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February 15, 2017 | White paper

How to Ensure You Have an Effective Advisory Board

By Jim McClung

Real-world insights on effective business advisory boards

Given the speed of technological change, regulatory complexities, and the encroachment of international players into markets once dominated by U.S entities, today’s business leaders have limited opportunity to keep current and clearly focus on strategies that will accelerate business value. As a result, an outside advisory board has become a business imperative for many organizations.

But how do you know if an advisory board will be effective? A starting point is with the structure and composition of the board itself. It should be right-sized for the problem at hand; composed of business leaders with deep experience relevant to the current issues; have the ability to be flexible, changing the advisory mix as the business strategy evolves; and it has lead director who manages the process and also works directly with the CEO or president who brought it in. In addition, there needs to be a measurement process related to annual objectives for the advisory board.

Advisory boards deliver value in many ways. Drawing on my experience at the top of multi-billion dollar business, plus the years I’ve served on boards of directors and business advisory boards, I believe there are four levels on which an effective advisory board delivers value:

  • An advisory board can serve as a trusted confident to C-suite executives. Let’s face it: Being at the top is lonely and people at the top have a limited number of confidants in a non-governance capacity that they can turn to when the path forward is unclear.
  • An advisory board brings a multi-faceted perspective to organizational issues that is informed by events, trends, and best practices outside of an organization’s four walls. This “outside-in” approach is by definition impossible to achieve from inside an organization. Here’s an example:
    Not long ago the U.S. dominated in research, development, and innovation. Now it’s possible for an astute individual with a computer in China to analyze trends and leapfrog the innovation cycle. It’s not the competitors you know about that bear watching; it’s the ones you don’t know about. That’s why it is important to have people who have eyes and ears out there—who share their thoughts and their experiences—to make sure you’re on track. An effective advisory board does that.
  • In the fog of an unpredictable environment, an advisory board provides clarity. The complexity of today’s business environment makes it nearly impossible for even the most capable leaders or boards of directors to successfully address the multiple challenges that can stymie business growth, or uncover positive opportunities. Top executives, on an individual basis, need a sounding board.
  • The advisory board has connections that are both deep and broad. These connections can open many doors and extend far beyond the reach of a single organization.

There are other ways that advisory boards bring value—and I’ll discuss those in later posts—but for now let’s examine what can stymie an advisory board’s effectiveness, or even derail it before the process begins:

  • Failure on the business’s part to define its mission, goals and objectives prior to retaining an advisory board. It is critical that goals and objectives be clearly defined prior to seeking outside advice. Although it’s possible objectives may change over the course of the engagement, setting goals for several meetings in advance gives the advisory board a starting point.
  • The business leaders’ inability to define the critical questions they want answered in the next year. If these haven’t been defined, then it’s likely the leadership hasn’t addressed goals and objectives. It’s impossible to build an effective advisory board around the client’s business issues unless these steps have been taken.
  • Selecting the wrong advisory board. The board doesn’t mesh with the organization’s culture, or it brings the wrong skill set to the engagement, or there are issues of personality. Whatever the source of the misfit, selecting the wrong advisory membership can eat up valuable resources and muddy the waters when it comes to finally choosing the right advisory board.
  • Appointing too many advisors at one time. It takes time to cultivate relationships with each board member and management. The best approach is to start with a lower number and bring them along, then add more board members later when appropriate.
  • Giving the advisory board little time to prepare for important meetings. It takes time for both pre- and post-board activity to plan each advisory board meeting, and to plan each current as well as meetings in advance. I’ve even seen a situation where the president of a $170 million organization brought in an advisory board, but didn’t prepare meeting agendas until the last minute. To be effective, an advisory board needs time to formulate worthwhile contributions to meetings and last-minute agendas make this impossible.

Advisory boards can be highly effective and bring tremendous value to organizations, but only if the advisory board is appropriately constituted and only if the businesses that bring them in are prepared to work effectively with them. 

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