“An effective Advisory Board will make a good CEO better.”
Figure 80.1: My weekend advisory board.
This past weekend, we celebrated Canadian Thanksgiving and the great fall weather with a two-hour hike through Gorge Creek in Riding Mountain National Park on Sunday. In our family group, we had people who were experienced and people who had never done this hike before.
Having an advisory board is a lot like our group hike: people with expertise and experience can guide those with less or no previous exposure to particular terrain and help them gain experience while avoiding dangers along the way and preventing injuries and rookie mistakes.
An advisory board:
- Has expertise and experience the CEO wants to access.
- Meets informally at the discretion of the CEO.
- Can provide strategic or tactical perspectives.
- Can easily be changed to meet the CEO’s or business’s needs.
- May be effective for CEOs who are concerned about reporting to a formal board or giving up control.
- Needs a good chair so the CEO can benefit from the discussions and analysis.
- Lacks formal power to guide decisions or implement change.
- Has no formal accountability to anyone.
Unlike an information advisory board, a fiduciary board, like that of a public company or formal non-profit organization:
- Is responsible to look out for the best interests of the shareholders (in the US) and for the best interests of the corporation (in Canada). Note: the US laws are gradually moving north.
- Is responsible to demonstrate a duty of care, meaning that they have properly analyzed information and documented the decision-making process.
- Needs a good chairperson who spends time building an effective working relationship with the CEO and who aligns the board’s expertise to help the company.
- Will hold the CEO accountable for performance.
- Will ensure CEO succession is discussed and planned for to protect the shareholders’ interests.
- May be overly concerned with short-term performance, as we often see in publicly-traded companies making poor ethical or business decisions in the interests of profit to drive up share price.
- Is not a guarantee of better decision-making or performance.
If you are a majority shareholder of your own company, a fiduciary board may be a great fit because they will be looking out for your interests as a shareholder (in the US) and for your company (in Canada).
A good advisory board does not look exactly like you. Innovation occurs on the perimeter when you bump into something different than yourself. A diverse board can accelerate the innovation, bring new and different perspectives, and help you be more relevant to more people in the future.
Our “board meeting” consisted of a six-kilometer hike where we climbed 711 meters and descended 427 meters, according to my amazing Apple Watch. That was a lot of calories burned against gravity, going up, and coming down.
A board meeting should not be a leisurely stroll through your recent financial statements. Your board meetings should consist of climbing up and thinking about future strategies, one to three years ahead. This includes evaluating your current strategies against the future possibilities. We call this foresight and oversight.
The board should also include some deep dives into critical strategic issues and tactical metrics. The board needs to ask “Why?” We call this insight and hindsight.
Figure 80.2: The creek at the bottom of the gorge.
Your board needs to think about your future. Your board will be most useful if you can vary the elevation of their perspectives and analysis above that of management who is busy with the day-to-day while pursuing short-term goals.
An advisory board can be an effective way for a CEO to gain perspectives, expertise, and experience in order to accelerate business growth and build their business wealth.
Full speed ahead!
Thanks for reading.