Profile of a CEO who assembled a board of advisors and the difference it's made in his business.
Putting together an advisory board can be a daunting prospect -- and your smartest move. Here's why one CEO decided he needed advisers, how he went about getting them, and what they've brought to his business
Bob Hartman couldn't help being impressed, nor could he stop the sweat from building along the edge of his hairline. Here he sat, the president of a $30-million technical-training school, interviewing the former president of DDB Needham Worldwide, an advertising agency with $900 million in annual billings, for a post on his soon-to-be-formed board of advisers. "I kept wondering, 'How do you interview a guy of this caliber?" the 46-year-old chief executive recalls. " 'What kind of questions do you ask? How will I keep his interest?' " Still, Hartman persevered. He explained why he needed the board, what his expectations were, and the problems facing his company.
Then he sat back and waited.
The 60-year-old adman didn't waste any time on the niceties. Frankly he told Hartman that his approach was way off base. "Why would I want to serve on a board of advisers?" he asked. "I don't need to warm another seat." A board of directors is far more effective than advisers. Directors are empowered: empowered to make decisions, to affect the company, and, he added slowly, to make radical changes if necessary. Hartman shifted uneasily and nodded. "For example," Hartman recalls the adman's saying, "on the last two boards I served on we had to oust the CEO. Neither guy knew how to operate a company."
Hartman smiled and ended the meeting quickly but cordially. Then he shut the door to his office and thought, "Why am I doing this?"
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A reasonable question to ask, for sure. After all, isn't the beauty of owning your own business making your own decisions? "It's frightening to invite outsiders to peer into the finer workings of your private company," allows John M. Nash, president of the National Association of Corporate Directors. In fact, he adds, few people do. According to Nash, only 5% of closely held companies actually do allow their boards to be dominated by outsiders. Those that do typically face an intractable problem like a generational dispute within a family business or are gearing up for a public offering and the scrutiny to come.
Nash estimates that 80% of the private companies considering bringing on outsiders select a board of advisers, a more informal group than a board of directors. Such a board counsels the CEO but has no voting power and, generally speaking, no legal liability to protect shareholder interests.
Still, even a board of advisers takes an element of control away from the CEO -- offering a certain degree of second-guessing from seasoned executives or trusted confidants that cannot be easily brushed off by the founder who invited their inquiry. Why invite outsiders into the inner sanctum to peer over your shoulder, to poke around and ask questions?
The answer is simple. Who can afford not to? In a day when the fleet-footed and savvy among us are reengineering, retooling, and "right-sizing" quarter by quarter, no CEO can afford to simply inquire within. Consultants aren't necessarily the solution, either. Not only is their expertise costly and often slanted toward a specific discipline, but also -- unless your pockets are really deep -- consultants aren't likely to wait around to see what kind of tweaking is necessary once their suggestions collide with reality.
That's not true of a board of outsiders, however. Plus, such expertise generally comes at a lower price tag, typically costing well under $20,000. For that money, you can harness a variety of disciplines from men and women -- often former CEOs -- who've actually served in the top office and will stick around.
A board of outsiders isn't for everyone, though. Certainly, it's not for CEOs looking to make their letterhead sparkle with marquee names. Says Susan Shultz, an executive recruiter with a specialty in assembling boards, "Any board candidate who's worth their salt will run if they suspect they're a rubber stamp." Nor is a board for the faint of heart. "You'd better be ready to take their advice seriously," Shultz warns. And you'd better be ready for the shake-up bound to follow.
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Hartman wasn't ready, but he was committed, and he was hungry for fresh direction and for answers about how to preserve the company he feared was headed down a steep hill.
Hartman's company, Universal Technical Institute (UTI), is one of the largest and most respected technical-training schools in the country. It was founded in 1965 by Robert Sweet; Hartman took over in 1990. The for-profit school has three campuses: in Phoenix, Houston, and Chicago. Specializing in training for careers in automotive-diesel and air-conditioning work, with the longest program extending 63 weeks, UTI caters to the high school graduate who isn't interested in college. "Many of our students are the first in their family to go beyond high school," Hartman explains. Seventy-five percent of the 4,000 students that enter UTI every year are kids trying to struggle out of a lower socioeconomic position, kids trying to find something better than bagging fries for the minimum wage.
UTI offers them that chance. Starting salaries for a certified technician are between $15,000 and $20,000. According to the Bureau of Labor Statistics, between 1992 and 2005, jobs requiring technical training beyond the high school level will be growing at a rate 50% greater than the general job market. The chairman of the Crediting Commission for Career Schools and Colleges, a watchdog group for the industry, points out that "schools like UTI will be the critical link in creating a world-class workforce, employment security, and even individual security."
