The Ultimate Board Game

To attract the best advisers, you've got to be networked or nervy.

Chief Exec

Doug Mellinger knows why he has an advisory board and a board of directors: to save him from himself.

Mellinger founded his now-$24-million software company, PRT Group Inc., in 1989, when he was just two years out of college. Early on, with $4 million in revenues, he went to his advisers with a plan to open 10 offices around the United States in one year. Since he lacked the financial resources and the management to do it, they advised against his plan. Today he's grateful that he followed their advice. "Entrepreneurs are the most dangerous creatures if left to their own devices," Mellinger explains.

Experts say that to mature, build strategic alliances, and gain access to capital, growing companies need an advisory group, whether it's an informal advisory committee or a formal board with outside directors. Mellinger credits his advisers with much of his professional development and the company's success. Two advisory-board members regularly give him and other key managers reading assignments and send them to leadership seminars. "There's a lot to be said for gray hairs," says Mellinger.

So what's stopping you from forming a group of advisers? Often it's not knowing where to look for expertise and lacking the nerve to ask for help.

When Mellinger started his New York City­based business, he didn't let fear of rejection stop him from cold-calling the top executives in America for guidance. "I was a bulldog who wouldn't go away. I was so determined to get these guys to help me," he says. Mellinger used his experience as the cofounder of an association for collegiate entrepreneurs as a starting point and then asked for advice about his start-up. "Very senior people get bombarded all day by people wanting to sell them something," he says. "They don't get hit up by people who just want advice."

Of the 40 or so executives he called, 15 agreed to meet with him for half an hour. Then he networked through seasoned executives like the chairman of a multibillion-dollar company whom he'd met briefly through his entrepreneurial group. Mellinger asked people he admired to be his mentors and sit on either his board of directors or his advisory board. His tenacity has been rewarded: PRT's boards have included the chief information officers of several Fortune 1,000 companies.

Although not everyone is as persuasive as Mellinger is, networking can pay off for anyone. Betsy Stewart recently decided she needed advisers to help guide her $3-million market-research company to the next level. So Stewart, CEO of Decision Insight, in Kansas City, Mo., started tracking down candidates through the half dozen associations, networking groups, and philanthropic organizations in which she's active. When inviting people to serve on her advisory committee, Stewart avoids picking anyone who is a pal. "I don't want them to worry about offending me," she says. Ted Cohn, coauthor of Survival and Growth: Management Strategies for the Small Firm, agrees with that strategy. "You need people who are not involved and can tell the owner they're full of baloney and not worry about the consequences," he explains.

When Steve Joyce, one of four founders at two-year-old Ganymede Software, in Morrisville, N.C., went shopping for advisory- and formal-board members, he discovered they could easily be found at neighboring technology companies. "I've been amazed at how I could pick up the phone and call someone and say, 'Do you have any ideas?'" he says. "Suddenly, a busy executive spends an hour with you on the phone." Joyce discovered that many big-company executives are encouraged to join small-company boards. "It's almost considered part of their job," he says. He also approached entrepreneurs who had already made it big. "A huge percentage of people around here like mentoring the next generation," Joyce explains. It took only about a month to round up Ganymede's board members.

Let's face it: despite the advantages of having a formal or an informal board, some entrepreneurs don't want to spend time recruiting members, planning agendas, and luring advisers to meetings. An alternative: busy entrepreneurs are turning to peer advisory groups, in which local businesspeople meet regularly with a facilitator and help one another solve problems.

For the past five years Ed Bunzol, president of Metron Electrical Rebuilders, in Addison, Ill., has been a member of one such group: PRO, or President Resource Organization, in Chicago. Bunzol, whose automotive remanufacturing company has $1.5 million in sales, pays $500 a quarter to meet monthly with 11 noncompeting fellow business owners. "It's my board of directors," says Bunzol. One member, recently visited by an Occupational Safety and Health Administration inspector, shared his experience with the group. Bunzol went back and reexamined his workplace. "You never know when you're going to deal with the same issue," he says. "If OSHA walks in here tomorrow, I'm not so ignorant."

Did you know that...more and more privately held companies are opting for informal advisory boards or committees rather than putting outsiders on their boards of directors? One common reason: to avoid the legal hassle associated with formal outside directors. Unlike advisers, directors are elected and have a fiduciary duty to the shareholders and the corporation. As company insiders, directors are potential lawsuit targets and should be insured by the corporation with directors' and officers' liability insurance. Advisers don't face the same risks.

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