Mar 11 2013

The Power of an Advisory Board

We are pleased to feature a blog written by Manny Tocco, from RBS Citizens, the event sponsor for the Wednesday FORUM.

Manny shares insight about the power of an Advisory Board to family businesses: (if you want to learn more, please register today for the FORUM!)

The problem that family businesses face is that they all generally think alike……literally.  It’s not their fault, it’s in their DNA, it’s who they are, the proverbial “the apple doesn’t fall far from the tree” aphorism.  That connectivity is perhaps the reason many privately held, family run businesses have risen to greatness.  But it is also a characteristic that could paralyze an organization.

Businesses, especially today, thrive on creative thinking, and if management is cut from the same cloth it could be problematic for the future of the company without an external voice of reason.  An Advisory Board can address these issues.

An Advisory Board shouldn’t be confused with a Board of Directors.  A Board of Directors is responsible for the well being of the company and its shareholders, whereas an Advisory Board has no fiduciary responsibility and is focused on the CEO and/or the rest of management to help guide them to make sound business decisions.

A good Advisory Board is comprised of trusted advisors that supplement management’s skill set. Before you decide who should sit on the board you may want to start by asking yourself “What do I want out of this?”  Develop a S.W.O.T. analysis (strengths, weaknesses, opportunities, and threats).  This process will help you identify the areas of your family business that need the most assistance. Then you’ll have the knowledge to identify professionals that you know are problem solvers or creative thinkers that will get the job done.

Most companies will initially gravitate to the Big 4 (CPA, Attorney, Banker, and Insurance Agent) when they start their board… don’t! You employ all of them and they may not feel comfortable giving you the brutal truth.  If you must, two of the four is sufficient, but you should look for like businesses that aren’t competitors; i.e.: if you are a distributor of paper towels perhaps you engage a distributor of coffee mugs.  You’ll enjoy hearing practical solutions from similar businesses and you’ll feel like you are not alone.

Lastly, and this is very important, remember that an Advisory Board isn’t highly compensated like a Board of Directors. These people are taking time out of their day to help improve your family business. To make their experience worthwhile, remember to:

*  Be appreciative
*  Openly discuss a strategy to compensate an Advisory Board even if it is nominal
*  Be prepared, and respect each person’s time.
*  Take each meeting seriously and everyone should check their egos at the door.  An owner should be humble enough to consider a board member’s idea and the board member shouldn’t feel discouraged when an owner doesn’t act on his/her advice.

With each meeting the process will evolve; stay dedicated, and choose a frequency for your meetings that’s meaningful……with an open mind to new, fresh ideas, great things will happen.

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