Entrepreneurs or Family Businesses with entrepreneurs should consider using Boards of Advisors or Advisory Boards to help grow the business. There are four steps in developing an effective Advisory Board using outside people. This is not a simple and easy process unless you have carefully executed these four steps.

1. Identify the reasons WHY you want to spend more money to hear other people's point of view that may be in conflict with yours.
2. Identify those people that best meet your expectations and intentions.
3. Develop Rules of Governance that best fit the culture and style your management team responds effectively to.
4. Begin using the Board, and let it evolve over time.

I have found that there are many reasons a company owner, president or Family Council desires an advisory Board.  They include:

1. the need to integrate outside opinion and viewpoints to counterbalance internal viewpoints,
2. Create a succession plan that allows for the selection of the "Heir Apparent," to avoid the conflicts that arise when one child is "favored" over others,
3. to provide expertise and experience lacking in the organization,
4. To provide a network of new opportunities using the board members contacts and influences,
5. To provide sound management practices in order to reach the next level of professionalism, or
6. To prepare the management team for dealing with outside directors, if the company wants to plan an IPO and needs the SEC experience.

Of course, the list could go on, but the above 6 are the most common I find. Selecting Advisory Board Members is probably the most difficult process of the 4 steps. It requires a tremendous amount of time and research to identify, interview, and select these key individuals. David Coulter's (CEO of BankAmerica Corp) Top Ten List of what makes a 'good' director/Advisor:

1. Put the Business or Shareholders FIRST, meaning that personal agendas of the CEO should be challenged if it appears the direction of the agenda doesn't benefit the company; or shareholder FIRST;
2. Have INTEGRITY to avoid conflicts of interest, while providing rigorous, factual analysis and candor to management and the CEO;
3. Must be COMMITTED, both emotionally and mentally, have a personal concern for the company, by staying in touch with the CEO and or management on a regular basis, beyond just the quarterly meetings, as well as making personal visits to company owned facilities as well as competitors, when available;
4. Must be AVAILABLE to contribute knowledge and expertise as well as time;
5. To Bring CONSTRUCTIVE alternatives to a discussion and reach the most effective solutions;
6. Must have a STRATEGIC POINT OF VIEW, and not get caught up in the operational details, which is a management responsibility;
7. a Director/Advisor must be INDEPENDENT, but not eccentric, which will allow for dissent but not "nay saying."
8. The membership should be DIVERSE, representing a variety of industries, experiences, and knowledge that will best keep the company competitive;
9. The Advisor should be SMART, meaning that the advisor may not understand the intricacies of metallurgy and EMI's but should be able to see that investing in a opportunity makes business and economic sense, and articulate both the good and bad issues; and
10. the Advisor should be a TEAM PLAYER, having both a collegial disposition and sense of humor as well as respect for each other.

It should be noted that some studies have shown that having your CPA, Attorney, Best Friend, Long Time Consultant, or Distant Relative may NOT be the BEST CHOICE, as these individuals in the LONG RUN may have conflicts of interest. However, I have found them to be great early stage advisory board members due to the full knowledge of the CEO, that will assist the transition to an full governing board with outsiders.  In the later stages of an advisory board, where I have sat on advisory boards of former clients rolling into a full governance board, I have either refused major consulting engagements or resigned. I always ask to resign off a board after 5 or so years as directors can get "stale" or do not bring any new ideas or concepts to the table. In early stages of an advisory board, I always recommend the firm's CPA, attorney or Long term friend.  I do this if there needs to be a balance to the NEW members who may not know the company, industry or CEO well. These close advisors would provide meaningful insights to the new members who would not have the historical perspectives they would need to have to be a good board member. Once that knowledge has been transferred, it is best these close friends retire or resign. You can call your closest advisors and ask THEM who they would recommend to join your board. The National Association of Corporate Directors (1707 L St NW, Suite 560,Washington DC 20036, (202) 775-0509 has a referral system for those who desire a less personal approach to the selection process. There are nationally recognized Head Hunters who do nothing but attract strong director candidates. Your Banker, Attorney or CPA could also recommend others. The Rules of Governance for an Advisory Board, not a formal Board of Directors, relates directly to purpose of the Board itself. Provided there are no crisis issues to deal with, an advisory board should follow the following recommendations:

1. Have all meetings prepared well in advance, with agendas, management reports, financial reports, and key issues to be discussed;
2. Advisor/Directors should have read the materials, discussing any issues BEFORE the meeting with the CEO, and be prepared to openly discuss those issues at the meeting;
3. Advisors should be compensated for their VALUABLE time, that means a check should be printed and given to the member BEFORE he or she leaves the meeting. ( I have found that $1,500 per day is reasonable) Travel expenses and other related costs should be reimbursed or paid for in advance;
4. Schedule the Quarterly Meetings IN ADVANCE, to allow the members to schedule their time around your meetings, it helps them to be available;
5. When a Advisor/Director misses more than 2 meetings a year, make it automatic that they offer their resignation and help the CEO find a replacement;
6. Recognize that membership is not "forever" and term limits should be stated. If you have ever been on a bank board where little is challenged or addressed, as the members have been there too long and do not like others who make waves, you know what I am talking about;
7. Advisor/Directors should have access to Key Managers, to talk with and ask questions to. I found this point to be most important in my getting insights to some of the strategic issues facing the organization. There is no need to go very far down the Org Chart, but it should be available to discuss issues with them to gain a different perspective of issues beyond what is presented at each meeting.
8. Treat the members with respect: start meetings on time, and end them reasonably on time. Have 5-10 minute breaks every 90-120 minutes, to catch a breath, attend to personal needs, or make phone calls. Feeding a decent meal, breakfast, lunch or dinner does not require expensive tastes, but allowing for personal orders or preferences is always appreciated.
9. If criticism is to be directed towards the CEO, it is best delivered in private, not in a board room. Not only does it create awkward conditions for the CEO, but to the remaining members who may not agree with you. If an Advisor/Director has such a deep criticism for a CEO's behavior, agenda or Ethics, and the member has made efforts to articulate these issues for corrective action, and they still persist, my suggestion is that the member resign from the board. That member is either not in sync with the other members or is not effective in developing solutions to problems he or she sees.
10. Once you select the members, get it started slow and easy. I recommend that the members meet with the CEO in the First meeting all by themselves. This helps the newly formed board get a feel for each other, ask the "dumb" questions, and develop the chemistry needed to become more effective.

As time progresses, the CEO should invite key managers, both family and non family, to the meetings. These meetings will then evolve into quarterly strategy sessions whereby each manager gains higher level perspectives and seasoned knowledge. It is this transference on knowledge and discussion that the management team learns to problem solve more effectively. This forum also helps facilitate those difficult decisions that the CEO would normally decide, but politically would be damaging to his or her relationships within the family or organization. When an outside, non family manager is selected to become the next CEO over less qualified family members, it can be smoothly developed through the use of a board. In various presentations and writings, Ivan Lansberg, a nationally known author and academic of Family Business issues, has presented or written numerous testimonies relating to the importance of Boards. In closing this article, I would like to share a comment he shared to others. Dr. Lansberg said, in an interview for a newsletter: that he could statistically show that having a board was much more favorable to the owners of the company than by not having one. He closed his remarks by saying "Any Family Business would be foolish or stupid to operate in a competitive marketplace without a board."