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While the consultants and management gurus ramble on about the benefits of advisory boards, small business leaders clearly know something the theorists don’t. Consider a (admittedly out of date) 2014 Business Development Bank of Canada study that found 94% of Canadian small businesses decided against having an advisory board. The consultants are preaching theory again. Those that can, do. Or don’t in this case.
There isn’t even an agreed upon definition of the term “advisory board”. One definition includes a group of people with differing skillsets and diverse opinions that act as a sounding board for the leadership of an organization. While they have no legal responsibility, they can provide advice and, while they don’t have the authority to hold leadership formally accountable for actions and decisions, they can act as accountability partners to remind leadership of their choices and the likely outcomes of those choices. On the other end of the spectrum is perched a board of drinking buddies of the CEO who get together quarterly for a day of golf, tasty food, maybe a cigar, and some light discussion of the latest economic forecasts. Likely there is dark wood panelling involved in the décor. The latter sounds fun, but let’s use the former definition to unpack why so many leaders avoid assembling one:
The whole reason you got into business for yourself was to get out from under “the man”. Why would you voluntarily subject yourself to other people questioning your actions and results? Sometimes what’s best for the business’ performance isn’t necessarily the easiest thing for the leader to do, and when you’re wearing both the ownership and leadership hats, a board will tell you when you’re pursuing the path of least resistance or at least make you think twice about it. No one needs their decisions second guessed. Your gut got you this far.
For a board to supply relevant advice, they need to know what’s going on in your business.But they can’t know without data like accurate financial reporting and key metrics that indicate the business’ performance. Assembling that information is a lot of work. Even knowing what information to assemble is complicated. And what’s the point? You know how the business is performing – you’re there every day. At least when the bank asks for that much reporting, they’re willing to lend you money in exchange. All the board will offer is their opinion. Dissecting past actions (most of which were the best you could do given the circumstances you found yourself in) is navel gazing. Finding strategic issues to plan for the future? Pshaw – no one can predict the future. Keep your head down and stay focused on today.
The last thing you need is some smarty pants questioning your strategy. Afterall, no one could possibly know your business better than you. Sure, a unique perspective might offer some insight but, in general, diversity makes life more complicated and can slow you down. The business world is composed of the quick and the dead and you know which you want to be.
People will occasionally volunteer to help your business because they like your cause or have a personal relationship with you, but if you want them to dig in, come prepared, and provide valuable feedback, they’ll probably expect to be compensated. Or at least the best ones will. Which means you’ll have to offer them money with no guaranteed return on the quality of their advice. Too risky.
Advisory boards typically meet three or four times a year to stay abreast of the company’s performance. Sometimes for three or more hours at a time! Life’s too short to waste your time in meetings.
The case seems clear that small businesses don’t need advisory boards. To be unbiased, we need to mention that small businesses with advisory boards saw their sales grow almost three times faster in the three years following the board’s creation than in the previous three years. You probably have a group of advisors anyway – friends, family, maybe a peer mentorship group – but formalizing the way you interact with these people will supply far more value to your organization and encourage you to spend more time thinking strategically (instead of being stuck in the day-to-day). Further, finding independent people to sit on your board – people with different perspectives and experience than your own – will pay dividends. The leader’s job can be a lonely one and having a sounding board for strategic decision making, one that deeply understands the unique challenges you face, will allow you to develop more robust solutions and strengthen your conviction to follow through on your strategic plans.
In conclusion, stick with the herd and eschew the advisory board. Sure, the companies that have one are stronger performers. But you’re doing well enough.
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