What qualifications should board members have, and how many members should there be?
Fewer than five advisory board members typically is a good number for small to medium-sized businesses. Too many thoughts and opinions can sometimes be distracting and confusing, so owners do not want to have too many advisory board members.
At the same time, you want to have enough members that you can get some diversity of skills and backgrounds to help provide a broad perspective.
Generally speaking, you want board members who are trustworthy, who will take a vested interest in wanting to see the company succeed and who will provide open and honest feedback. Many advisory board members have a business of their own, or otherwise have strong business backgrounds. It is often helpful if their experience has been with companies of similar size, or perhaps slightly larger, which helps them understand the typical trials and tribulations currently being experienced by the owners.
Obviously, board members with sharp, creative minds can be a real asset.
It is always helpful to have at least one member who is very familiar with the industry or marketplace in which the business operates. While that member does not need to have worked in the exact same industry, a professional who has worked in a closely related business or industry can be extremely helpful in an advisory role.
Having a member on the board with a financial background is also advantageous. Other backgrounds that can be helpful include marketing, legal and operational. Choices should be tailored to the specific needs of the business.
What should companies avoid when selecting board members?
Family and friends are not a good choice as advisory board members, generally speaking. The advisory board needs to be unencumbered by personal relationships so they can provide open and honest feedback.
The board should also be as diverse in experience and skills as possible. Having too many like-minded board members often will be a limiting factor to obtaining a broad advisory perspective. Having a domineering board member can also be a detriment, as the individual may inhibit others from sharing their point of view.
The best advisory boards are made up of accomplished and confident individuals with personalities that complement each other.
In these ever-changing and challenging times, an advisory board can be a powerful tool to provide a broader business perspective and strategic direction.
John F. Schlechter Jr. is a director in the Audit and Accounting Group at Kreischer Miller. Reach him at (215) 441-4600 or [email protected].
