If you have reached the point in your company’s journey where it becomes clear you need the expertise of an advisory board, there are a number of considerations to build your board successfully.
Not only do you have to find engaged, knowledgeable individuals but you also have to determine how they will be compensated and ground rules for meetings.
Choosing Your Board Members
John Munie, president of Focal Pointe, based in Caseyville, Illinois, advises seeking out board members who can help with your blind spots and greatest weaknesses.
“To have people on your board that can give you a high degree of confidence and tell you what those answers are, and then I can go out and execute, that’s super helpful,” Munie says.
Munie says you need to look within your network and find others who understand how you operate and believe in it. Otherwise, you may find yourself in a push-pull situation.
“You want all the horses to run in the same direction, so I think you want to surround yourself with people that are different than you but believe in your vision for where you want to go,” Munie says.
Munie advises seeking out board members who fit the culture you’re trying to build. He says when you have individuals who are emotionally invested in your vision, they will push you further.
“By having a bunch of high-performing people in a room, you’re not going to be relying on just one guy that may have an agenda,” Munie says. “The quality of the decisions gets polished when you have bright people in the room.”
Nate Farley, president – West, Perennial Services Group and founder of NationScapes, based in Lakewood, Colorado, believes the people you want on your board should probably be too busy to be on your board.
“You want successful people that know what they’re doing,” Farley says. “I didn’t want people that were my beer buddies who were going to pat me on the back and say, ‘You’re doing great.’”
When Farley decided to build his advisory board, he created a list of 10 people he admired who run successful businesses. He says while there is wisdom in the green industry, he opted to limit those with landscape industry experience to two seats on the board, while the other three board members are from outside the industry.
Farley’s board included a large mechanical contractor, a financial expert, and one individual focused on culture and their brand. This variety of viewpoints would challenge the status quo, whether something was financially smart and how it would impact the NationScapes’s team.
Farley says it took him about 90 days to assemble his board as he wanted to meet in person to gauge each potential member’s interest.
Munie says he approached Kevin Kehoe, Bruce Wilson, Verne Harnish, a managing partner at a private equity firm, a private investor and an investment banker from the industry.
“I just felt like that filled all the gaps that I would need to know how to go about growing this business,” Munie says.
While Kehoe’s fight with cancer prevented him from participating, the other five saw the same opportunities for Focal Pointe that Kehoe did and accepted Munie’s invitation.
Munie recommends seeking out a banker or an attorney as potential board members. He adds that these individuals tend to be risk averse, so you need other board members who have an entrepreneurial spirit and will push for calculated risks.
“Who can really help?” Munie says. “Who’s empathetic to your vision? Who’s anxious for you to be successful and excited about it?”
One consideration to keep in mind is whether you want your board members to be local or if you want to cast a broader net. Farley says four out of his five board members were in Denver, and the fifth would come into town for their meetings.
Munie says it depends on your goals as a company. Focal Pointe is looking to compete with the Chick-fil-As and Ritz Carltons of the world, so he says he wanted board members who get what that means.
“Everyone has their own idea of success,” Munie says. “We’re not trying to be the biggest; we just want to be trusted. We want to build a great company for the benefit of anyone who comes in contact with us. That’s a different mindset.”
Compensating Board Members
There are a range of ways to compensate your board members for their time. Aside from paying for their travel, room and meals when they are gathering for board meetings, you can also award them equity shares or other payouts for helping your company reach certain milestones.
“When building out your board, you want to make sure the compensation meets what their goals are,” Munie says. “If they are retired, they may just want to be part of building something. At a minimum, even if someone’s doing it for free, you better not take that for granted. If that’s gift cards or tickets to a ball game, you’ve got to show something to them so they know you appreciate their time and that it is valued. I think that’s really important.”
Farley says while his board members aren’t concerned with money and want to help him be successful, he still gives them a payout based on any incremental gain they have. For instance, if NationScapes earned $1 million in profit and the next year they still only reached $1 million, there is no payout for the advisory board because there was no improvement, but if they went to $3 million, they would receive a payout.
“It incentivizes you to show up and bring your A-game and ask hard questions and push the envelope because you’re only being compensated if the business performs,” Farley says.
Farley says that tying your board members’ compensation to your business’s success makes them even more motivated to see your company grow.
Setting Expectations
Farley recommends hosting your board meetings in person and setting clear expectations from the get-go. He created high-level terms and conditions where the board members could quit or be fired for any reason and forfeit all compensation.
In NationScapes’ case, they decided to do 12 meetings over three years. He says board members were allowed to miss one meeting, but if they missed two, they would be removed from the board.
“I think it’s important to set those because I didn’t want lame-duck people on my board,” Farley says. “I wanted people who came and were dedicated for four to six hours solely to NationScapes. There were no phones, no checking emails. We were talking about my business and my business only.”
Farley says after the first year, they moved to meeting three times a year due to the seasonal nature of the business.
Munie says his board meets quarterly. He says if you take the time to assemble an advisory board, you need to be willing to take their advice and execute.
“Nothing is worse for high-performing people than for you not to execute,” Munie says. “I don’t think I could pay the board enough for me to say, ‘Hey, give me a bunch of advice, and I’m going to do nothing with it.’ They would say you’re completely wasting my time.”
Farley notes that you should not assume that having an advisory board will be a silver bullet for your business to become successful.
“They’re going to give you a lot of advice and that outcome may happen, but they’re not just going to say, ‘Do these three things and you’re going to be a millionaire.’”
