Research shows small and medium enterprises (SMEs) with advisory boards perform better in terms of sales, productivity and profitability and 86% of business leaders with access to advisory boards say they had a significant impact on the success of their business. However, only 6 percent of SMEs establish an advisory board and benefit from this untapped potential resource.
Louise Broekman, founder and CEO of the ground-breaking Advisory Board Centre visited Hamilton last Friday to share her insights in a workshop run in partnership with Faraday and Soda Inc. – hosted by ASB.
In a room full of directors, entrepreneurs and executives of small and medium sized enterprises, Louise conducted a practical workshop sharing her knowledge on why SMEs need to start a high performance advisory board.
Louise said there were different stages of when businesses needed an advisory board; starting a company, growing a business, changing operations, and working towards exit or succession planning.
She said you could have informal or formal advisory boards, but informal ones often fizzled out, as there was little to no structure therefore making it better to go with a more formal approach.
“The people you chose should be professionals who are independent and can provide you with an experienced, outsider’s opinion.
"They are a group of professionals who assist organisations with internal decision making, the key word there is ‘assist’. It’s non-binding, it’s flexible, and it can work in a lot of different ways as long as it is grounded in best practice. It is also very different to the role of a governance board,” she said.
A governance board makes legally binding decisions for the organisation. Those decisions are focused on things that have already happened within the business and need attention, they are past focused. The directors are personally liable for what goes on in the business, even if they don’t action anything. In Australia, the average age of each governance board member is 64.
Louise explained there are best practice principles to creating the perfect Advisory Board and they should be in place for 12-24 months depending on the age and stage of a business or project.
An advisory board uses a problem-solving model for future decisions. They support the business owner, help review options and give input. However, the decision stays with business owner, not the advisors. A common approach for the setup of an advisory board is to have an independent chair, two internal representatives and two external advisors. Louise recommended the advisory board should meet once per quarter, or six times a year if it’s a high-risk business. The average age of an advisory board member is 48; and is often a reflection of their business relevance, and the currency of their connections in the market.
“You should aim to have only the best on your advisory board. If you don’t think big enough, you don’t reach out far enough,” Louise said.
The growth of the advisory board model reflects the changing dynamics of business. At least 1.3 million advisors are engaged worldwide with an estimated 434,000 advisory boards globally meeting the demands of emerging businesses, ambitious mid-market organisations, multi nationals, and corporations.
Four key stages when advisory boards are useful:
Emerging (18 months, once they're through this, their needs are usually different, so need new advisors)
Growing (generally, 3 years)
Exiting (18 months)
Changing (generally, 3 years)
For more, check out https://www.advisoryboardcentre.com.au/.
For more information about the NZ partner delivering this service visit https://www.faraday.company/.
To learn more about the emerging advisory board industry read The Advisory Board Centre State of the Market Annual Report.