This article follows on from my blog “Does Your Company Need and Advisory Board?” BDC published the results of their first-ever study on the use of Advisory Boards by Canadian small and medium-sized enterprises (SMEs).
This study outlines the impact that Advisory Boards have on the performance of SMEs in Canada. The key findings of the study are as follows:
- Only 6% of companies have an Advisory Board and they are found most frequently in companies that have been in business for 11 to 20 years, companies with more than 20 employees and companies operating in a variety of sectors.
- For the companies that have Advisory Boards, 86% of the company leaders believe that having an Advisory Board has had a significant impact on the success of they business.
- Sales growth (average) in the first three years after putting in place an Advisory Board was 66.8% versus only 22.9% for the three years prior to putting the Advisory Board in place. Productivity (average) increased 5.9% versus 3.2% during the same periods.
- Comparing companies with Advisory Boards to those who do not also shows a very dramatic impact on business performance with a 10-year better sales performance of 24% and higher productivity of 18% for the companies with Advisory Boards.
Given this overwhelming evidence that Advisory Boards can have a significant impact on the growth and productivity of a business, why do only 6% of SMEs in Canada have an Advisory Board in place?
Based on my personal experience with more than 50 companies and organizations, I would suggest the following reasons:
1. Lack of Awareness
Many entrepreneurs and leaders of organizations are so busy managing the day-to-day affairs (including customers, products, competitors, employees, as well as government remittances, taxes and reporting), that they don’t necessarily consider getting help from others.
Hopefully, the BDC report will be beneficial in getting more entrepreneurs thinking about how to improve their business by working smarter instead of working longer and harder.
2. Control Issue
Often entrepreneurs are reluctant to bring in outside advisors of any type because they don’t want someone else to tell them how to run their business. By building the business to the current stage, there is a reluctance to have someone else have a say in how things are done in the future.
The key to overcoming this issue is to clearly articulate the role of the Advisory Board to be one of review and guidance, which can be acted on, or not, by the leader if the advice is considered appropriate and at a time when it makes sense to do so. At the end of the day, the leader is in control but has trusted advisors to provide input, which can be taken or ignored.
3. Cost Impact
Strong business leaders generally have been successful by being careful about where money is being spent. The cost of an Advisory Board is generally quite low, since good advisors are often willing to accept the role in order to leverage their knowledge, expertise and network and don’t need a high level of compensation.
That said, I always advise entrepreneurs to pay their Advisory Board members a reasonable per diem to ensure that they stay engaged and can be relied on to be there when you most need them.
4. Time and Effort
Another reluctance relates to the time and energy required to bring advisors up to speed on the business before they can offer good advice. Although it always takes effort to get the advisors properly onboarded, it has been my experience that by the first or second meeting there is usually some significant value generated, even in the questions that are being asked.
Many entrepreneurs are reluctant to “open the kimono” or share openly what is happening in their business. They may be modest about what they have achieved or embarrassed by the current state of play in the business.
Strong entrepreneurs are generally passionate and have lofty goals for the business. They may not feel that they have achieved as much as the advisors would expect. In reality, the fact that they have built a solid business and have managed to survive for a few years is reason to be proud. The advisors are not there to judge the entrepreneur but rather to provide guidance and suggestions to make the business even better.
In summary, the impact of a strong Advisory Board is very substantial for all companies, and especially so for SMEs. Getting the right people in place to help you accelerate your business will make a world of difference and interestingly you will sleep better and have more fun.
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About the Author
Claude Haw is the Executive Leader for the Strategy & Governance practice at Business Sherpa Group. He has been directly involved as a senior manager, CEO, founder, funder, mentor, advisor and board member of more that 30 private, public and not-for-profit corporations over the past three decades. Claude loves working with energetic and passionate people to take their business to the next level.