First ask: What Would I Turn to Them For?
It’s a question many CEOs start asking when their company reaches a certain size: Is it time for me to look for an advisory board?
It’s worth noting that the question relates to creating an “advisory board” which is very different than a board of directors or fiduciary board, which involves legal obligations.
In deciding whether you need an advisory board or not, you need to start by deciding what you want your board to help you with.
One of the common reasons CEOs form advisory boards is to get help with business development. The idea is to recruit people to your board who align and support the business and who can also help make key introductions for the company and to key users of the company’s products or services.
These kinds of boards are very common in government contracting, for example. If someone is a two- or three-star retired Army general, you might want to recruit him or her to the board as a way to get connections and introductions to the general’s former colleagues.
Having board members like this also gives you the chance to collect feedback and ideas on how you might improve your products and services in a way that your customers need.
While you aren’t beholden in any legal way to heed the advice you get from your board, you should make the time to listen. If you don’t, you find that your board members won’t hang around for long.
Creating a board along these lines isn’t free of charge either: you need to compensate your board members for their help. And you can do that in a variety of ways. One way is to pay them directly for their time, say, $5,000 a day. Or, you might offer them the chance to travel with their spouse to an exotic destination once or twice a year. You could even pay them a kind of success fee every time they make a key introduction to your business. And some people do a combination of the above to make it attractive enough for these very highly capable people.
Advice And Counsel
The second kind of board you might want to recruit members for is much more about getting great advice and counsel from senior leaders and executives. In this case, you are asking your board to help you with issues like financial oversight and governance. It’s also a great way to begin identifying potential successor candidates should you have to step aside from your role as CEO.
As with the business development board, you are under no legal obligation to follow the advice you get from your board. But, again, if you persistently ignore their advice, they certainly won’t stick around. If your longer-term plans call for creating a more official fiduciary board, it makes a lot of sense to get your feet wet early on by creating a board like this. On the other hand, if you never plan to need a fiduciary board, you might not need to have a board at all.
If you do, you need to compensate advisory board members as well. But if you need to pay them $30,000 a year for a few days a year, you will likely find that to be a prudent investment if they can help you avoid millions in mistakes.
A key piece of advice is to decide early on what kind of board you want and be very open and honest with potential board members about what you want from them. I was working with one client, for instance, who was struggling to recruit board members because he didn’t recognize that what he really wanted was help with business development but he was asking for advice on other things like strategy.
When he figured out what he really needed from his board, everything became clear for him and he was able to lay out clear expectations for the kinds of leads he was hoping to generate out his board. The result was that this CEO’s company benefitted tremendously from the extra help his board provided.
So if you think it’s time for you to create a board of your own, go into it with a clear idea of what you want them to do and everybody will benefit as a result.
Jim is the author of the best-selling book, “Great CEOs Are Lazy” – grab your copy today on Amazon!