As a company grows and the business becomes more complex, one of the best moves a leader can make is creating a board of advisors. Unlike a board of directors, a good set of advisors can give the top executives honest and direct feedback on strategy and planning without bias or reservation.
Unfortunately, many of the CEOs and leadership teams I meet have failed to create a powerful advisory team. Many make it a social event over a boozy lunch or dinner. Others use it as a perk for their friends and colleagues and plan boondoggles to exotic locations.
In order to create a highly effective board of advisors, you first need to assess the strengths and weakness of the current leadership team. With that insight, you can build an advisory team using the following factors; these factors will diversify and expand the capabilities of the CEO and their key executives.
1. Gain knowledge and insight into your business domain.
The first--and easiest--area to consider seeking advice for is the specific domain knowledge your team lacks. This can be general business domains such as sales, market, reach, and development, or it could be more specific technical knowledge like solid state computing, pharmaceutical manufacturing, or perishable food distribution networks. Your board of advisors is a great chance to bring in the expertise you need to get to the next level of your business.
2. Bring functional skills and expertise.
Another way to leverage your board is to bring in the specific functional knowledge you don't have internally. This expertise includes sales, marketing, finance, operations, production, distributions, risk analysis, and human resources. Early stage companies can't often afford senior experts in all of these functions. Your advisory board is a great way to bring in these skills without having to hire full-time staff.
3. Include experience in key areas of business.
Some businesses need special experience to execute their plan. If your strategy includes a roll-up of smaller companies, franchising your business model, or building out a software-as-a-service business, having senior executives on your board who have been through the process you are going through now can be invaluable to your team.
4. Diversify your thinking styles and perspectives.
Many teams overlook this factor. Some people are highly analytical and others are very intuitive. Some are process oriented and others are big-picture thinkers. Seeking advice from others with differing perspectives is important and it helps you cover all your bases. For example, if your leadership team is analytical technologists, your advisory board should have more intuitive sales and marketing experts to give you a balanced perspective. Find people who think differently than you.
5. Limit your sensitivity and tolerance for risk.
Many entrepreneurs are naturally risk tolerant, some might even consider themselves risk-seeking. This is critical in the early stages of a business when great odds need to be overcome despite the risks and uncertainty involved. However, as the company grows, a more balanced approach should be implemented.
If your leadership team is made up of all high-stakes poker-type players, you'd best balance this tendency with an advisory board which can point out the risks and potential consequences that need to be fully realized and considered
6. Access the right networks and people.
Finally, your board of advisors is a great opportunity to extend your network and access the right people to grow your business. If you're planning a round of financing, a board member with a deep money network is critical. If you're building out a technical team, someone with great connections to developers is key. And if you're planning on manufacturing product overseas, then someone with contacts in foreign factories is extremely valuable.
You probably won't be able to address and balance all of these factors at one time. Start by discovering where the greatest needs are relative to the current leadership team and future strategy. Then, see where you can find the right people willing to be members on your board and select the best overall team.
Make sure your board is treated well and make sure they enjoy the experience of working with you and your leadership team. Good dinners, nice venues, and fun trips all help. But don't forget the main purpose of the advisory board is to engage in open debate and constructive conflict to advance ideas and perspectives. My suggestion for your advisory board--as with leadership teams--is work hard, then play hard.