Appointing Advisory Boards
Advisory boards are playing an increasingly prominent role in businesses of all sizes, but they are particularly relevant for scale-up ventures, where gaining high-level strategic advice is often invaluable in addressing key issues such as understanding international markets, business development or creating an exit strategy.
Without holding any legal responsibility or authority over the governance of an organisation, an advisory board is a body that – quite simply – advises the management of a business. It does not replace the board of directors but, instead, it complements it – filling specific knowledge gaps and providing specialist expertise.
The purpose of an advisory board, therefore, is to be a source of expert advice on a particular area. This could be keeping abreast of the latest scientific or technological developments, or offering insight into how best to penetrate global markets. Regardless of the kind of expertise a business is trying to secure, it is important that a clear remit is set in order for an advisory board to be effective.
So, what steps should you consider when appointing an Advisory Board?
The first step is to define the strategic objectives and then identify and agree upon what skills exist (or should exist) within the main board. In doing so, it creates a clearer picture of the nature of the contribution required of the advisors.
Once the objectives of the advisory board have been set, it is important to have a structure in place which keeps a focus on the delivery of these. In this sense it can be beneficial to appoint a Chair to keep the focus on the achievement of the objectives. Determining the expected time commitment from the outset will make it easier to target potential advisors who possess both the experience and the availability required. Whilst most may operate on an informal basis, either on the phone or email, it is useful to have some face-to-face meetings once or twice a year.
There are a variety of models which can be employed depending on what is feasible for the company. In the US for instance, the role of advisor is extremely common and something that the majority of employers are comfortable for their executives to undertake. To avoid potential conflicts of interest, most commercial agreements are on an equity only basis. This also keeps everyone aligned towards the same goals and building value.
An alternative model, perhaps more common in the UK, is to remunerate on a day rate basis. A typical fee would be between £1-4k a day, depending on experience. This could be supplemented with a bonus element, based on performance, which is particularly relevant if the objective is on business development.
We worked with a business whose growth strategy hinged on international expansion into an emerging sector. They were looking to augment their board, which was largely investor heavy, by building an international advisory board. We supported them in this initiative by securing them high profile individuals, who were well networked and considered thought leaders amongst their proposed customer base. From this they were able to draw high level input into their corporate growth strategy, coupled with tactical input in the form of key decision maker introductions. Its success played a significant part in delivering 200% CAGR in destination markets.
Making the right appointments is paramount. Good advisors will not only help build the business but also act as mentors to the management team. They should challenge the thinking of the board and, free from corporate responsibility be able to move and adapt at a pace suited to the demands of a scale-up company, offering a much concentrated focus on key issues.
With sufficient planning and clear objectives, an advisory board can be a powerful asset to any company. It provides a business with access to otherwise inaccessible talent, allowing businesses to tap into a collective experience that broadens its thinking, networks and opportunities.