Every corporation, no matter at what stage of the corporation’s development, requires regular evaluations of corporate objectives and applied insight into making advantageous strategic decisions. The makeup of boards can either make or break the corporation’s performance. It is for that reason that the makeup of boards is a recurring and growing issue.
Recently the Diversity Council Australia (DCA) and Deakin University commissioned a study into the cultural diversity of ASX boards. Though the last decade has seen a progression towards a more culturally diverse board composition, the ASX boards do not come close to reflecting the cultural diversity of the company and of the wider Australian community generally.
The productivity of a board relies on the right arrangement of people with diverse skills and backgrounds. We sat down with one of our Managing Partners, Joanne Jacobs, to talk about what makes an effective Advisory Board. She distinguishes between executive and advisory boards and reveals the key to establishing a board that works for any business.
DH: WHAT MAKES AN ADVISORY BOARD EFFECTIVE?
Joanne Jacobs: I’ve been on many advisory boards and their effectiveness varies dramatically, but I do find there are a few factors that will encourage success.
Firstly, you need to make sure an Advisory Board is not too big. To have a productive conversation about strategy and development, advisory boards should be kept to less than fifteen people, and ideally, less than ten. But sometimes it’s hard to get everyone in a room at the same time, so some organisations will have a board of twelve to fifteen people, because they know they will only get eight to ten people around the table at any single meeting. That’s okay, but it becomes harder to keep everyone up to date about what is happening, so time at meetings is lost in repeating ideas that have been raised at previous meetings. I prefer smaller advisory boards because I think more gets done.
Secondly, I believe advisory boards should be comprised of people with a variety of skills and backgrounds. Boards that have too many people with similar skills will tend to overlook the opportunities and challenges that sit outside their realm of expertise. I’ve personally learned a great deal from people on advisory boards who have come from a completely different domain, and who offer advice on processes and policies that can transform an organisation. But if a board has too many cheerleaders from one category of expertise, organisations are more likely to try to please their advisory board than focus on what their audiences need from them. And that can lead to total failure.
Finally, organisations need to ensure they are not using advisory boards as a rubber stamp on their existing planning. People who are on advisory boards generally want to take an active role in decision making. They want to help shape the plan. Organisations that do a lot of work in planning and then expect an advisory board to applaud their work, totally miss the fact that advisory board members never want to have their name associated with a plan that is unworkable, incomplete or that misrepresents their collective priorities. Some business representatives believe they are the experts at strategic planning within their organisation, and they should thus present a completed strategy to a board for (limited) feedback and minor amendments. But in so doing, they are wasting a highly useful resource, as well as annoying the board members in the process. This approach will generally produce something easy to implement within an organisation, but it won’t address the primary market for a strategy. And that’s what advisory board members are there to represent – the first customers, as well as the first salespeople for a product or a process. It is far more valuable for organisations to turn strategic planning in to a SCRUM-based process, where advisory boards can continuously contribute to strategic planning, and review development in short, effective board meetings.
DH: YOU HAVE SAID BOARDS NEED A VARIETY OF SKILLS; WHAT SKILLS ARE NEEDED FROM ADVISORY BOARD MEMBERS?
Joanne Jacobs: So in answering this question we have to be clear on the differences between an executive board and an advisory board. An executive board will need someone with legal and compliance experience, someone who understands the financial situation in significant detail, someone who understands the technological issues impacting on an organisation, and someone who understands the product industry or market sector. And then you might have a fifth director who will perhaps have connections or existing customers who will help to sell the product or the idea. Each director on an executive board has the fiduciary and legal responsibility to ensure an organisation operates within the legal and regulatory framework, and will be a check on the performance of the management of a firm.
An advisory board is a completely different entity. It’s designed to help build the trust in the organisation and their products, whether those products are commercial goods, charitable activities or community and regional projects. But trust is key.
While there’s no hard-and-fast rule on the range of skills needed, I think every advisory board needs people who represent stakeholder audiences for the organisation’s products or services. So if you have commercial products, you need representatives from among the retailers and distributors of your product, as well as representatives from key buyer groups, and influencers who may help sell your goods. If you are a social enterprise you need representatives who will bring in investment and help to market an idea, as well as people who understand the philosophy of the enterprise’s activities – someone in whom the ‘buyers’ of a social idea can put their trust. If you’re a government entity you need a board which has representation from the different business and community stakeholders who will be affected by government policy – from small business players, and community groups, to big business and industry experts.
So the range of skills needed among advisory boards should be focused on the products of the organisation, and their input should help to drive trust in those products.
And because trust is the outcome of appointing an advisory board, you will also need diversity among your board. An advisory board made up of old white guys is certainly not going to generate the trust you need to develop your product, project or policy.
Of course, advisory boards members will also have to have a fairly thick skin, and be prepared to be openly critiqued in the board room, and they need to be prepared to work for many hours to generate the outcomes needed. But their reward for that strength is seeing the growth of an organisation, and perhaps even moving in to a paid advisory or executive board position.
DH: HOW DO YOU FIND PEOPLE WITH THESE SKILLS?
Joanne Jacobs: There are a lot more people willing to be on boards than is commonly known. There are a few websites out there for people who want to be on boards, you can list a public call for advisory board members on job sites, and of course if you look through LinkedIn, you will find people who specifically state in their profile that they are open to executive and advisory board positions. But probably the two best ways to find people with the skills you need involves getting outside of your comfort zone – and that can be hard for some business leaders.
The first best way is to turn up to events and networking meetings, focused on the market segment or audience for your organisation’s products. That may mean a few awkward conversations with people you don’t know, talking about work histories and determining how people think. But it can be a great chance to identify people who can listen, think about and adapt ideas. And it can be a great opportunity to observe how representatives from that sector interact with each other.
The second best way to find people to join an advisory board is to ask people you don’t know who they would recommend. You can also ask people you do know, too, but it can be revealing to request recommendations from strangers who might be connected through a meetup group or a professional association. You will frequently find outliers who will become profoundly valuable to the organisation, mostly because they have completely different networks.
Whatever strategy you choose, you are more likely to struggle to balance the skills, talent and diversity of the board than struggle to find the people willing to help.
At Disruptor’s Handbook, we are determined to help you set up an advisory board that works for you. We welcome any business seeking advice as well as any comments on your experience or knowledge of boards.