“A good advisory board should change over time and members should relinquish their roles if they are either too early for the venture or the venture has outgrown their scope of knowledge.”
Alan Hucks, Creative HQ
Setting up an advisory board
Clearly establishing what you are trying to achieve is imperative to a successful advisory board experience. Which area of the business will most benefit from external support? Aim to lock down your own expectations of your advisory board before members are engaged and then work with your advisory board members to collectively confirm the expectations of all parties and how the advisory board is going to operate.
It is really important to select a balance of individuals to join your advisory board and ensure robust but constructive debate. Setting skill criteria allows for an objective assessment of candidates, however, also look for the right chemistry (respect, shared vision, challenge and ability to get over disagreements) – both ways.
Ask yourself the following questions, to help you determine the composition of your advisory board. •How many advisory board members are you seeking?
- Who will be involved from management?
- What specific skills will help my situation?
- What soft skills will champion cohesion?
Compensation for your advisory board members will depend on who is recruited and how involved you need them to be. A number of options exist such as voluntary (no monetary compensation), pay per meeting, a monthly or quarterly retainer, equity in the business or a combination of the above. You need to select the right compensation option to fit your business.
For advisory boards your approach to recruitment doesn’t need to be formal – many advisory board members have been recruited over a cup of coffee or casual drink.
If you want to ensure you cast your net wide enough to ensure you find someone with the right mix of skills, consider advertising with IoD’s DirectorVacancies, where for a small fee you can make your position known to members.
Setting up a board of directors
Put it on paper
Before going out to seek directors for your board, it’s a good idea to put on paper a little bit about how your board is going to operate or in other words a kind of a board charter. It’s not necessary for this to be hugely complicated and you might like to use IoD’s sample board charter as a guide and work through topics like board procedures and number of meetings, tenure, ethics and accountabilities.
In order to get the right person for the role, it is also a good idea to write up a position description. Not only does it give you a better idea of what you are looking for, but it will also help attract the right people.
The description should cover:
- skills, experience and personal characteristics being sought
- purpose of the role
- main duties
- period of appointment (often three years)
- time commitment/expectations
SME owners often fall into the trap of only asking people they know to sit on their boards. Instead, it is important to shop around and meet with as a diverse bunch of people as possible so that the best decision can be made.
The IoD is well set up to help recruit new directors with DirectorSearch and DirectorVacancies.
Due diligence – a two way street
Before taking on a new director, make sure that: •their referees have been consulted
- a credit check has been performed
- a check of the Companies Office records is done to ensure the individual has properly disclosed all directorships and has not been barred
- a check to ensure there are no other conflicts of interest.
Expect similar diligence by the potential candidate. A good one will want to know as much about the company as possible to ensure they aren’t putting their personal wealth and reputation at risk.
Insuring against liability
The board should be insured! However the level of cover can vary from company to company depending on what is laid out in the constitution. It is always best practice to speak to one’s own insurance broker just in case.
Formalising an appointment
Make sure that the appointment, once verbally accepted, is formally confirmed by letter.
- The induction into a company is vital if the director is going to make an effective and informed contribution to the board. A new director should: be introduced to the board and all staff
- meet important business partners
- visit the business premises
- gain a full understanding of the goods or services the business specialises in
- do anything else to acclimatise them into the business as quickly as possible.