CEOs and owners of high-growth private businesses are limited by their resources, knowledge, imagination and capability to execute. We know what we know – we also have some sense of what we don’t know.
The real challenge is we don’t know what we don’t know, or as Donald Rumsfeld articulated, there are “unknown unknowns.”
We know we can do better
As a business leader, are you sure that you and your management team are focused on the right things – the right business strategy, marketing, innovation, sales or HR strategy to maximise the performance of your business? What are those four things that managed well will help ensure success?
We can often obtain broad industry benchmarks around overall performance, but they don’t tell us how we need to change – benchmarks don’t highlight the unknown unknowns. What growth opportunities are not even on our radar – what particular threats might we not be mitigating? It’s not about doing more things or doing things the ‘right’ way, it’s about making sure you’re doing the ‘right’ things.
At some point in your growth plans, you’ll have the resources and capability to hire that required talent, provide them with the requisite resources and allow them to drive new initiatives, to keep their antennae tuned appropriately to anticipate market needs. But perhaps that’s a year or two away after you’ve penetrated that overseas market, or mined that new market channel.
The benefits enjoyed by public companies
Public corporations have the benefit of both executive and non-executive independent directors whose function it is to assist with the formulation of strategy, provide support to the leadership team while evaluating performance, identify risk and mitigation strategies, and leverage connections.
Directors often sit on boards for a number of years – they become deeply knowledgeable about the company, its markets, opportunities, capabilities, potential and strategies – they have the time and capacity to discover the unknown unknowns.
Leaders of private businesses typically do not have the resources for this tier of governance and oversight. The board of a private company, generally made up of the majority shareholders, is focused on known opportunities and challenges and the known unknowns, but does not necessarily have the skills nor strategies to respond to all issues – including discovering the unknown unknowns. Equally, most private leaders are fiercely independent and would not relish the control that a corporate board can exercise.
An Advisory Board can help bridge the gap
The Advisory Board or Committee can provide a bridge that enables private company leaders to gain access to some of the benefits of the governance and oversight of corporate boards, but without the formal structure or the control element.
The advantage to private companies is that an advisory board can take the shape and structure that the leader prefers.
There are a range of factors to consider when establishing an advisory board, depending on the outcome and effectiveness that the leaders seek. Issues such as the number of members, frequency of meetings, focus areas, skill sets required, remuneration and access to board networks all need to be worked through. There are low to high intensity solutions to these issues, each with implications for value and cost.
At one end of the spectrum, an Advisory Board may consist of a single advisor that meets with the leader on an ad-hoc basis. At the other end of the spectrum is an advisory board that has several members, meets regularly and follows a specific agenda.
‘Advisory’ is the key term
One important caveat is that the advisory board or committee must be ‘advisory’ in nature, and that the legal company directors are solely responsible for balancing the advice received from a number of sources, and specifically have responsibility for all decision making.
Finally you should only consider appointing an Advisory Board if you are motivated to grow or develop your business, that you can acknowledge your limitations and that you relish accountability and objective critique of your ideas.
To determine whether the time is right for you to establish an Advisory Board, contact Lead Your Industry.