I sit on an Advisory Board for a long-time client (a privately owned company). After a recent meeting I have a few thoughts for those of you who sit on such boards, or run privately owned companies that have access to such a Board, or have considered forming one. This particular Board was formed to help the ownership and management transition from the founder to next generation, as well as helping the very successful company manage their growth more effectively despite the challenges of a very competitive industry.
This particular Board consists of the top management team and three outside advisors – a wealth manager, an estate planning/business attorney, and me, their former financial management coach. As the company struggles with the challenges of a post-pandemic economy, including:
- voracious need for workers across their network of locations,
- rising prices for raw materials and labor, and
- high turnover at entry level positions,
they look to their Board for ideas that might enhance what they’re already doing, bring ideas from other industries and companies that might work for them, and help the company to develop long range plans and operational metrics to achieve those plans. The discussion during meetings is sometimes spirited with inevitable differences of opinion about what works and what doesn’t. But what makes this Board work so well is that those disagreements are conveyed with respect for other views and genuine willingness to listen for those hidden gems that might pop out of a discussion. Sometimes I want to jump in and say “that just doesn’t make sense for these reasons” but I don’t – actually we all don’t – because the discourse is often as valuable as the ideas that come from it. As a result of working with its Board this company has a top notch, relevant strategic plan – that actually gets reviewed, measured and updated – and some really good management metrics to help them address their key operating issues, every week, every month, and every quarter at our meetings. They have maintained profitability throughout the pandemic and are growing every year. And they really know their industry well, even as it evolves dramatically.
Advisory Boards, unlike fully authorized (“fiduciary”) Boards of Directors, don’t carry authority to instruct management on goals, objectives or policies; nor do they have the authority to evaluate or replace the CEO. They offer advice from their depth of experience and management gets to decide if it wants to follow that advice or not. This works well for companies that are able to manage their affairs but still want to grow their management strength and improve their governance practices.
So for privately owned companies that have grown into middle market size (whatever that means to you) Advisory Boards can be the best of both worlds for continued growth, and learning how to make that growth personally successful for their employees and financially successful for their owners. Want to learn more about how that might work in your company? Just ask me.
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