ROLE OF AN ADVISORY BOARD - BDC Study

ROLE OF AN ADVISORY BOARD ACCORDING TO AN SME BUSINESS LEADER

It is not unusual for the CEO of an SME to be a “one-man band,” personally seeing to every detail and micromanaging his business. Isolated, he tends to manage everything himself. According to Jean-Yves Sarazin, CEO of the Delom Group, an advisory board allows entrepreneurs to break free from their isolation and to have a sounding board to validate their strategies. An advisory board allows business leaders to question themselves and forces them to reflect. The mission of an advisory board is to ask the most relevant questions and delve deeper into underlying issues. It can also help compensate for weaknesses. An entrepreneur who lacks financial expertise can benefit from the recommendations of an advisoryboard member who has financial expertise. Moreover, an advisory board forces theleader to be prepared, triggering the thinking process: [Translation] “When preparing, one often self-corrects one’s strategy. Having an advisory board builds discipline.”

BENEFITS ACCORDING TO LEADERS

As a governance tool, advisory boards are not common among Canadian SMEs. However, according to business leaders who have set them up, they yield tangible benefits. When asked to rate the advantages on a scale of one to 10, they responded that the advisory board:

·         is an essential tool                                                                        8.2

·         is like having a sounding board                                                    8.1

·         is a support for the owner/management team                              8.1

·         allows you to develop a broader vision                                        8.0

·         strengthens the management team’s convictions                        8.0

·         forces management to look at the company                                7.5

·         challenges the company’s management team                            7.5

·         brings rigour in to the company                                                   7.2

·         is a driving force for the growth of the company                          7.1

            In particular, the existence of an advisory board allowed them to:

·         improve strategic business choices                                             8.0

·         broaden the universe of knowledge and skills                             7.8

·         develop new ideas                                                                       7.8

·         put in place a better management structure                                7.4

·         improve company reputation and image                                      7.3

·         reassure shareholders and investors                                           7.2

·         avoid costly mistakes                                                                   6.7

·         break down the isolation of company executives                         6.4

·         ensure succession of the company                                              6.1

IMPACT OF ADVISORY BOARDS

Most (86%) respondents who have benefited from the advice of their advisory board believe it has had a significant impact on their company. In particular, respondents note that advisory boards had a direct, positive impact on:

·         company vision                                                                            7.7

·         innovation within the company                                                     6.9

·         risk management                                                                          6.8

·         company profitability                                                                     6.8

·         company survival                                                                          6.6

·         sales growth                                                                                  6.6

·         labour relations                                                                             6.5

·         hiring the best emp                                                                       6.2

These results clearly show that an advisory board improves the company’s vision and enables better strategic decisions. Moreover, an advisory board encourages entrepreneurs to think long term and define a direction for their company.