you have one. And this doesn’t only apply to start-ups and scale-ups, as law firm strategy guru Patrick McKenna told me years ago when he recommended the creation of an advisory board for my firm, NautaDutilh Belgium. Thanks to him, we now have an informal group serving as a sounding board and a discussion forum where members can play the devil’s advocate and bring sensitive and difficult issues to the table. Getting their honest feedback is sometimes tough to swallow, but on the whole it has made us stronger and very happy with the result.
Creating that advisory board has sometimes been a bumpy road, which is I why decided to share our experiences. I also interviewed CEOs and business advisors, and finally ended up with eight tips to guide you through the process.
Eight Tips to Creating an Effective Advisory Board
- Determine the objective(s).
Make clear up front why you want to create an advisory board and what you want to achieve. To give but two examples, the objective of your advisory board could be to provide ideas to the board of directors or serve as a sounding board. In any case, clarify the objectives and jot them down. You can then provide them to potential members who are truly interested in your project.
- Consider the size of your advisory board.
Nothing is written in stone. Some people prefer small advisory boards (2- 3 people) while others advocate for larger ones (10 people). As usual, the ideal number will be somewhere in between. Of course, much will depend on your objectives and the efforts needed to bring the group together, but I would say that 4 to 6 people is ideal.
- Choose the right people.
As mentioned above, I am a big believer in recruiting people for your advisory board who are committed to investing time and energy in you and your company. Again, much will depend on your objectives, but be sure to find people with diverse skills, expertise and experience, preferably with different backgrounds. It goes without saying that you want critical-minded people who dare to say what they think and are able to listen to others.
- Be upfront.
When asking someone to join your advisory board, make sure your expectations are very clear from the outset. Consider how many times you want the advisory board to meet, the time required to get to and prepare for meetings, their responsibilities, etc. Consider also whether you would like them to sign a confidentiality agreement and if so, tell them upfront.
- Don’t compensate your advisory board members
I may offend a few people here, but I strongly believe that, unlike directors, advisory board members should not be compensated. In some of my interviews, respondents stated they were in favour of compensating their advisory board members but to me, this goes back to choosing the right people. You really need those with a genuine interest in you and your company. As mentioned above, advisory board members also benefit in several ways, including exposure to new ideas and opportunities to expand their networks. This alone should be sufficient compensation.
- Consider your obligations to your advisory board.
Be prepared and send the agenda for each meeting in advance so that members have time to prepare and delve into the subjects. Consider soliciting their input. Distribute the appropriate articles and materials together with the agenda but don’t overdo it.
Stick to the schedule. It is your job to develop and manage the agenda throughout the meeting.
Draft minutes and circulate them (both to the advisory board and your management team).
- Keep everybody informed
Keep in touch between meetings. Most advisory boards meet twice to four times per year. This doesn't mean, however, that you should only communicate with advisory board members on these occasions. On the contrary, keep them informed of and involved in key decisions. After all, they've agreed to be on your advisory board which means they care about your company. Keeping them informed will allow them to be of greater value to you.
Always remember that your advisory board members are busy people with limited time, so only send them what's absolutely necessary.
- Limit the board membership in time
This issue is particularly important when establishing an advisory board for the first time. It may be awkward to bring this issue to the table when recruiting advisory board members, but on the other hand, it's important to be honest up front and tell them that they will be appointed for a specific period of time with the possibility of extension. I recommend two to three years, as it gives member enough time to get to know you and your organisation, but at the same time it is short to enough to make sure you have fresh ideas and insights.