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Surrounding yourself with a wide range of skills to advise you on your strategy is an enriching experience for business leaders. Here are some tips and best practices for setting up an advisory board. The advisory board is a powerful tool at the service of managers, from start-ups to ETIs.
Very much in vogue in the new economy, the advisory board could be translated into French as something like "conseil consultatif" or "conseil informel". But it's hard to escape the appeal of a term coined by the influential American ecosystem. The advisory board is a powerful tool at the service of managers, from start-ups to ETIs. Here, we will focus on the benefits it can bring to start-ups, whose survival rate is particularly low: 50% of them will have disappeared after four years.
What exactly does it involve? It's about an entrepreneur, a company director, surrounding himself with an informal, benevolent group of a few independent people chosen for their individual and collective ability to effectively challenge him on his company's issues.
An advisory board is very different from a board of directors: it interacts freely with the executive, without any hierarchical link to the latter, and the latter is in no way obliged to follow its recommendations. The advisory board has no structural link with the board of directors, where one exists, even though it may interact informally with it at the request of the executive.
On the other hand, the Board of Directors, for companies in the legal form of a public limited company, represents the shareholders, appoints and dismisses the management, and more generally has decision-making and supervisory powers - which is not to say that it exercises them frequently. The Board of Directors and its members also have extensive responsibilities towards third parties, in particular shareholders and the law. Finally, it's worth noting that start-up boards are often reduced to their simplest form; depending on the maturity of the project, capital is provided by the manager himself, close friends (fools, family and friends), then one or more business angels, before the arrival of venture capital funds imposes rigor and formalism on the functioning of the board.
The case of the business angel is an interesting one; it is in his interest to keep a close eye on his investment and on compliance with the forecasts and growth milestones "sold" to him by the entrepreneur, and he often devotes a great deal of time to this. They generally welcome the support of an advisory board made up of independent personalities.
Some of the issues and topics frequently addressed: vision; corporate values and culture; choice of strategic options; dynamic assessment of market and competitor positions; equity and cash flow; growth (scaling); organization, human resources; search for financing; investor relations.
This group generates collaborative intelligence. The first advantage is certainly the added strength of strategic thinking and monitoring. Secondly, the common sense of independent people is forcefully expressed; they say things as they feel them, which is not always the case with an employee.
A solid, well-balanced advisory board is a major asset in the eyes of the company's partners: shareholders, banks, customers. The men and women who make up the advisory board also play a very important role in helping the entrepreneur to disconnect from his day-to-day life and gain perspective. When you're too close to your subject, you quickly end up neglecting certain aspects. It's a truism that the entrepreneur rarely takes his head off the handlebars. Firstly, because his business takes up all his time, but also because he devotes all his energy to implementing the strategy he has set himself. The result is a gradual, unconscious isolation.
There's a pernicious bias here too: changes in the business environment (market, technology...) can be extremely rapid, and the risk of missing out on a necessary adjustment or pivot in the company's strategy and resources is real. His advisory board is there to question him, to play the role of the candid observer, to prod him, to make suggestions, to challenge him. It helps them to think outside the box, acting as a catalyst for the salutary lateral thinking theorized by Edward De Bono.
Let's risk a metaphor! Once he has set out to implement his initial idea, the manager throws all his energies into a game of chess. His advisory board will enable him to add dimensions specific to the game of go: anchored in his solidities, he will now also devote time to understanding and anticipating the indispensable movement; a transversal approach which may help him to plant his next pawns in places he hadn't thought of... and his competitors perhaps not either.
To sum up, the advisory board quickly provides managers with the assurance of a certain lifestyle when it comes to strategic thinking, project calibration and implementation.
Entrepreneurs don't always understand the value of surrounding themselves with people whose skills and backgrounds are far removed from their own field. The most common mistake is to look for specialists in that field, fund-raising specialists, communications specialists.
This is a fundamental mistake. The contribution of such experts must be contractualized, and their skills assessed and remunerated. The advisory board is a benevolent reflection and stimulation group at the service of the entrepreneur and his project, not a low-cost service company. In other words, you can't replace skills that are essential to the smooth running and growth of a company with friendly advice.
Its composition is free and affinitive, at the initiative of the manager. A few qualities to look for: curiosity and a general level of understanding of the "honest man" of the 17th century; experience content: giving importance to the diversity of experiences (professional sectors, company sizes and cultures); strategic skills and an appetite for the subject; agility of thought; availability; high level in their field, professional reputation; complementary profiles of members; and, of course, absence of conflicts of interest.
Understandably, businessmen and women who have enjoyed long and varied careers have as much a place here as the young entrepreneur's peers.
The entrepreneur has complete freedom with regard to his advisory board. However, loyalty must be shared with its members, and he owes them a certain visibility over the duration of the arrangement. One year renewable is common practice. I recommend that managers make explicit provision for a systematic review of the team's composition at the end of each year, based on a number of parameters: relevance of each member's contributions, attendance, changes in the company's issues, etc.
But why should good men and women be interested in spending time on an advisory board? There can be many reasons: the pleasure of being useful, of passing on experience, of making one's network available; the intellectual challenge; a certain degree of recognition, identification and appropriation; the discovery of intergenerational collaboration, with the corollary, for some experienced members, of revealing the intellectual functioning and codes of the younger generations, and their detailed knowledge of new uses linked to digital technologies (reverse mentoring).
Participation in an advisory board should, a priori, be disinterested. But for the entrepreneur, the question is how to motivate the best people to join and participate over the long term. Here are a few suggestions: taking part in meetings should not cost members anything; at the very least, they should be reimbursed for expenses incurred (travel, parking); taking part in meetings should be a pleasure: reserve a pleasant, comfortable venue, offer a good lunch at the end of meetings, a small gift at the end of the year, etc.; visibility is rewarding; communicate on the constitution of the advisory board and its composition.
A start-up can reserve a symbolic percentage of shares for members of its advisory board, e.g. 0.5% to 2% for all members. This can take the form of free shares or share warrants. The resulting motivation is not only financial, but also fosters a sense of belonging to the company. However, such an arrangement can only be put in place if the members concerned have already demonstrated their efficiency and assiduity, and offer guarantees of commitment to continuing their involvement over the medium term.
The first thing to do is to set simple but rigorous rules to ensure that working meetings don't turn into Café du Commerce discussions. A frequency of four to six meetings a year is a good starting point, to be adjusted as experience dictates. The schedule should be drawn up several months in advance to ensure that all members are present.
After one or two fruitful meetings, the manager may choose to invite close associates to attend his advisory board meetings from time to time; I don't think this should become the rule.
A meeting needs to be well-prepared and well-paced. At least two weeks before each meeting, the manager should propose the topics he or she wishes to address; these will be discussed in a round table, then the agenda should devote a considerable amount of time to free discussion; the last half-hour will be the time for an informal wrap-up. A three-hour meeting should suffice. Don't forget to keep a record of the progress made.
Naturally, the manager is free to call on the Advisory Board or any of its members from time to time, as and when required. He will also make a point of informing the members of every important event in the life of the company: contracts won, recruitments, difficulties encountered...
Pierre Clamens
Pierre Clamens sits on several advisory boards of food and deep-tech companies.
The Author: Pierre Clamens (Executive MBA HEC 2000) is a strategy consultant and member of advisory boards for agri-food and deep-tech companies. He is a former food company executive. This text is taken from the collective work "100 + testimonials on corporate governance. Over one hundred HEC graduates from all horizons share their boardroom experience", published by Les Ozalidsd'Humensis, 356 pages, 23 euros.
Article published in Les Echos Entrepreneurs
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Published Apr. 8, 2021
