It’s been said many times that it’s lonely at the top, and that may be true for CEOs who choose to “go it alone” when it comes to setting a course and making decisions for their businesses. In the corporate world, that seldom occurs, since boards of directors exist to focus on governance, performance, and strategic planning — providing expertise, asking tough questions, and issuing challenges to facilitate long-term success.
Family businesses are a completely different animal, as the power lies with the owner, who may or may not feel inclined to create an advisory board to help steer the ship, so to speak. As a family business advisor, I’m a big proponent of such a body. However, it is important to note that an advisory board is different than a board of directors; most notably it is not a legal entity and has no fiduciary responsibility. That being said, it can serve the same purpose as a board of directors in theory: providing unbiased feedback to the owner.
How Does an Owner Go About Forming an Advisory Board?
Owners who want to start slow might identify just one person, perhaps someone in the same industry, to serve as a mentor. But even that one-on-one relationship will require being vulnerable to achieve significant benefits — and the first step is the same as it would be for a full-blown advisory board: identifying the purpose, including what the owner wants to get out of it, and what topics will be discussed.
Who Should Serve on an Advisory Board?
There are several key issues to be considered when deciding who should be invited to be on an advisory board. For the body to work, the family business owner must be vulnerable, trusting a group of people who are supportive of the growth of the business. The board can include family members, but they may not feel able to really speak their minds. It is best for an advisory board to be comprised of professionals such as attorneys, accountants, industry experts, and the like who can provide a real business perspective, identify other streams of business, and weigh in on current processes.
Those tapped to serve on an advisory board (or a board of directors) should possess these qualities:
- Trust
- Respect
- Ability to communicate
- Commitment to the process
- Passion for the business
Why Are Some Owners Reluctant to Form an Advisory Board?
Many family business owners have a hard time being open and are especially uncomfortable sharing their business challenges or the details of their financials. When they are willing, the “payoff” is invaluable, as board members can comment on everything from strategic planning and family-related issues to succession planning. An advisory board doesn’t have any real power, but it can strongly encourage an owner to stop and think about issues that affect future success.
In my experience, most owners who have formed advisory boards, even those who were reluctant initially, find it doesn’t take long for them to appreciate their value. It provides great peace of mind to get advice from people who care about the business, especially when tough decisions are on the table.
