HB “Next Level” Advisory Board

(A hidden imperative to achieving your “Next Level”)

Public Company Boards often primarily focus on compliance.  As or more important than compliance is the board advisory function and its relation to the success of the firm.

Rather than outsiders, the majority of Private and Family-owned Enterprises have historically used solely family members and insiders on their legal and advisory boards for both compliance and advisory functions.  Why?   Control, cost, trust and knowledge of the business is the frequent rationale.

Much of my past 30 years has been spent representing & advising  private company  (and frequently lower) middle-market  owners, leaders and boards.  Survival, sustainable success, strategy, leadership,  and boards’ compliance and advisory challenges have been  most important topics.

During 2013,  I wanted to  know– for myself– 2 things:

1)  Whether independent research, if it existed, supported a proposition that advisory boards, whether or not part of a formal corporate board, really are an imperative of private firms; and

2)  If so, how and with whom– and how  might or should this  change–based upon the company, its owners, its leaders, its industry, its condition, its landscape and its seeming prospects as all of these change.

Having sorted through the titles (and brief descriptions) of over 2500 research articles and  having reviewed over what I considered the 250 most likely to help answer my questions, I reached my conclusions (having over-layed the research results on my 30+ year direct experiences):

1) advisory boards are an imperative for better and more sustainable successes,  and

2) how so and how should and might this change depends upon many variables, starting with the people involved.

I understand that you may or may not be your sole board – and your (perhaps very considerable) successes to date may be solely because you trusted your judgment and some of those around you.  You know you know your business better than anyone else—and always will.

Yet extensive and independent research has proven to me that regardless of how well you have done or are doing,  one (or more) formal advisory boards—including qualified independent outsiders–should be used by you and  each other business owner if better, more sustainable successes are important to you.  If you want to achieve your “Next Level” an advisory board is an imperative.

Moreover, experience shows that adding qualified outsiders can be key to survival and is frequently, I believe, a cause of firms achieving and sustainably remaining in the top quintile of their market niche(s).

Advisory Boards are a Sustainable Success Imperative and should be critically important to you in significantly increasing your firm value and  critical to you in  achieving your “Next Levels” on your time-line.

 

Additional Points to Consider (or have reiterated):

Public Firms boards all-too-frequent focus is governance by primary focus on compliance.  Compliance with external mandates is, of course, a primary oversight function of legal boards (and failures in this area can and do doom firms)—both public and private.  Compliance is and should be major issue—for public  and private companies and is a frequent business press theme.  As or more important than compliance is the board advisory function and its relation to the sustainable success of the firm.

The majority of  Private and  Family-owned Enterprises  have historically  used solely (or predominantly) family members and insiders (for both compliance and advisory functions)  as their advisory and/or legal boards of directors—sometimes with great effectiveness, more often not.    Trust, knowledge of the business, and occasionally perceived costs and effectiveness are the frequent explanations given by owners and CEOs for not using legal or advisory boards comprised of a number of qualified outsiders.

Legal Boards, for good reasons such as control, are often times limited to insiders.  Insiders, affected by the strength of the CEO and family and ownership dynamics, frequently find their knowledge, experience and/or ability to effectively exercise compliance and advisory functions—both as to strategy and execution—limited.

Adding outsiders, though, comes with costs:  trust, professional competence, dedication, financial, learning curve, effective and timely communication, board longevity, and focus to name some of them.

Experience and research shows that adding qualified outsiders—other than just other CEOs—as members of one or more Boards of Advisors and/or a legal Board of Directors, and the use of and reliance on such Boards for advice, can be key to survival, helpful for pattern recognition otherwise obscured, and is, I believe, frequently a cause of firms achieving and sustainably remaining in the top quintile of their market niche.

Though there is no optimal structure or process for the use of advisory  boards  across the spectrum of types and sizes of family and private firms, each of experience and a survey of the literature  confirm that the advisory function—on legal boards and on advisory boards—is a success imperative for long term firm success.

How Advisory Boards when employed effectively can and should be an imperative for Private and Family Firm future “Next Levels” is our prime focus.

How to go about establishing an effective board, what level resources to expend, how to lead and effectively employ your board, what combination of insiders, non-independent outsiders and independent outsiders should be uses– and  how should and might this change– depends upon many variables starting with you, what’s important to you and your and your current leaders’ characteristics and tendencies and where in your current business landscape your business now is.

I and We  listen to you.  After listening to you and your key leaders (and some others), studying, discussing, and analyzing, I and We tailor  recommendations to your “Next Levels”.   And after discussing these with you and your senior leaders (and providing you and they an opportunity to analyze and discuss them), we then design, implement, and lead an HB “Next Level” Advisory Board solely focused on your “Next Levels.”

If you choose to be among the successful minority wise enough to explore this imperative, call me.

Bill Hubbard