Dear Advisory Advice:
The key to creating and sustaining an effective advisory board: Be thoughtful and clear at the outset about your expectations and goals for the group. Those goals should drive your decisions about members, frequency of meetings, the time commitment you're looking for and even compensation. These expectations will also be critical in your outreach to potential advisory board members: Each potential board member needs to clearly understand its role and the benefits (tangible and intangible) they may receive from serving.
For example, some companies have advisory boards designed primarily to keep the company on top of the latest thinking and innovations within its industry. Typically invited to serve are prominent thought leaders who gather regularly to consider the latest trends and developments, usually in a relaxed setting. Membership on this kind of board can be relatively fluid and the relationship between the company and the members should be symbiotic. (A modest honorarium, often in the form of equity, may be offered in these cases as a tangible sign of the company's appreciation and to keep the members engaged.)
At the other end of the spectrum are advisory boards whose members are expected to engage with the company more intensively, advising management on issues ranging from product development to long-range strategy. At the far end of this continuum, the model is more akin to a consulting relationship and meetings are geared primarily to the company's needs and getting work done. Depending on the nature and extent of the time commitment, the members on this kind of advisory board are paid a retainer (typically in the form of equity) or as paid consultants
Along a different tangent are what might be called high-profile advisory boards, whose members are selected primarily for their star power or prominence in the field. These boards typically meet relatively infrequently and the members tend to be compensated for the use of their names, rather than for any substantive contributions.
Regardless of the board's purpose, what's critical is to carefully define the purpose and then recruit and compensate the members accordingly. To create an engaged advisory board, you need to:
- Have clearly defined goals for how it will help the company
- Use existing connections among your management team, board members and supporting organizations (such as investors, industry organizations) to identify and reach out to people with the right experience and standing in the field and a demonstrated affinity for the company's issues and industry
- Make sure that the participants receive something of value for their time—whether it's access to company resources and real-world experience (often quite attractive to academics), broader connections within the industry or, where appropriate, compensation.
SOURCE: Olivia Wakefield Lee and Carl Schmitt, Towers Watson, Boston and Los Angeles
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