By Bradley S. Schneider
In a restaurant, a board might consist of investors, operating people and one or two independent directors.
While the start is relatively straightforward, the greatest incidence of board collapse is in the first year.
Many family-owned restaurant operators talk about establishing a formal advisory board, but few actually invest the time, energy and money to do so. Why should you bother to establish a board of advisors? The short answer is that having outside advisors will enhance your business's performance.
The source of this benefit is the access your leadership team has to the insight, wisdom and experience of your outside advisors. Over time, the board will potentially help you perform four key functions:
- develop and implement a strategic plan
- steer clear of potential, "avoidable" problems
- create optimal solutions to issues and challenges as they do arise
- hold yourself accountable over time
An advisory board does not replace the owner's primary role of leadership, decision making and strategic vision. Rather, it is a mechanism to enhance both the individual and collective performances of the leadership team.
Advisory boards are often discussed interchangeably with boards of directors. There are, however, some critical differences between the two. Corporations are required to have a board of directors by statute, while no law controls a board of advisors. Directors are "elected" by the owners of the company. Advisors are appointed by the leadership. Because directors are in a legally mandated position, they have very specific obligations with fiduciary responsibilities—and liabilities. The responsibilities of the advisors are whatever you make them. Lastly, directors actually make decisions that are effectively binding on the company. Advisors are only in a position to offer ideas and make recommendations, which carry no legal weight.
What Makes for an Effective Advisory Board?
There is no magic formula for creating an effective advisory body, but there are some fundamentals that will at least set you down the right path. First and foremost, it is critical to carefully assemble the right mix of people. Quality of character is key—the advisors should reflect the values of the restaurant and of the owners. You also want to ensure diversity of experience and perspective—each person should bring something distinctive to the board. Chemistry of the group must also be taken into account. While a mix of thought and style is important, it is equally important that everyone interact well together.
In a restaurant setting, a board of directors might typically consist of investors, operating people and one or two independent directors. An advisory board, on the other hand, would not necessarily include the investors, unless they brought specific insight to the running of the business. Rather, we would try to surround the operator or leadership team with a group of people with backgrounds and expertise that specifically support the needs of the business.
A second key to a value-added board is the creation of a written charter. Such a document provides the board with a clear mission and very specifically sets out the expectations of the board, both individually and collectively.
It is also essential that you maintain discipline regarding meeting routinely and strictly adhering to agendas and schedules. Set the date for all meetings a year in advance and distribute background information and a summary of topics to be addressed one week in advance.
You must also commit to complete openness in your communications with the advisors and promote the same openness in the communications among them as well.
Lastly, you must be patient and willing to allow time for the board to take root and ultimately mature to its full potential value.
Recruiting and Compensation
Don't undersell yourself or your company's ability to attract exceptionally high-caliber advisors to your board. It is also important to recognize that this is a position of serious responsibility and high expectations. You should not populate your board with "prima donnas" or "yes-men."
The first step in recruiting is formally stating what you want/ expect from your board and its members. You then must developa formal position profile for each seat on the board, followed by assembling a list of people whowould possibly fit the specific needs.
You must contact each candidate to explore their interest and then conduct a formal interview to examine their fit. If your goal is to start with three advisors, your objective should not be to find the "three best," but rather the "best three."
It is likely that the people for whom a board position holds an interest and to whom you will be attracted will not be motivated by the money you will offer. On the other hand, it is, at the same time, important that both you and the advisors clearly understand that a board seat is a position of real value. Therefore you should compensate your advisors with either a cash stipend, or if deemed appropriate, an opportunity for acquiring company stock. You should expect to pay between $5,000 and $20,000 per year, per advisor.
Getting Started and Staying on Course
Creating an advisory board is not rocket science. The hardest aspect is getting started. The basic considerations and steps in launching your effort include:
- Design and agree upon the board development and selection process.
- Who will be involved?
- Who will make the decisions?
- Who will have input?
- Decide what you want to get from a board.
- Create a board charter.
- Identify the attributes/competencies of ideal board candidates and draft a "job description."
- Develop a preliminary prospect list.
- Contact and interview prospective candidates.
- Put together the slate of the best three to five individuals.
- Extend offers to those selected.
- Hold an initial board orientation meeting with introductions to each other and the company.
- Establish a schedule for the next four quarterly meetings.
While the start is relatively straightforward, the greatest incidence of board collapse is in the first year. Often the second meeting lacks the excitement of the first, the third meeting becomes perfunctory and the fourth simply never gets scheduled or is postponed into oblivion. It is, therefore, of paramount importance that you stick to the schedule, adhere to the agenda and invest the time and energy into the quarterly meetings to make them worthwhile for you and your advisors.
The Consultant's Role
Essentially, an experienced consultant will act as your guide through the process, ensuring structure and focus through to completion. He or she will help you define your goals and should work with you to draft the charter. The consultant must be able to help you put together a list of potential board members. If you want, he or she can also make the initial contacts, conduct preliminary telephone interviews and screen the candidates to develop a short list. Additionally, your consultant will be able to serve as a sounding board to help you put together the best group of advisors from the list.
After you have the advisors in place, it is often beneficial to have the consultant lead the initial orientation meeting to ensure that the group is structured to achieve the board dynamic you desire. Again, this first meeting is generally a longer session as you will take the opportunity to more fully explain the business, share your vision and strategy and reiterate your expectations.
Usually, advisory boards meet on a quarterly basis. Following the orientation meeting, your consultant should probably attend the next four quarterly meetings, assuming the responsibilities of facilitator, time keeper and scribe. Your goal should be to diminish the consultant's involvement over time, to the point that you are fully weaned from his or her role by the end of the fourth meeting.
Bradley S. Schneider is the director of Blackman Kallick Strategic Services Group (www.bkadvice.com). The Blackman Kallick Family Business Center offers broad consultancy expertise to family businesses.
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