Organisations of all shapes and sizes engage advisory boards for myriad purposes. Whether it is filling expertise gaps, demonstrating credibility to prospective customers, making the business more attractive to investors or all the above, entrepreneurs build ABs to inject value into their organisation that they don’t have (and probably can’t afford) on full-time headcount.
There is much discussion and disagreement as to whether these bodies are truly valuable or whether they are simply costs to businesses with at least hidden return on investment, and possibly none.
This article takes the view that the advisory board is an inherently positive force, the real variable being whether such an asset is designed and managed adequately by the organisation.
There are four questions every entrepreneur should be asking in the AB design and implementation stages. Below we explain and contextualise each one of them:
What is an Advisory Board?
Let’s start by explaining what ABs are typically responsible for and what they are not. Advisory boards do just that – they advise. They do not directly oversee, reward or reprimand on an operational level anything occurring within the company. They serve to augment the activities of the main board and management team by providing:
- Social access to a previously unavailable network of investors, thought leaders and industry luminaries
- A view ‘from the outside looking in’ to the business, forcing management into seeing the business as the market sees it
- First-hand support and the voice of experience in the development of business functions such as corporate governance frameworks
How robust is the interviewing process?
For young entrepreneurs, validating their venture by engaging a ‘big name’ advisor is often too great a short-cut opportunity to ignore. Certainly, this individual can bring contacts and experience, but has their ability to advise really been tested? Good advisors should not only possess the right credentials but also be skilled in the art of communicating their knowledge constructively. Businesses that conduct competency interview processes ascertaining advisor strength in this area stand higher chances of running a successful AB than those that don’t.
Which came first, the advisor or the strategy?
An advisory board member’s time can be extremely costly. According to advisorycloud average yearly remuneration per advisor is between $1,000 and $6,000 USD for small businesses (seed and concept stage businesses typically hand over between 0.1% and 1% equity). With such substantial resource expenditure, it is imperative that each board member has an unambiguous set of objectives to work to before they come onboard. All too often advisory boards are made up of highly qualified individuals who were either brought in based on reputation and only retrospectively have a function assigned to them, or worse, never receive a clear mandate at all.
The order of events should be the following:
- Decide what you want your AB to achieve
- Pursue the talent most befitting of those aims
- Nail down your advisors as regularly as required
- Squeeze all possible value out of the meetings
Don’t shy away from ad hoc phone and email contact, particularly where equity has been offered and it is in the direct interest of the advisor to get back to you ASAP.
Are you just hiring your fan club?
Sometimes the truth hurts. Whether it comes from market research, investors, customers or technological limitations, businesses must fend off a perpetual barrage of reality checks that get hurled their way. The most successful companies don’t take it personally but learn and make the necessary adaptations. This resilience should be mirrored when putting your AB together. Forming your AB exclusively from your fan club will limit its effectiveness, or worse – blind you to imminent threats. Bringing in people willing to contradict your business narrative will enable you to continually reassess your value proposition’s validity and come up with unique solutions to capitalise on opportunities you didn’t even know existed.
Let’s summarise the key points raised
- When you meet prospective advisors, don’t simply read their resumés and say yes. Ask yourself “can this person truly translate their credentials into value for my company?” and then test this with competency questions.
- Define a clear vision for the AB and split this into component parts with the requisite skill sets. Only then go find the advisors
- Enrich your world view by stocking your AB with a wealth of different opinions. Ferment disagreement and healthy debate as much as possible.
- Squeeze every last morsel of value out of the time you have paid for.
With over 8,500 successful placements in 37 countries and counting, Guided Solutions is Europe’s largest search & selection consultancy operating exclusively within Medical Devices.
Contact us today to make sure your next hiring step is done the right way.