“What you need is a manager” – Mickey Goldmil to Rocky
It seems no matter what stage your company is in, entrepreneurs are always told that “best practice” is to have an advisory board. Like Mickey’s advice in that scene from Rocky, the right advisors, friends and colleagues are good resources when you face certain business problems. But just like any other idealistic solution, there are pros and cons to having an advisory board.
On the pro side, it is true that a properly structured advisory board can be a real asset especially to a younger entrepreneur. People with the experience (especially in your industry) or with skill sets which do not exist in your current management team certainly add to an entrepreneur’s arsenal. Most advisory board members are very conscientious, sincerely want to help and can provide invaluable guidance. But the advisory boards that are the most successful are those where there is a clear set of expectations on both sides as to what the role of the advisory board will be. If the entrepreneur realizes that these members are a sounding board and are not necessarily problem solvers nor fiduciary agents, he or she can maximize the value that a board can bring. I strongly encourage an advisory board particularly when the entrepreneur is struggling with issues they may not yet want to share with their management team.
But like nuclear energy that can either be an effective tool or a disaster, misdirected advisory board members can also create chaos. Especially for young entrepreneurs, at times advisory board members think that they have a better answer and instead of just listening to the entrepreneur and trying to provide guidance, they begin to direct. In fact, in doing work with certain early stage companies at accelerators, we have had a few instances where the mentors or advisory board members actually threatened to either take over the company or to place the entrepreneur in a position where they begin to doubt their leadership ability. Not the desired outcome.
So some simple rules:
- Don’t just bring on anyone as an advisory board member. In addition to their knowledge, make sure you are compatible with their style.
- Get a reference check from other advisors or entrepreneurs as to their experience with that individual as an advisory board member. It certainly is fine to have them challenge what you are thinking but very strong willed and opinionated board members can lead to dysfunction instead of helping you move the ball forward.
- Finally, make sure the person has the time and wants to serve in an advisory board capacity. A number of my colleagues who serve on advisory boards will not do so unless they have a stake in the company. Their belief is that unless they invest, their advice will be ignored as they do not have any “skin in the game.”
Following some simple rules will allow you to have an effective advisory board which I believe is one of the keys for any successful venture.