Advisory boards are recruited to help leaders make high-quality decisions and expand influence. They are useful mechanisms in resource-constrained environments and hence popular at startups and not-for-profits.
I serve on numerous advisory boards. And while these roles are different to company directorships where I manage fiduciary responsibilities with my board member colleagues, I enjoy both styles of engagement.
I formed my first advisory board nearly 15 years ago. The key reflection from that first one, those I have formed since and through serving on advisory boards today is that the formation step is only a small part of the journey. The underlying routines and rituals that generate value from the advisory board is the main game.
Founders contemplating the establishment of an advisory board will nod in conceptual agreement. It’s these same founders who 12 months later lament how disappointed they are with the group they brought together.
Predicting advisory board demise
The recruitment and formation of members to their advisory board might have felt like the assembly of a grand coalition of the willing. A formidable team destined to achieve greatness. But something went wrong along the way. Greatnesses is still a long way off. Advisory board members seem disinterested or hard to reach and the founder feels like a significant piece of their armour is missing.
This is not a new issue.
In fact, the pattern of decay is predictable and it begins after the formation honeymoon is over and the advisory boards slip into becoming an ‘advised boards’. This is a state where founders start infrequently sharing large volumes of information as progress updates with the expectation that advisory board members will fully digest, internalise and self-organise into action.
I have shared the following thoughts with my mentees and portfolio companies to avoid this fate. Business schools teach this as ‘Forming, Storming, Norming, and Performing’ but, like most concepts, it oversimplifies the solution due to its lack of context. Here is one lens of the startup context and I hope you find it useful.
In 12 months the advisory board will be remembered for…
As I’ve written about before, imaging how the advisory board will be remembered is the all-important first step. Most founders start by trying to answer questions about the capabilities, personalities or experience that they think they need on an advisory board today. In my experience, this leads to answers that are more focused on near-term issues.
For example, founders might be obsessing about hiring a Chief Technology Officer or key engineering talent if that is an acute pain point today. This insecurity leads them to think they need ‘technology’ people on their advisory board. While that might be true, technology is a broad church and the tactical issue to be solved isn’t a technology issue. It’s a hiring issue. Rushing to find a ‘technology’ advisory board member to help solve a hiring problem isn’t likely to create the value needed when it comes to deep knowledge and relationships that the founders may need on specific technologies.
While this example might suggest a focus on advisory boards for software companies, it also extends to solo founders and entrepreneurs building professional services companies where the challenge is how to scale you.
To that end, I correlate how advisory boards will be remembered with the most vulnerable parts of the business model. For young companies, technology is often a vulnerable part but usually nowhere near as vulnerable as how the product is packaged and distributed. And just to be clear, I’m not talking about physical packaging, I’m talking about how a product is created and sold directly to consumers or businesses or as an ingredient of a larger product.
To start answering the question about how their advisory board will be remembered, I recommend that founders think about their key growth metric, the 12-month forecast for that metric and then specify as precisely as possible the five bullet-points of what needs to be built to achieve the forecast.
This is useful for two reasons. First, it clarifies the types of help that are needed and second, each bullet point provides a clue for the type of person needed on an advisory board.
Understand and play to incentives
As Berkshire Hathaway Vice Chairman Charlie Munger is famous for saying, ‘incentives are superpowers’.
When founders leverage their networks to create advisory boards, they do it for the right reasons. They need expertise and support to solve problems and there are people out there that want to help. But for all the thought that goes into the controllable aspects of an advisory board, e.g. structure, function and meeting schedules) very little time is often devoted to understanding the uncontrollable aspects, chief of which is why a candidate would join.
As remuneration is typically low or non-existent, candidates usually join advisory boards for one of two reasons. First, they have bought into the mission and are convinced their skills can be put to good use (missionary). Second, they can advance towards their personal ambitions which might include expanding their network to elevating their personal brand (mercenary).
Both of these motives are perfectly acceptable.
Due to the power imbalance that founders think exists between themselves and potential advisory board members, they often place emphasis on the missionary motive. The irony is that they downplay the mercenary motive while knowing the other party will probably only engage if there is something in it for them.
PRO TIP: Be authentic and forthright. If an advisory board candidate says they ‘just want to help’, treat this as a half red flag. The value must flow both ways. Remove the half red flag if they acknowledge value will come in time or if they suggest a value exchange you are comfortable with. But move to full red flag if they insist that they just want to help and deprioritise them as a candidate.
This might sound like a strange thing to do. They want to help. The founder needs help.
The objective is to find people who can play the long game. In my experience, ‘just wanting to help’ is nice but usually reflects a short-term intent. And when a founder comes to rely on that person over the medium term and their desire to engage wanes because the value is only flowing in one direction, it can lead to a breakdown in the relationship.
How incentives can translate to value
Founders can create financial and non-financial value for advisory board members. And these should be determined by the founder prior to engaging with prospective candidates.
In terms of financial value, founders can consider offering options as part of an employee share plan. This requires the advisory board member to have a formal agreement with the venture and that can be a good thing for two reasons. First, it helps the advisory board member becomes clear on how they need to contribute to meet milestones in order for their options to convert into shares. Second, it aligns them to the same strategic objectives as other team members.
Non-financial value is just as important. It can meet more immediate needs, especially when offering financial value is not an immediately available option. Non-financial value for advisory board members can include:
- Listing them on the venture’s website
- Authorising them to highlight their involvement on their LinkedIn profile
- Asking them to attend and speak at events as the venture’s representative
- Including them on early conversations about new strategies or product developments
PRO TIP: Incentives change with time. Advisory board members, like other team members, will be exposed to new opportunities, need to refocus their efforts or will want to increase their contribution at different points in time. Some of these changes will be easily identifiable whereas others will be more opaque. In any case, each of these scenarios brings with them a change in incentives. To ensure founders aren’t spending too much time trying to understand these changes, I recommend each advisory board member agreement have a 12-month duration. This can be reviewed annually and extended if both parties are excited to continue engaging.
I use the bullet point summary, incentives and a simple framework to identify (and deprioritise) advisory board candidates which I consider non-negotiable:
- Expertise – They have lived experience, are at the top of their game, are radically candid and come with humour and compassion. These are a unique set of qualities which in my experience can be found in other entrepreneurs and founders-turned-investors.
- Available – They are available when you need them, not when they have time. Practically, this means they respond to you within 24 hours of you reaching out to them. This also means they are ready and have a track record of proactively looking for ways to help.
- Ready to play the long game – They instinctively know that value will ‘come out in the wash’. This means they are ready to put their reputation and relationships to work and less worried about immediate remuneration
I don’t compromise on these characteristics because life is too short to be surrounded by mediocrity.
A little formality is a good thing
I think it’s important to formalise relationships with advisory board members. It can be a two-page document that talks about the role, the 12 month tenure and expectations about conduct and confidentiality.
While more formal documentation will be entered into where options are made available, this two-pager should be a plain language document that is signed by both parties. This is simply good governance.
Gone are the days when an advisory board meets twice a year to discuss a high-level agenda.
While this biases the founder, advisory boards needs to be available and highly responsive to support the venture. Today’s advisory boards operate in Slack (and other team messaging services) where they can be called on for micro-advice and be kept up to speed on company conversations. Of course, you can use email, phone and video calls to similar effect but the point is that speed and availability are key to a high-performance advisory board.
I think it’s also useful to bring the advisory board together once a quarter as a team to have a broader conversation. This is where they can contribute their perspective on relevant industry trends and engage in debate with their colleagues.
PRO TIP: One quality of high performing advisory boards is when members start engaging on other business outside of the venture. It reflects cohesion which usually ends up benefitting the venture in unexpected ways.
When you are asked to join an advisory board
It is always humbling to be asked to join an advisory board. And while each request should be judged on its merits, I find that founders often make the request because they need help focusing on what’s important and being held to account. Consequently, I have learned to ask if a founder needs help with focus and accountability each time I am asked to join an advisory board.
I highly recommend you do the same. It often accelerates relationship development and exposes new ways to add value.
One last thing…
Advisory boards are small teams of three to five outstanding people who can help founders achieve the unachievable.
If you are a founder, invest time in setting up and operating an advisory board that can be nothing but high performing. Be clear on how this group will be remembered in 12 month’s time. Align incentives, create value and get to work.
If you are a prospective advisory board member, join for the right reasons and start generating value as quickly as possible.
At the end of the day, advisory boards can be highly valuable or just another ‘thing’ for founders to manage. Like most things in life, you get out what you put in and advisory boards are no different.