Arm yourself with an advisory board
By Verne Harnish November 2, 2012
- A great board of advisors can become a vital sounding board and source of strategic insights for a CEO
- Tap the right talent: People with specific capabilities, skills, knowledge and values
MARISSA Levin more than doubled her revenues at Information Experts in the past three years, and she’s the first to tell you she couldn’t have done it alone.
Her secret sauce: A great advisory board. About three years ago, the founder and CEO of the 18-year-old strategic communications consultancy turned to a mentor for help in growing Information Experts.
“My company was stuck at US$5 million,” she says. “I couldn’t get past certain road blocks.”
Her mentor advised her to put the board of advisors in place. “He said it’s a group of people you hand select that can get over your problem,” she says. “That conversation sparked a light-bulb for me.”
Last year, the firm, based in Reston, Virginia, brought in US$11 million in sales. She’s been so happy with her experience that she’s even written a book to help other CEOs, called SCALE: How Top Companies Create Breakthrough Growth Through Exceptional Advisory Boards.
If you don’t have a board of advisors in place, now is a good time to start putting one together. As Levin has found, a great board of advisors can become a vital sounding board and source of strategic insights for a CEO, helping you to grow your company while others in your niche falter.
Given global uncertainty, growth companies can’t afford not to have one.
Tap the right talent
Levin invested nine months in recruiting the right board members—experts who can help her strengthen the company in key areas.
Her six-member board now includes an entrepreneur who sold a US$55 million company and who has helped with project management; and the former head of one of the government agencies her firm works with, who has sparked business development. “He’s been instrumental in making introductions for me and leading me to millions of dollars in work,” she said.
Make it formal
One of the big mistakes that growth companies make in choosing an advisory board is that they’re too relaxed about it.
That won’t get you very far. Ask John DeHart, CEO of Nurse Next Door, a 60-unit franchise chain based in Vancouver.
About five years ago, the home healthcare company, which he co-founded with Ken Sim, brought on three advisors. Meetings were held every two months, and though the company would send the advisors a report two weeks before the meetings, everything was pretty informal.
“We ran it like two entrepreneurs running it,” says DeHart. While the advisors were paid, “it wasn’t the right amount,” he says.
Result: “It just ended up stopping,” he says. “Advisors wouldn’t show up to meetings.”
But DeHart didn’t give up on the idea. “Our next target is US$100 million in sales,” he says. “We’re at a little over US$30 million right now. We simply realized if we are going to become a US$100 million company, we better start acting like one.”
About a year ago, the company formed a new board and brought in three new advisors to help with matters like the transition from two CEOs to one (Sim, originally co-CEO, has shifted his role into strategic projects).
Two advisors are past CEOs of large companies, and the third is a successful entrepreneur with strong corporate governance experience. They meet every month for four to eight hours and hold a two-day annual retreat. The company makes it worth their while financially.
The new board has required Nurse Next Door’s team to stay on top of key information – from financial metrics to risk factors – on a constant basis.
“Every single month, I and my entire team have to do formal reporting to the board,” says De Hart. “It’s made us so much more disciplined in our actions and thought.”
The board has the power to hire and fire the CEO “which is me,” De Hart notes. That accountability has made him a better CEO.
“I literally get challenged at every board meeting,” he says.
Look beyond company logos
When Mike Ferranti started his New York City company, Endai Worldwide, in 1999, during the dotcom era, he set up a six-person board of advisors from well-known firms. But it was hard to get the advice he needed from them.
“They were big company guys,” he says. “They could not relate to an entrepreneur.”
The web analytics company, which now manufactures its own email marketing software, tried again and set up what Ferranti calls “Advisory Board 2.0” in 2008. The three-person board, made up of marketing professionals with experience in important niches, is much more hands on.
Ferranti pays them to attend meetings and sometimes to tackle consulting projects. “Experience taught me that I needed to surround myself with people who had specific capabilities, skills, knowledge and values,” he says.
The “intellectually challenging debates” he has had about strategy with his board have led to decisions that have helped the company grow. Endai, which has about 23 employees, is “very, very profitable” and saw triple digit sales growth last year, he says.
“It’s all part of a brutally honest dialogue,” he says. If you want to keep growing your company, you need to have advisors who will challenge you the same way.
Verne Harnish is an author, consultant and entrepreneur. He currently writes for Fortune, which is a service of CNN, Fortune and Money. Prior to that he was selected as one of "The Top Ten Minds In Small Business" by the magazine. He also has written for Inc.com.