I have never seen a board of advisors work after the initial few meetings. I’m sure there are cases where they are managed well and it works out, but for the most part, my experience is that any initial engagement and excitement wanes and the value diminishes fairly quickly.
I think that the reason this happens is that there’s no fundamental attachment between the members of the board of advisors and the company. Sure, there might be a small financial one, created by offering the members of the group some equity or cash compensation, but it’s very difficult to establish any emotional link that would compel the outside members of the group to put in the long term effort to continue to add value, stay engaged and work to make the company successful.
The problem is that the people who are generally targeted as advisors have other jobs and responsibilities. After the idea of equity participation and initial interest in what the company is doing wears off – which can happen quickly – the company that they are advising becomes a much lower priority than any of their other responsibilities. Since they are not involved on a day-to-day basis, there is no other link to keep them thinking about what their advisee needs. Ultimately, the relationship moves from a mutual one to one driven entirely by the company until it breaks down completely.
As it turns out, while the board of advisor setup doesn’t work that well, there are other ways of achieving the benefits desired in setting up the group in the first place.
- Compensate company adviser(s) frequently – the value of any compensation dissipates quickly when the advisor isn’t thinking about the company. More frequent grants of equity or cash payments will serve to keep their attention focused on the tasks at hand.
- Put them on the Board of Directors – if they add enough global value, put them in a more responsible position with the company, like its board of directors. The added responsibility will keep them focused on the company. Of course, you can only do this for a small number of people and only for those who are appropriate for such a role.
- Hire them as a consultant – in this way, they have responsibility for delivering value to the company with an agreed upon income for doing it. This arrangement has the added advantage that it’s easy to sever If and when the advisor no longer adds value. The advisor can then be replaced by someone with different experience or knowledge.
Having outside advisors is always a good thing. They can bring perspective to your efforts and direction. They can also bring knowledge and wisdom into the company that may be missing in the current team. Ultimately, the structure of such a group of advisors is critical to its success, though. The classic board of advisors structure frequently fails because it does not establish an emotional or responsibility link between the company and the advisor. There are other ways of accomplishing this though. When these are used, a great relationship between an advisor and company can be established although, perhaps, not as a group.