The Australian Small Business Blog

Friday, October 15, 2010

Small Business Advisory Boards

The great thing about being your own boss is that no-one can tell you what to do (apart from your customers, suppliers, staff, government, your spouse etc), because you are the boss!

However, in any business, large or small, the owner/CEO can lose sight of the big picture. They may become obsessed with one way of doing things, in spite of repeated evidence that it is not working. They can be too internally focused and miss important opportunities. Even the best of CEO’s can miss their own shortcomings as a powerful CEO can make dissent difficult and becomes surrounded by ‘yes people’.

When Roman generals rode into towns to be welcomed by the cheering crowds, having just been liberated from the grip of their local thug-king, there was a slave placed in the general’s chariot whose job was to whisper into his ear “Remember - you are not a god”.
Who is whispering in your ear?

All successful businesses that have reached a significant size have a board. The objective scrutiny of the executive ensures their accountability as well as a strategic focus that makes sure that they work ON the business rather than IN it. Good boards also watch the CEO’s back.

Even though there is a cost to operate boards, their value has been proven over hundreds of years. However, for the non-executive director there are severe legal burdens which hold them accountable for the actions of the executive which translates into a significant cost. (Why would you be a director unless you received fee of sufficient size to cover the risk that you could lose your house if the board/CEO makes a bad decision?)

For a smaller business, this model is not appropriate, not only because of the cost, but also because the owner generally wants to maintain control. For such businesses an Advisory Board is a far better option.

The Advisory Board has weaker accountability than a formal board as the ultimate decision on whether to proceed with a particular course of action recommended by the board is that of the executives (owners). However, if the owner keeps ignoring the board, and performance deteriorates, the advisors won’t hang around for long. Even though they have no legal liability, the advisors would not want to be associated with such a business as it will damage their reputation. (On the other hand the owner who ignores their board, and is continually proved right should sack their advisors!)

Many smaller businesses which find this model attractive also find it to be unaffordable. For even just a half day meeting once a quarter with four advisors, the cost could easily exceed $30,000 per year.

There are other models such as a Mastermind Group and Empower Business Solutions Small Business Advice and Accountability Board. Mastermind Groups may be attractive as a self help arrangement with friends/peers, and therefore very informal and free, but they lack the structure and disciplines that come with an Advisory Board. Businesses that seek to grow look for formality and discipline to enable them to take their business to the next level.

It is the development of business discipline that in the end separates those businesses you have never heard of from those of whom you have. It is not enough to have great ideas, it is the implementation of the ideas, the monitoring of the results and the business’ response to these outcomes that signal whether the business will achieve the goals the owners have set for them.

More on Advisory Boards here.

May Your Business Be - As You Plan It.

Over to You. What do You Think? Post Your Comments Below.
Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.

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