SMEs have the opportunity to make more rapid progress with the help of an Advisory Board. There are good reasons for the 5 million UK SME owners to bring together an Advisory Board. In a complex, challenging and increasingly global business environment, SMEs need to be able to access skills they don’t have. An Advisory Board provides this access for a relatively small investment, and the board members will be able to get to know the business well, and could become a regular and valuable source of information. Only a small percentage of UK SMEs have boards of directors, but, with or without one, an advisory board makes sense.
Value of an SME Advisory Board
An SME is faced with multiple challenges, so a small-business owner might well wonder why he or she should take the time to put together an advisory board.
According to the UK Institute of Directors, support and guidance from an advisory board could:
- Accelerate growth
- Improve financial performance
- Manage risk
- Enhance operational performance
As SMEs grow, they inevitably encounter challenges that were not addressed in the business plan. An Advisory Board can help an SME overcome these challenges, providing solutions that the SME would otherwise not have been able to access.
According to Aaron Rink, Director and Chief Executive of the small business CF Reese Plumbing:
“We needed growth, and the solution was to form an advisory board. Systems, processes and delegated authorities were put in place, and the business grew in a more structured way, with the staff going from two to 35 in a few short years.”
For example, the SME may be trying to enter a new market. An Advisory Board member with the requisite experience could smooth the way in. If the company is trying to raise money, an Advisory Board member who has already obtained venture capital or who has crowdfunding experience could be invaluable.
Or perhaps the SME simply wants to improve the efficiency of its operations, or manage its staff better. Again, an expert on the Advisory Board could share experience and find new approaches to management.
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“Some companies may wish their advisory board to provide intelligence on the latest scientific or technological developments. Others will draw on their advisors for knowledge of international relations and government affairs, while some may seek insight on public relations and reputation management,” commented specialised consultancy Odgers Berndtson.
Advisory boards can be a useful way for the main board to challenge its own assumptions, particularly on technical matters.
As Bill Emmott, former editor of The Economist and a prominent advisory board member, points out: “They are there to give focus to or sometimes challenge research and intelligence work being done in the company, thus avoiding groupthink and giving direction on big picture issues.”
Working with an Advisory Board
Gathering an Advisory Board involves finding the expertise in your community that you need to access, and showing them how collaboration with the SME would be good for them and for the business. Usually, a small fee and expenses are offered to each Advisory Board member.
But how can the board members stay in touch with the business, as well as keep its critical documents and data safe from intrusion?
Diligent’s Board Portal enables a small business to manage relations with its Advisory Board in an efficient and secure environment.
Diligent assures the security and efficiency of board communications, so that members can access and update materials in real time, as well as share critical business data with online security at the highest grade of threat protection available. Sharing can be managed so that only specific board members have access to specific documents – the entire board does not have to share all of the business’s critical information.
A busy SME owner may well wonder how to manage an Advisory Board, along with all of the other things he or she has to do. Diligent makes organising an Advisory Board easy, and ensures that all communication will be safe.
Organising an Advisory Board
Advisory Boards work separately from an SME’s own management or board. They have no power to make decisions, and so they are not subject to the rules that govern management or a company’s board. They are, of course, expected to work in the best interest of the company, but they cannot be held liable, as management or board members may.
All of this means that putting the board together is simple.
“There is no need for elections, term limits, committee structures or extensive disclosure of the advisory board’s role, remuneration or performance. They are therefore free to concentrate their energies on their core role, namely to complement management by providing specialist experience, knowledge and contacts not readily available elsewhere.”
Hold meetings whenever you want: An advisory board can meet more or less frequently than a board of directors, and it can be consulted whenever a business needs advice. The business can contact a single member more than others, and only share materials on specific subjects, as required. Moreover, there is nothing that the business cannot discuss with the Advisory Board.
- Be clear about aims: Unlike boards of directors whose aims are established by law, advisory boards are free to focus on strategy or business-critical areas. That focus should always be clearly defined. For example, topics include cybersecurity or big strategic issues.
- Clearly define relationships: Draw a clear line between the role of the advisory board and the board of directors. The advisory board offers advice, but it does not make decisions. It also should not fill gaps in board competencies, such as financial acumen.
- Draft a charter: This document should cover the board’s structure, responsibilities, terms of service and limitation of authority as an advisory board. Advisory board members are not directors for purposes of the Companies Act or other relevant legislation. This document is usually much shorter than a board charter, but is useful for orientation and risk management.
Create a Diversified Working Group
An Advisory Board should be a portfolio of diversified and complementary skills. There is always a temptation to attract stars, but stars won’t help you to grow if they don’t have the skills you need. Bring together people who will make a difference as they work individually and together to help the business grow.
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