B+P Insights: 10 good advises to work with your advisory board

Establishing an Advisory Board is not a simple task. Especially, if you are an SME that is ready to take your professionalization to the next level, there are some important considerations on how procedures in you new advisory board should take place. Here we present 10 advises that could inspire you in your work with an Advisory Board.

 

 

  1. Don’t let the “egos” rule it all:
    1. When the board and the daily management meet for a meeting in one room there are a lot of talent and experience gathers in one place. Most likely there will also be a few egos present who will put themselves at the centre of things. To keep these egos at bay should both the board and the management be very aware of why they are meeting: To handle the interests of the shareholders. The shareholders expect that the board and the management work together to create a profitable and ethic business with the greatest shareholder value as possible. Harvey Pitt refers to Ronald Reagan’s continual comment about: “There’s no limit to what you can accomplish, if you don’t care who gets credit.”

 

  1. New board members should see the company’s operations, talk to other in the management than the CEO and secure insight in business plans:
    1. New board members should have the possibility to acquaint oneself deep with the business before they say a final yes to a seat on the board of directions. It is not enough to give potential new members of the board published documents as stock exchange announcements and annual reports. They need something more. The management should provide briefing for the new member about critical operations, go through concrete business plans, describe the company’s competitors and market and also go through the latest important decisions within the board.

 

  1. New board members must be fully informed:
    1. Before new board members enter the board it is not only crucial that they have acquaint themselves into the business. It is also important that they have established an impression of how the management and the board work and how they cooperate, including how procedures and politics go together. New board members should not only be selected because they are the favourites of the management or are familiar. New board members should meet the management to get a deeper understanding of the company vision and the current business plan. Simultaneously they should make sure that they are comfortable working in the given business environment.

 

  1. An important part in the cooperation between the management and the board is complete sincerity towards the board:
    1. The assessment is that the daily management tend to wait to inform the board about critical issues until there is no longer any way out, because the case is getting off track. Maybe because they don’t fully trust one or more of the board members. Harvey Pitt points out that the board regularly has a need for relevant and significant information about the business. Relevant information for the board will among other things be the information that the management also considers reliable as foundation to essential decisions. If the management is afraid that the information leaks maybe the concerned board members have to be replaced. To hold back information is not the solution.

 

  1. Before board meetings the board must be provided with written material which neither looses relevant problems in paper stacks nor skim over:
    1. Written material issued for future board meetings should be well-structured and clear. As introduction to important decisions on the board meeting, important assessments and factual information cannot be brushed under the rug, and information must be presented as objective and sober as possible. As many board members are or have been CEOs they are able to see through bad service from the board.

 

  1. The CEO must be prudent and take an impartial ownership in the group – even in cases that are not proceeding in the CEO’s favour.
    1. The CEO should raise relevant issues and questions on the board meetings. If the management is in doubt whether an issue is a matter for the board it should be raised in the board. The management should put themselves at disposal for conversations with board members with questions or other issues they want to discuss with the CEO. Construction of more personal relationships with the individual board member may also result in more trust and in general improve the communication between the management and the board.

 

  1. A nomination committee should nominate new board members:
    1. The process of designation of new board members, especially for listed companies, should be independent of the management and a few main suppliers and a formal process with necessary competences should exist. Well – a first the competences that the board is missing should be identified for example financial competences and afterwards starts a search process on the basis of the defined profile.

 

  1. The management should be able to explain why the company is doing worse or better than the competitors:
    1. The CEO should be knowing very exact how the company is ding compared to the closets competitors and why it is doing better or worse. The analysis should be presented to the board, as it can be very important to understand the company’s strengths and weaknesses.

 

  1. The management should secure continuous update of the board:
    1. The daily management should secure that every board member receives continuous briefings and updates about the company situation and market. It is emphasised that a person is not a experienced board member from the beginning, but that it is a learning process.

 

  1. Problems and potential problems should be presented to the board as soon as possible – and afterwards to the shareholders:
    1. Some board members don’t want to hear about the problems from the management. But when they receive the information from the press they respond with anger and disgust. In other words: Transparency is a key word. The management should have absolute faith in the board and inform about potential problems as soon as possible. It also involves serious potential problems, which have not opened yet. In that case the board should help produce press releases and decide what and how much should be published. A rule of thumb is: Ask yourself what you would like to know if you were ordinary shareholders.

 

Read more: http://www.smetoolkit.org/smetoolkit/en/content/en/6750/Advisory-Boards-