SIMON SAYS...  Think you're really hot?  It's reality check time.  Create an external panel of judges who don't suck up, but who tell you the unembroidered truth.  (It just might make you a star.)

Leader's Edge Magazine - July 2005
Author:  Robert J. Lieblein

Here’s a conversation you might hear around the coffee pot at a stereotypical brokerage:

Boss: Say, I’ve got a good idea.
Underling: Yes.
Boss: Let’s knock a hole in the copy room wall and open up a drive-through espresso stand.
Underling: Yes!

Okay, it might not be quite so one-sided at your firm, and you may have what you think is a well-managed agency. But have you ever felt like a Simple Simon and your creative ideas could use a little constructive criticism from outside the company? If so, consider developing an outside board of advisors. 

Where do you begin? Think of yourself as a candidate on the popular television show “American Idol.” You’re facing the judges for their final evaluation. You don’t need a happy Paula Abdul (unless you plan on following through on that espresso drive through). No, you want that scowling, critical, straight-shooting cad, Simon Cowell. What Simon says could set you on the path to best show off your talent. Think of your business in the same way.

Think boards are only for the Fortune 100, those guys whose suits match their limos? Not so. Even a modest-sized firm can benefit from the sage advice of well-chosen advisors. Worried that you might be hiring a new boss? No need. You don’t give up anything when you bring on an advisory board, but you just might get a more objective response to your next brainstorm and a jumpstart to long-term success.

An outside board of advisors is something of a hybrid between a board of directors and a consultant. While a board of directors has fiduciary responsibility for other shareholders and a consultant works on short-term projects, the primary purpose of an outside board is to help drive shareholder value over the long term.

Establishing an outside advisory board can yield a surprising number of benefits, including access to expertise not available on staff, the ability to see big pictures and long views, enhanced market credibility and competitive advantage. But most importantly, an outside advisory board can contribute significantly in various ways to enhance shareholder value, which should be the underlying goal of the leadership team at all agencies.

Consultative Clout
Not quite convinced? Let’s run down a short list of what an advisory board can do for you.

Forest Management. Every day, you’re out there chopping wood, focused on just one tree. In our fast-paced business, it’s hard to do otherwise. An outside observer sees the forest looming up around you. The perspective of outside advisors will improve the decision-making process of the president or operating team. The advisory board can help create a long-term strategic plan then track its progress toward big-picture goals and objectives. Hire consultants to take on short-term projects and leave the long-range work to your advisors.

Creativity. Nothing against your folks, but when was the last time a truly challenging idea came out of a staff meeting? The rigors of keeping current with clients, following up on leads and enacting marketing plans can divert the energy of even the most diligent go-getter. Not to mention the fact that it’s in the nature of many sales people to think of themselves and their plight first and the team second. You might need new juice pumping through the brainstorming sessions.

Image. An outside advisory board shows a level of sophistication not seen at every Tom, Dick & Harry Agency. It tells clients, carriers, vendors and your employees that you are serious about management of your business. It’s impressive to outsiders and insiders, and that will boost your image. In a relationship-based business, there are few things more important. To borrow the words of a famous ad, perception is reality.

Economy. For perhaps the cost of a file clerk (we’ll cover the particulars in a bit), you get a small team of advisors who, if chosen well, offer vast levels of experience and greatly complement your core capabilities.

Safety. Consider this risk management at a very low cost. Unlike a board of directors, an outside board of advisors has no fiduciary duty, hence there is no expensive D&O insurance policy to purchase and virtually no danger of liability to the advisors or to you.

Rules of Engagement
The first thing to understand when deciding to create an outside board of advisors is that it is not a board of directors. What you are doing is simply seeking advice, and whether or not you take that advice is up to you as the decision-maker. That absolves the advisor from liability and makes the development and use of an outside board of advisors much less risky.

You need to consider four things to create a board of advisors: whom to recruit, how to define their roles, how often to meet and what to pay them. Yes, you need to pay them. But in a vast majority of cases, a board of advisors provides an excellent return on investment. And since you’re always in charge, you could end or restructure your advisory program if it isn’t working. But let’s assume it will and focus on getting it done.

Recruit people with complementary skills to what you have on staff. You may want experts in sales/service, law, technology, mergers-and-acquisitions or finance. Try not to choose people who are too narrowly focused, however, because you don’t want a large board of specialists; rather, you want a small board of specialized generalists.

Here’s a profile of an excellent candidate: she’s worked in a number of different businesses, in many different roles. She’s risen to the top. Her experience is in financial services, but maybe a business ancillary to insurance. She’s done sales and service. In this person you would get an expansion of your core capabilities, experience in the overall running of a business, and hopefully the ability to see your company’s weaknesses and potential.

Hold an informal meeting with a prospective advisor. Chances are it will be someone you already know or admire, a leader in your community. Perhaps the person already sits on other boards, so you know that’s a role with which he or she is comfortable. In your initial meetings, you want to see demonstrated interest in your company, the willingness to offer advice and to brainstorm, and you want to feel a natural rapport.

Before you make an offer, be sure you know what you’ll be asking your advisors to do. Outline a plan where you’ll define the number of advisors on the team, the number of meetings, basic duties and responsibilities you’ll be asking of them, and a compensation package.

It’s best not to meet too often—two to four times a year is ideal—and to make sure you have enough time to delve into a robust agenda. Your advisory meetings should be half-days or a full day, and you’ll need to come prepared with financials, plans, presentations from business unit leaders or whatever other agenda items will give your advisors what they need to help you.

Consider a team of three to five people for your board of advisors. Two is not enough because, if one advisor can’t make a meeting, you’ll very likely be wasting time. Too many people will become unwieldy.

One of the main duties of an advisor is often overlooked: An advisor should be available to you on a one-on-one basis. A good advisor will have the time to take your calls (or get back to you promptly) and quickly grasp your needs to be able to offer advice. That means they’ll have to have a good understanding of your business model, your market and your goals.

How much is this going to cost you? An average advisory board will cost $5,000 to $10,000 per member per year, including an annual retainer and a stipend per meeting attended. The actual amount you offer depends upon the size of your business and how much you’ll ask of them, but the compensation is a key way to indicate you’re serious about the program and that your advisors are valuable to you.

Earning Their Kibble
To be collectively worth their clerk’s pay, an advisory board must provide you with independent insight and perspective on all relevant issues related to your agency. Their most important role is to advise the agency on long-term strategy and to help identify and determine priority issues and tactical objectives necessary to achieve your goals. It’s equally important that your advisors stay out of operational decisions. That is not their role; if you need program or project advice, hire a consultant.

Your advisors will bring an outsider’s perspective that can be useful in many ways. A carefully selected advisory board will bring core capabilities that you cannot possibly have on your staff. Just as important, the outside advisors’ main responsibility is to improve shareholder value. Therefore, whatever their perspectives, outside advisors do not have to worry about office politics or personal advancement. They raise the questions and issues that most internal people will not ask or maybe you have not considered.

Looking through the forest, outside advisors often see the dangers before you do. Why? Let’s just say that years of experience and lessons in hard knocks that these advisors bring with them will be invaluable to you.

You might ask your outside board of advisors to review compensation plans and leadership performance. This role adds credibility to those plans and can increase rapport with your staff, as they know that you are not making arbitrary decisions about their pay. Again, be careful about involving advisors in operations, however, and deal with staff gripes and grovels yourself.

The board might review your succession plans or perpetuation strategies. If you’re considering an employee stock purchase program, equity participation by key producers, or strategic compensation plans, the board can validate your methodology or help you find mistakes. This is especially useful at the outset of such plans but also is vital when considering plan revisions.

Corporate accountability is another area where the board’s objectivity will be helpful. This role is especially important if the agency is either considering acquiring another agency or being courted by a public company for a merger or acquisition. Sometimes the most valuable role an advisor can perform is as simple as the basic sanity check, making sure your plans and actions are realistic.

In the end, perhaps the greatest value is that the outside advisory board can bring discipline to what is often an unstructured, fly-by-the-seat-of-your-pants management style, where decisions—particularly difficult ones—can be put off by privately held companies because there is no pressure or requirement to make such decisions. Let’s put it this way: properly run outside advisory boards bring structure and accountability to those who previously did not have such pressure. The possibilities might surprise you.

Stress Producer?
It might sound like working with an advisory board is all confession and absolution, along with great ideas over hot coffee. That’s not always the case. Let’s discuss the pitfalls of an unsuccessful outside advisory board.

Delving too deeply into the details. Outside advisors are useful for the big picture, but you may need to steer an eager board member away from the minutiae of the business and into a more macro view.

Dictators who won’t listen. Some leaders are not willing to listen to and accept advice from the outside advisors. If your personality tends toward dictatorship and control, don’t even think about putting a board together. Over time, this type of personality will ruin all good intentions of the board.

Lies of omission. Other business leaders cripple their boards by failing to give their advisors the complete picture—both the good and the bad. To be able to provide sound business solutions, the board must have all relevant information.

Overkill. This is the company that compiles a board of seven to 10 top-notch business leaders. The result is too many chiefs, not enough time spent resolving issues, and a lot of palaver and spinning. Keep your board small.

Cultural misfit. However talented an advisory board, if the members don’t fit with the culture of the agency, it will be ineffective. Choose board members fit not only your style, but also the agency’s style. While diversity is good, culture, style and thought process are also very important.

For most agencies that try it, an outside advisory board works out to be a positive experience, and history has shown that the agency will perform greater than its peer group and enhance shareholder value at a much greater rate.

Help is on the way for your long-range planning process. Strategizing sessions are just around the corner. Someone is there to rein you in before you take the Sawzall to the copy room wall.

Is a board of advisors worth the effort? Even your underling would say yes.

Lieblein is a contributing writer and managing principal of WFG Capital Advisors.  rlieblein@wfgca.com