In an earlier article I outlined seven reasons why you may want an Advisory Board for your family business. In this article I discuss the two key elements to setting up an Advisory Board to ensure it is a good fit for you and your business.
- Establishing a structure for the Advisory Board that will allow for it to function effectively, and
- Having the right people on your Advisory Board.
These two elements are interdependent, with membership influencing the structure, and the structure being tailored to the membership and the business’ needs.
The structure for the Advisory Board should be outlined in a written document to which all members sign on. It would include such things as:
- the purpose of the Advisory Board
- who are the members
- roles and responsibilities (including whether it is simply an advisory role or whether there are any authorities or responsibilities)
- how often it meets (and whether in person or by teleconference)
- annual strategic planning retreat
- identify the information to be shared and how often (e.g. quarterly financials, strategic plan update etc.)
- confidentiality and restrictions on use of information
There should also be an individual agreement with each Advisory Board member that outlines the term of their appointment (and termination) and any remuneration.
The people you will have on the Advisory Board will depend in large part upon the need that is being filled. In deciding who to approach, you should reflect on the reasons for having an Advisory Board and make sure that you appoint people who are going to fill those needs. For example, if the business could benefit from someone with particular expertise or experience, you will seek them out. If current management needs someone who would be a strong independent thinker (and challenge them on the conventional ways of running the business) then you would appoint someone with that character. Members of the Advisory Board can include family members but there should also be non-family members. I suggest at least two non-family members (so that one is not a lone wolf up against the pack).
With careful attention to these two essential elements, an Advisory Board can be very empowering for a family business, and contribute greatly to its future growth and sustainability. It can also play an important role in supporting the transition of management to the next generation, or the future sale of the business.