Some Best Practices for Evaluating an Advisory Board Position

These guidelines have been developed from the ABA methodology and are based on our process of building effective advisory boards. This is part one of a two part discussion, the first part will speak primarily to advisory boards and the second part will deal more with Boards of Governance. Although this first part of this topic is centered mostly around advisory boards these guidelines can be followed for either Corporate, or Advisory Boards whether non-profit or for profit organizations. This evaluation process can and should take some time. 

If you were to ask anyone who has been on a board and had a bad experience (we have) it commonly comes down to four main areas of concern that you should consider before accepting an appointment:

1.    Liability - probably the biggest issue today. Given the liability that goes along with a board of governance or potentially even an advisory board (if agreements are not worded correctly this could be an issue) it is imperative that a perspective member/director understand all of the risks associated with particular opportunity. There could be financial and reputation risks for you in a board situation that goes awry.
2.    Time Commitment - Your time is valuable and limited so the question to ask yourself is; can the time commitment be met both professionally and personally and will the time committed be rewarded in some way (not just money!).
3.    Reputation -Very important to consider as you will be an officer or advisor and representing this organization. Make sure the organization and its management team is reputable with a track record of success.
4.    Expectations - time commitment, compensation and organization needs are all part of expectations that if one party or the other has not defined can cause issues. For example one of the most common disconnects is the type of board that this is designed to be. Is this a "police" board or a "pilot" board? This is something that tends to be an issue for many of the executives that we speak with.

Some basic characteristics that any successful advisory board opportunity should have:

1.    The organization should have a formalized agreement that explains in detail the time commitment and expectations of a board member even if it is an advisory board position it should be very formal.
2.    Does the organization provide you an in depth packet of information on the organization with Bio's of management team, other board members or officers? Have they discussed some of their issues with you and how you might be able to help them? Do they understand and articulate where you fit as a board member?
3.    The organization should be clear about what skill sets you have to help further the organization. Data that we have collected from our advisors shows the organization that is simply looking to associate with a member because of a name or title has a high chance of proving unsuccessful and unsatisfying for the member.
4.    We advise our clients that they should be more interested in advisors providing their wisdom rather than just lending their names. This leads to a more engaged member for a longer term and a more satisfying and successful opportunity for all involved.
5.    Does the organization have a process of accountability from the members to the management team and vice-versa? What does that process look like? This should be open and communicated to all members and it should obviously be tracked. Accountability (on both sides) is a key component to the success of any board.
6.    What is the organizations process for communicating outcomes from advice/introductions back to the board? Again should be fully transparent and tracked.
7.    Does the management team "know it all" about their business/industry and are just looking for "Yes" people or are they open to criticism/ideas and are asking you to be on their board because "they don't know what they don't know".
8.    What's in it for you as an advisor/director? Are you passionate about the organization and what it's doing? Are there networking opportunities with the other board members? It usually is not the pay and probably shouldn't be about that.

This is a brief and quick overview of some very basic parameters to think about when evaluating a potential board opportunity. If any of this information has not been addressed then that should be raising some red flags. There is much more that you should receive in evaluating what should be part of this opportunity to ensure a successful engagement. In part two of this topic we will give you some ideas of how to go about performing some basic due diligence on an organization that you are considering taking a board position with which can be especially critical in a corporate governance situation.

Bob Arciniaga
Managing Partner/Founder
Advisory Board Architects