Seven Reasons Why Advisory Boards Don’t Produce

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

It’s not the idea of an advisory board that is important – it is the implementation of the idea that determines how potent it will be in contributing to the growth of any company. Knowing is not the same as doing – and doing is the real test.

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I build and manage Advisory Boards as business development engines for emerging and well-established companies. They are the single most powerful component of business development that I have ever found – bar none! The process of setting them up and managing the Boards is one of the most fulfilling roles that I play. It is a journey that begins with a first contact.

Often I am the first contact with CEOs who have become frustrated with the lack of effectiveness of their business development strategies and have decided to seek out another way. CEOs might read one of my articles on Advisory Boards and contact me to see if our approach could make a difference with their company. Others are referred by friends who are trying to help. However it occurs it is most often the first step in a journey that changes forever the way the CEO looks at the process of business development and their role in it.

Many of these companies already have advisory boards that haven’t been very productive. Dissatisfaction with the lack of results is often a primary driver. Mostly CEOs are frustrated by unfilled promises and are determined to find a better way. These conversations, and the engagements that have followed, have yielded a pile of war stories over the years. Patterns have emerged – here are seven of the most common reasons that advisory boards fail to produce significant value:

The Logical Imperative: Advisory boards get formed for all sorts of reasons – most of them ineffectual and some flatly unwise. In most cases boards seemed to have been formed under what I call the ‘logical imperative’. “Of course we’ll have a board! Let’s pull one together just like those guys did. Of course it will focus on advising us on technology issues – or management issues. It will be like a coffee clutch – a collegiate meeting of like minds. We’ll meet once a month – or (somewhat later) once a quarter. It will be great!” Well, maybe you get the picture. The point is that the founders have not thought through why they are forming the board before they form it. For the most part they have not even thought through the proper mission of such a board. Most have no real experience with a highly productive board and end up doing what seems like the logical thing to do at the time. It all seems so intuitive that the board seems to form itself. Many times it is a ‘peer-gathering’ group – “I’ll be on your board and you on mine.” These boards are almost always net-zero undertakings at best and net-negative in the long run. Logical imperatives lead to ineffectual gaggles rather than productive, working boards.

Dangerous Liaisons: For some reason lots of CEOs never seem to put the words ‘corporate’ and ‘espionage’ together. They build advisory boards (I suspect out of a suspicion of personal or professional inadequacy) to advise them on technology and/or management issues. Over and over I come across boards that regularly see the latest and neatest advances of a company – boards that are populated with people who have interests outside their board participation. “Oh, no – I trust these people,” I am often told. These statements remind me of a story about a young woman who was visiting her spinster aunt. While they were having tea in the parlor a cat wandered in with a litter of new kittens. “Oh, aren’t they so cute,” said the visitor. “Yes they are – but I can’t figure out how they happened. Fluffy is a house cat and she never goes outside.” As she was talking a clearly virile tom cat came into the room and stretched sensuously. “What about him,” inquired the girl? “Oh no, couldn’t be Tom,” said the aunt. “He’s her brother!” I leave the reader to follow the story where it leads – but the point should be clear enough. Too late smart is, first and foremost, too late.

Who’s Minding the Store: Often when reviewing the history and mission of ineffective boards we often find that there is no clear mission for the board, no defined strategy for managing the board and no formal metrics for measuring effectiveness and performance. The CEO is nominally in charge but the board is managed effectively only during the times just preceding and following meetings. For the rest of the time it is mostly ignored with little contact between board members and the senior team. Additionally, the lack of clear, effective and enforced metrics has defined a culture that virtually guarantees little or no production from the board. Many times board members serve based on a ‘verbal agreement’ as to what the company expects from them – and as Jack Warner used to say “a verbal agreement is not worth the paper it’s written on!” It is as if this section of the company has been set aside – a kind of sandbox. Within this strange area you see leadership without purposefulness and participation without responsibility. Meetings of this kind of board tend to be rambling discussions on management style, Monday morning quarterbacking the CEO and water cooler type hashing and re-hashing of corporate gossip. Board members, who see a leadership without apparent purpose or concern with purpose, react similarly. Over time these boards tend to discuss the same issues over and over again until they all get bored and the merry-go-round just slows down and finally stops.

What Mission Statement: “What’s it good for? Absolutely nothing!” Logical imperatives, dangerous liaisons and inattentive management lead to just that. Wasted energy, lost opportunities and negative branding are the most common result of this combination. Yes, negative branding! I have dismantled boards and interviewed lots of ‘advisers’ – some of whom have spent many frustrating years on ineffectual boards. Often I was sure that the ears of the senior corporate team had to be burning. And these are supposed to be their friends! Oh, you think that your advisers always say such good things about you? Well, wake up and smell the decaying flesh! If you are wasting their time and the company’s resources, if you are risking their reputation, if you are acting more like a den mother than a CEO, if your ego seems to be the most important part of your anatomy – what do you think they are going to say? A board should, from its very conception, have a clear mission statement. Board members should be recruited with that mission statement front and center during the discussions. They should clearly understand what will be expected of them, how they will be paid and what will happen if expectations are not met. Without this, forget the idea – it is a kamikaze raid on a vacant lot!

Wisdom on the Cheap: There is a whole category out there – thieves parading as CEOs and senior team members. Visit any chat room dedicated to start-ups and you can listen in on the same conversation over and over. Most of them start with the premise that it is unwise to pay advisers in any but an incentivized way – in other words only based on the results they generate. Although incentivized compensation is a component of any good advisory agreement, there needs to be a base of recognition for service. But these people take the argument to the extreme. In one recent thread a series of so-called CEOs weighed in with almost identical observations. Most of them had war stories about consultants that had taken their money and produced very little. As the single-perspective discussion reached its peak, I introduced two ideas into the mix. First, aren’t the selection of a non-productive consultants a direct reflection on the ‘decider’ and the inadequacies of the process of selection and engagement? And second, if you limit the pool of possible consultants to those who will work only for incentivized compensation, don’t you filter out professionals whose track record of production puts them in a position to require non-incentivized compensation? You would think that I had dropped a cat into a box full of mice! “Oh no, it wasn’t me … it was ‘them’.” The so-called CEOs all considered it a failure on the part of the consultant. ‘Blame the other’ was the theme of the day! Psychologists have a term for this kind of denial of responsibility. Look, you either believe that there are people out there who have knowledge and connections that can help you or you don’t. If you do, you go out and find them then make agreements which reflect the reality of the market for their services. The onus is on you to search effectively and reach productive agreements – even if it taxes your company’s resources. The expenditure must yield a return on investment and any agreement must specify performance metrics – but no professional would find that onerous. My experience is that no well connected person with a serious intent to make a contribution will give away that potential in exchange for a purely conditional compensation. In other words, you get what you pay for! CEOs who can successfully navigate these waters have a substantial leg up on their competitors. It is a skill that needs to be learned both to avoid the waste of non-productive relationships and to reap the benefits of productive ones. Wisdom on the cheap is just another tilt at yet another windmill.

Making Love to the Inertia: Many of our engagements begin with a dismantling of an existing advisory board. Most of these boards were formed amid much enthusiasm – with members happy to have a chance to contribute. But over time and, with a declining enthusiasm from the management, they have simply ceased to function. For the most part little of this is the fault of the board members. They are, after all, not officers of the company and have been asked to help it succeed by people who they expected to show the way for them to do just that. But inertia is overwhelming in the face of the lack of motion – and motion is driven by leadership. Management often falls in love with the inertia that these boards allow. My suspicion is that, in the face of a wildly chaotic world, they see the board as a kind of oasis – a quiet place to go to have peaceful conversations with fellow travelers. Without connection to the imperatives that are driving the rest of the company, these boards languish into unproductively neutral cultures. Finally they ossify into a mass of inertia. The end has arrived – it doesn’t matter how much longer the board is in existence. It becomes the proverbial ‘dead man walking’. Execution is the merciful thing.

We’re Ready for Prime Time – Not: I get this one a lot! A CEO reads some of my stuff and comes to the conclusion that “I’ve just got to have one of those boards.” So we have our initial meeting. I talk a lot about how the company has to ready itself for a board. The middle-level business development types will become a liability and need to be replaced with one far more experienced team member. The resourcing of targeting, proposal development, red-team and capture have to be beefed up if the company is going to take advantage of the opportunities that an Advisory Board can make available. There is a lot to be done in getting ready. I emphasize that this is a complex process that has to be approached professionally and with careful preparation. Then it comes. “I don’t think that we need all this ‘getting ready’. Why don’t you just go out and get me some advisers?” At first I am patient and explain that very important people will be hesitant to risk their reputations with a company ill prepared to take advantage of their assistance. Then I get something like “This is obvious and it should be a concern of yours. However, not in our case. We do have considerable experience working with “very senior and highly professional” people and also, we are quite capable of executing.” And this from a CEO whose advisory board has been completely unproductive and whose company is about to run out of resources because of management’s complete failure to generate significant volumes of business! The hard truth is that the advisers that I place on its Boards care deeply about preserving and expending their reputations. They are not about to risk them on such representations. They know a whole lot better than that! You should as well. This mutual understanding is the gateway to a more productive way of relating to the process of business development for your company.

They Can Work – and Work Beyond Your Wildest Dreams: The single most amazing thing about these discussions is that, despite all of the hazards and misunderstandings, so many of them lead to productive engagements that produce results. Perhaps one out of three get through the kinds of challenges outlined above. And, out of them, somewhere around four in ten actually begin the process of forming a board. In truth, the process is self-selecting. CEOs who can understand and adapt to a new approach to business development are precisely the right candidates for having and learning to benefit from an Advisory Board. It is these four in thirty that make the entire process such a joy to me and the professionals associated with me. For, once the preliminaries are out of the way, the real magic begins. The old saw is that ‘nothing succeeds like success.’ Well nothing feels better than helping someone succeed beyond their wildest dreams.

© Dr. Earl R. Smith II

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Related Articles:

• Amazing Pace: Turbo-Charged Business Development

• Advisory Boards – Turbocharged Business Development

• Advisory Boards – Ancillary Benefits

• Turbo-Charging Business Development

• Advisory Boards as Business Development Engines – The Beginnings

• Dysfunctional Advisory Boards – A Family of Problems

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