A number of farm businesses have already appointed or are considering either a board of directors or an advisory board to help them define and execute on their strategy.
In this article, several considerations in developing an advisory board are addressed. How does it differ from a board of directors? Why have one? How do I get the most out of an advisory board?
Advisory board versus board of directors
Advisory boards differ from governance boards in two ways. First, advisers have no fiduciary responsibility: they are advisers to the farm manager and aren’t responsible for the financial health of the business. Second, they also have no legal liability. Control of the business and its liability is retained by the farm owner(s).
Many farm business owners wish to retain control and not share it with others. An advisory board provides outside input without loss of control.
Why have an advisory board?
At the most general level, an advisory board offers an owner/manager the opportunity to pick the brains of smart people who have expertise and experience that can help grow the business.
Therefore, an advisory board can perform whatever strategic purpose the manager needs. Some advisory boards provide continuing advice to the owner/manager. Some are used as a sounding board to discuss new ideas and issues. Some are used to develop all or specific aspects of strategy, to assess performance and/or to provide advice on how to improve it. Others are formed for specific purposes: One advisory board was used to help the owner develop a succession plan and then was disbanded.
Forming an advisory board for maximum benefit
Several points are key to consider in forming an advisory board:
- Be clear about your objectives. Make them specific both for yourself and for your advisers. What do you expect from them, and what should they expect from you?
- Choose your advisers based on your objectives. Make sure you have people with the expertise you need for the expected outcome.
- If you consider your lawyer and/or your accountant, put them there in a different professional capacity than their normal relationship. Why would you pay for the same advice twice? Can they add something in addition to their normal input?
- Keep your number of advisers small and their terms flexible in case your needs change. You may need different capabilities as your business changes over time.
- Think seriously about compensation. Some professionals may be willing to “give back to the community.” Others may take the attitude that if you want them to help you make money, then it should be worth something to you. If they make or save you a lot of money, why wouldn’t you be willing to pay them?
- Make sure you are ready for a board presence in your business. Have a strategic business plan in place (or be prepared to have the board assist in its development). Be committed to listening to third-party input and advice. Busy and talented people are not particularly interested in attending meetings, giving advice and seeing nothing done with it.
- On the other hand, minimize the number of “pals” who think like you. You don’t gain much from “yes people.”
- Consider having an adviser or two whose expertise is not agriculture. Set lofty expectations in terms of the individuals you will approach.
Operating an advisory board
As with any organization, effective meetings enhance organizational effectiveness.
- With modern technology, time and money can be saved and a wider array of potential advisers can be recruited by using programs such as GoToMeeting.
- However, especially when members don’t know each other, the first meetings should likely be face-to-face to help build working relationships.
- Meeting frequency depends on your objectives. Often it is good to start quarterly, then adjust to what fits.
- Meetings should be held without constant interruptions for management to attend to day-to-day matters. This is where you work “on” the business, not “in” it.
- Meetings should be chaired, agendas with decision items and background material should be sent ahead, minutes taken and actions from recommendations reported to the members.
Terry Betker is president and CEO of Backswath Management Inc., located in Winnipeg, Man. He teaches in the management programs of Agri-food Management Excellence. Larry Martin is co-owner and lead instructor in AME’s management training courses.