There is still some confusion regarding the difference between a company board of directors and an advisory board.
How can companies benefit from having an advisory board?
I learned a lot from building an advisory board in Los Angeles in 1999-2000. I managed to recruit top-level people front Yahoo and other well-known companies and they were very valuable in several ways.
The company board of directors should represent the stockowners.
Therefore it makes no sense for a small, owner-led company to have external people in the company board, especially if the CEO is also the majority shareholder.
A company board also should not have individual experts in law, economy etc, instead the board should focus on strategic long-term value growth. It’s better to buy specific expertise when you need it.
It is very difficult to recruit top-level people to the board of a small company since the members of the board are also personally liable for the company finances and taxes etc. And if you find a willing high-calibre external board member you probably have to pay up substantially.
But this also means that an advisory board could be an especially valuable strategic asset to an owner-led company.
An advisory board should preferably consist of 3-5 members with very varying backgrounds, coming from different business areas and perhaps having expert skills in things like marketing, social media, future trends and communication. They can then freely advise the board of directors and management on how to reach the company goals (set up by the board of directors) and help with connections from their personal networks.
The trick is to find the right people for the advisory board and create a win-win situation. Since you want top-level people but don’t want to pay high fees you have to offer something else of value.
Begin by listing a dream team of well-known people that you think might be interested in your endeavour. Ideally they should complement each other and not be acquainted. Present your list to these people and explain that this will be a high-calibre advisory board for a company with an exciting potential and interesting business networking for the members.
Then create very fun advisory board meetings about once every quarter where you organize brainstorming sessions over a decent dinner.
Make sure the advisory board members get PR for their efforts by writing about them in your news letters, press releases etc, building value for your own company in the process.
Remember: Give to Gain works both ways!