This December marks 8 years of regularly posting content on The BAM Review Blog. This month we are sharing some past posts on practical BAM topics that you might have missed.
Dear BAM Mentor,
I keep hearing that having an Advisory Board is good idea for a BAM company. How is an advisory board different from other kinds of boards and how should I go about setting one up?
~ Needing Advice
Dear Needing Advice,
The question arises as to the purpose and practicality of an Advisory Board for a small business or a startup. I have had advisory boards for several of the businesses I’ve launched and served on advisory boards for others. Needless to say, I am a big fan.
King Solomon put it like this:
“Where there is no guidance, a people falls, but in an abundance of counselors there is safety.” Proverbs 11:14
“…for by wise guidance you can wage your war, and in abundance of counselors there is victory.” Proverbs 24:6
The basic premise of an Advisory Board is that, rather than try to figure out everything on your own, you can enlist the wisdom, perspective and experience of others to help you “wage your war.” In addition to advice there is also a healthy element of accountability – something many entrepreneurs don’t want, but something all of them need.
There is a significant difference between an Advisory Board and a Board of Directors. A true board of directors is typically made up of paid directors and/or stockholders (or their representatives). They have varying degrees of authority but a true board has authority – even over the founder. As their name implies they direct. An advisory board holds no legal authority. They advise and they have varying degrees influence.
In my past, I have set up Advisory Boards in this way:
1. Members must have spiritual maturity and be committed to the ultimate mission of my company.
2. They are asked to meet live 4 times per year; usually over a nice dinner. In today’s world these meetings can be virtual as well.
3. They are asked to be available for phone/email/skype for ad hoc input and discussions.
4. They are not paid a designated fee but whenever my companies were able they would receive a check (usually around $500) at the quarterly meeting.
5. The best advisory boards represent a variety of disciplines: pastoral and/or missiological, finance, general management, technology, for example.
6. Members were asked to serve 1 year terms that we could choose to extend or not as required. Sometimes people need a break; sometimes a member proves to be of less value than expected. You don’t want to be saddled with a “board for life.”
Size is another matter to consider. I recommend between 3 and 5 members. If the board is too small you won’t get the perspective you need; if it’s too large it becomes cumbersome and unwieldy. Keep it small, smart and simple.
What do you share with your board? That’s up to you but in the past I’ve shared company financials (Profit & Loss Statement and Balance Sheet each quarter), strategic plans and updates, a summary of basic operations, and any topic upon which I need counsel. My Advisory Board was always a group of the most trusted counselors and brothers and sisters. The more open I was the more benefit I received.
I have to say that the Advisory Boards I’ve had have been of tremendous value. They have done more than I could ever have asked for in terms of counsel, support, friendship and contributing to the success of my companies. As you can imagine I believe very strongly that you should have one.
More Responses on this topic:
When we hear the word “board” most of us think of large corporate Boards of Directors. This sort of board has the authority to hire or fire the general manager and is the highest decision making body short of the general assembly of all the owners. But there are other types of boards as well.
Advisory boards differ from boards of directors primarily in that they do not have the legal authority to enforce their decisions. Advisory Boards are used around the globe for different purposes and can be boards of key customers, boards of technical experts or, as is common for many BAM companies, non-binding management advisory boards. […Read more]
We must first determine what type of Board you are inquiring about. Usually, an Advisory Board is used to give strategic advice on a narrow topic. A Board of Directors, on the other hand, is who the CEO is accountable to. They give advice on a broader range of issues. This position has some legal responsibilities and Board members on large companies can wield considerable power since they hire and fire the CEO. This is highly unlikely in a BAM company, however.
Let’s talk for a minute about a Board of Directors. You should have such a Board. You, as CEO, need to be accountable to someone outside the company that has direct experience in what you are doing and can likely spot a potential pitfall before you can. Otherwise, it is more likely that you will make a significant mistake – and we all do – and there will be no one to help guide you through a particularly tricky situation. […Read more]
Article first published on The BAM Review blog in August 2015 as part of Ask a BAM Mentor series.