Ideas & Debate

Advisory boards: What to ask on road to Damascus

idea
carol musyoka

Summary

  • The idiom has Biblical origins when a stroppy young man Saul, exhibited an irrational exuberance for the persecution of early Christians.
  • The advice provided by members is non-binding to the owners and management of the company and members cannot vote on company-related matters such as payment of dividends or appointment of the managing director.

Last week I signed off by saying that entrepreneurs should think about setting up an advisory board as it may help create a road-to-Damascus moment.

The road to Damascus is an important point in someone's life where a great change, or reversal, of ideas or beliefs occurs. The idiom has Biblical origins when a stroppy young man Saul, exhibited an irrational exuberance for the persecution of early Christians.

As he galloped down the express lane from Jerusalem to Damascus, a bright light appeared and a voice asked Saul why he didn’t have better things to do with his free time other than hunt down early adopters.

Having been blinded by the light, his sight was restored three days later, powered by a newfound love for the very people he had persecuted before.

If Paul, aka the artist formerly known as Saul, existed today he probably would have been one of the highest-rated influencers of the mass movement known as Christianity. But what kind of questions would a business owner have as they tiptoe down this road to Damascus?

1. Is the advisory board a legal entity?

No, it is not a legal entity and the members do not have legal responsibilities over your company. The advice provided by members is non-binding to the owners and management of the company and members cannot vote on company-related matters such as payment of dividends or appointment of the managing director.

2. Can my adult children sit on the advisory board?

Yes. If you think about it, it is a good way to introduce your children into the business to understand what the key business drivers are, how the financial reporting is done and how the strategy is formulated and executed.

It works well if your children are not interested in working in the business itself, but you want them to have line of sight on what goes on in case anything happens to you. Because, well, you’re not immortal.

3. Will the advisory board members have to sign director guarantees when I am borrowing from the bank?

No. Unless your bank manager is a quack or you are borrowing from a loan shark who wants everyone and their brother to know that you owe them money. If in doubt, refer to question one.

4. Should I chair the advisory board if I am already chairperson of the company's statutory board?

Yes, you can, but ideally, you should not. Your advisory board should be made up of independent members who are not shareholders and who bring insights that you would want to take you down that road to Damascus we spoke about.

The chairperson should be someone who can facilitate intelligent discussions that help illuminate the often lonely journey that an entrepreneur endures as she navigates the business landscape. The chairperson should help design the agenda for the advisory board meetings to ensure that the objectives for which you set it up are achieved.

Your chairperson should be able to provoke members to engage you and your management on a challenging discourse about your strategy, as well as your financial and operational performance.

The chairperson should be a respected and mature individual who can also help steer a leadership transition in your company in the case, well, you are not immortal.

And listen, the advisory board chair is in no legal position to lead a coup and kick you out of office. If in doubt, see the answer to question one above.

5. Can one of my children chair the advisory board?

Yes, they can, but ideally, they should not. This is particularly important if you are still in active management of the business as the family dynamic will still play out in the boardroom.

Parents struggle to be questioned by their children and children who may be in active management may take umbrage when their siblings ask innocent questions about business performance.

The family social dynamic will always play out in a family-owned business. Introducing independent chairpersons is a good way to start inculcating neutrality in the way family members engage amongst themselves where the business is concerned.

It will also get the children, who potentially are the future shareholders and statutory directors, accustomed to a different kind of business oversight that is distant enough to provide the right kind of unemotional circumspection over the way the company is being run. Also, just in case I haven’t mentioned this, you are not immortal.

As a business owner, you birth and nurture your business into a viable enterprise that employs people, serves customers and presumably pays its taxes, adding to the economic growth of this country.

Setting up an advisory board is a palatable way to ensure the sustainability of years of your blood, sweat and tears. Oh, and by the way, you are not immortal.

[email protected] @carolmusyoka