How to Assemble a Board of Advisors
I often mention that the construction industry has the highest failure rate of all industries with the exception of restaurants. Most of my readers infer from this statistic that I’m implying construction’s failure rate is due to poor management. That, however, is not the case.
- Construction suffers from the second-highest failure rate because it is largely populated by “solopreneurs” at the helm of undercapitalized companies competing in a high-risk industry.
These small and mid-size firms lack both the human and financial capital to weather the market cycles and fierce competition that marks our highly volatile construction industry.
“Solopreneurs” (sole owners or few partners)
It is the “solopreneur” element that puts small and med-size-sized contractors at risk. The heroic impulse to “go it alone” or with a few like-minded partners that drive successful entrepreneurs also limit their ability to expand and grow in a highly complex, competitive industry. They need a team of experienced decision-makers to guide their growth. However, since they believe their company would not exist if it were not succeeding, “solopreneurs” usually think they’re doing just fine on their own.
- However, what most fail to recognize is the impending tipping point in every contractor’s growth cycle where his/her solo knowledge and experience is rendered inadequate by the ever more complex challenges of their growing company.
Board of Advisors
With all my contractor clients I eventually get around to encouraging them to form a board of advisors (as opposed to a board of directors that is essentially a public company governing body).
I begin by distinguishing between “advisors” and “directors”, pointing out that “solopreneurs” do not need anyone to govern (direct) their decisions. But as they grow, they do need to seek the advice of experts who have the ability to view their business from a perspective different from their own.
What Does an Advisor Look Like?
How do we form this “board of advisors”? Who should be on it? How many members does it need? Should I pay them? Can they be family members or old school chums? Should they all be in construction? Should they be doing business with my company? Do they have legal liability? How do I indemnify them? Etc. etc. etc.
Board of Advisor Do’s and Don’ts
- There is no magic number of advisors. The number will depend on the size of the company, the complexity of the problems, the personality of the CEO, and the willingness of appropriate individuals to serve. I recommend starting with three if you can so that you will get a variety of perspectives and a confluence of thinking. However, one advisor that you respect is better than none. (The Wall Street Journal refers to seeking advice from one person not associated with your firm as a “Personal Board of Advisors”.)
- Try to attract independent advisors. People who have a vested interest in the company can rarely make objective judgments. Avoid close friends, relatives, employees, major vendors, and lawyers or accounting firms employed by you. They are never independent and rarely objective. You will only be getting the advice you want to hear. That is not the advice you need. Only truly independent advisors can see things from a perspective that is not tainted by your influence or involvement in their well-being.
- Select only advisors who you truly respect. If you do not respect the individual’s expertise and admire his or her independent success, you will not listen to their advice. That’s just human nature.
- Try to find individuals from a variety of disciplines. Entrepreneurs or successful businesspeople such as bankers, marketing professionals, accountants, etc. can bring a variety of thinking to the table. The type of business is less important than selecting individuals who are or have been responsible for the success of their business, department, or organization. Construction experience is not a criterion because it is assumed you know how to do the work. Note that people in small professional practices often lack true competitive business experience.
- By all means, pay your independent advisors. Some companies pay by the year and some by the meeting. It doesn’t matter which schedule you follow but be sure the amount and frequency of payment are motivating and respectful. Most independent advisors are flattered to be asked but won’t last long if they’re not treated respectfully along the way.
- Ask advisors to meet as frequently as you feel you need to. However, meeting less than twice a year means the members will lose touch, and meeting more than six times a year means they will become more like management or insiders than advisors.
The Board of Advisors Top-Ten
All successful entrepreneurs are driven by a sense of independence and self-respect. The construction industry is largely populated by men and women who preferred to make their own job, rather than go out and find a job. I get it.
Here’s my suggestion – use the same critical self-evaluation that motivated you to start your own company to look at your current circumstances. Ask yourself:
- Am I feeling more pressure these days than ever before?
- Do I find myself avoiding critical decisions?
- Am I short-tempered?
- Am I blaming subordinates for everything that goes wrong?
- Do problems seem to sneak up on me?
- Am I constantly putting out fires?
- Am I experiencing increased key employee turnover?
- Am I procrastinating?
- Am I snapping at my spouse?
- Have I begun cheating at golf?
If the answer is “yes” to a majority of this Board of Advisors “top-ten” – it is time to admit that you could use some help.
Please circulate this widely. It will benefit your constituents. This research is continuous and includes new information weekly as it becomes available. Thank you.
For more information on developing and utilizing a board of advisors, click on these links: https://simplarfoundation.org/?s=advisors. For a broader overview on organizational change, click on https://simplarfoundation.org/category/organization-transformation/ and learn about the 5 Essential Strategies for Implementing Organizational Change
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