Managing a Board of Advisors: 4 Best Practices for Your Leadership Pipeline and Outside Experts

Purpose and Motivation

The Board of Advisors has a narrower, less central role than the other components of your firm’s leadership. However, where your Directors and executives are integral to every aspect of company function, advisors should be relied on to fill specific, well-defined knowledge gaps and do so in particular problem-solving contexts. Advisors may, for instance, be brought on for intensive but short-duration co-management of a specific phase of a critical project or might serve as liaisons to a particular branch of your market or a companion industry. 

This kind of precise, efficient functioning is only possible if an Advisory Board is both well-organized and well-managed, in addition to requiring individuals who are recognized leaders of attested expertise. Having seen many clear examples of successful Advisors and less successful ones over the last several years, I have compiled what I believe to be the top four best practices for effectively using this resource. 

Best Practices Overview

In general, the critical point is that advisors’ roles need to be clearly defined concerning one another and the rest of the organization. They are being brought on to offer expertise or perspective not available within your firm. But, as would be the case for a new hire, that expertise can only be leveraged if you have transparent workflows and consistent processes for getting information to the advisors and collating their advice and insights. This typically requires four structural best practices:  

1. Assessment

One form of assessment, of course, involves the search process. Professional help can remove the time burden this usually imposes on a company’s existing leadership, ensuring that your Advisory Board is populated with 1-4 outside experts who are leaders in their fields and whose experience is directly relevant to the issues at hand. 

Just as important, though, are ongoing forms of assessment of the board’s efficacy. These must include, at minimum, Annual Reviews of board activity and contributions and Economic Impact Measurements, which can be conducted on an annual or quarterly basis. Annual Reviews should be used to confirm that advisors remain aligned with company goals. In addition, the Economic assessment ensures that they are contributing materially to its success. 

2. Charter

Because the Advisory Board is not embedded within your existing organizational structures, its membership, role, powers, and expected contributions must be specified in a charter. Typically, this document will also cover protocols for meetings and other forms of engagement. 

3. Meeting Standards

The actual business the advisors are involved in – their tasks within the company’s overall scope – are likely to change dramatically from quarter to quarter, especially for startups and other young firms. To account for this, the board should have clear protocols for meetings, input, review, and assessment, including meeting schedules and record-keeping, responsibilities around agenda-setting and issue coverage, and preparation of Annual Reports. 

4. Independence

The relationship between the business and its advisors needs to consist entirely of their role on the Advisory Board. They should not be shareholders, contractors or other service providers, or previous employees. They should be independent both of the business and one another. The best way to create this arrangement is to appoint a Chairperson with a specific professional credential in running Advisory Board recruitment and meetings. This ensures that the board members have one person they can rely on as a resource for procedural, legal, social, and ethical questions and safeguard their independent role. 

Compensation

One other concern when bringing on an advisor is compensation structure. Part of the challenge here is that advisor tenure can vary so widely, from a few months to a decade or more. LifeSci Search is equipped to provide specific, detailed guidance based on your business’s particular situation. However, it’s possible to sketch some general guidelines that will apply in most cases. 

First, compensation should depend primarily on frequency and depth of engagement and the level of expertise. Later-career advisors with a broad, useful network are more valuable, as are advisors willing to invest the time to attend meetings more frequently, make additional introductions, and review more extensive amounts of data or business intelligence. 

Second, both scale and type of compensation will depend on your business status. For example, while short-term advisors should be offered per-meeting compensation, longer-term board members can be compensated with stock options, profit-sharing, or annual retainers. A standard range for stock options is 0.1% to 1.0% for startups, dropping to 0.05% to 0.4% as companies exit the growth stage. 

For more detailed insights and guidance, we encourage you to reach out to Paul Cashman, COO and Head of Europe pcashman@lifescisearch.com to arrange a discussion.