Forming an advisory group is a smart move.
But like anything you do in business, it's all about execution. To ensure that you make the most of an advisory group, here are some common advisory group mistakes you'll want to be sure to avoid.
Role Confusion. Your management team, board of directors and advisory group all perform different functions in your company. Yet too often, small business owners and advisory group members attempt to play a decision-making or management role rather than an advisory one. To avoid confusion, clarify the advisory group's role and document it in written form.
Lack of Diversity. One of the advantages of an advisory group is its ability to pool expertise from a cross-section of industries and fields. Unfortunately, a lot of business owners play it safe and create homogenous advisory groups comprised of people with similar backgrounds and experience. Maximize the impact of your advisory group by tapping individuals with experience in finance, marketing, law, accounting and other fields – as well as experience in other industries.
Non-Confrontational Mindset. If you are intent on populating your advisory group with close friends who will avoid telling you the truth about your company, then an advisory group is probably not a good idea. An effective advisory group should feel free to challenge you to grow as a leader in a confrontational, but supportive way.
Not Focused. Successful small business advisory groups stay focused on the most important issues facing you and your company. As your company's senior leader, you are responsible for identifying the critical issues and bringing them to the attention of your board members. Although board members may occasionally identify issues you haven't considered, it's a mistake to abdicate the responsibility of maintaining focus to your advisory group.
Too Big or Too Small. Size matters when it comes to advisory groups. If your board is too small, it may lack the expertise to be of any real value. On the other hand, if your board is too large it may be difficult to achieve real results. For most small businesses, an advisory group of three to five members is optimal while slightly larger companies may benefit from a five to seven person board.
Inadequate Compensation. Although it's typical for advisory group members to be compensated for their time and expertise, compensation doesn't necessarily need to be in cash. Savvy business minds may be willing to sit on a well-formed advisory group if it provides opportunities for strategic networking or other non-cash value items. However, don't assume that non-cash forms of payment will suffice – plan to pay board members for their time unless they indicate they indicate that cash compensation is unnecessary.
No Meaningful Outcomes. No matter how well you compensate them, a meaningful experience – not cash – is what ultimately motivates your board members. Unless you are willing to pursue outcomes and follow through on your board's advice, board members will likely view the process as a waste of time.