The advisory board: a CEO's secret weapon. (Advertising Supplement: Corporate Expansion & Relocation).

After recent corporate scandals, increased scrutiny and legal liability might make it more difficult to attract high caliber talent to statutory boards of directors. An attractive alternative that allows a company to tap into powerful resources without the legal implications is an advisory board. In fact, having an advisory board is like having your cake and eating it too. While an advisory board has no legal authority or formal control over the CEO, it brings all of the benefits of a board of directors and much, much more: perspective, expertise, prestige, contacts and strategic wisdom. A well-designed, highly effective advisory board can have tremendous bottom-line impact.

Abundant Business Benefits

The multiple benefits of an advisory board -- a group of executives/ professionals that meets regularly to offer advice on a range of issues -- are often underestimated. An effective, well-balanced advisory board can help increase the value of a company by offering the following:

Experience and expertise. An advisory board is the most cost-effective way of introducing additional experience and business acumen into a company. Members who are successful entrepreneurs, senior managers or partners in venture firms can help get a faltering business back on track or prevent expansion mistakes. "Our advisory board's diversity of experience and real world perspectives have been invaluable when working through tough strategic issues," says Larry Hayes, CEO of Ventura Distribution, Inc. in Thousand Oaks.

Perspective. An advisory board brings a fresh set of eyes to prevent leadership tunnel vision and provides a truly objective sounding board for the lonely at the top. "I can always count on my advisory board for good, clear, objective feedback," says Jon Tamiyasu, CEO of ActSys Medical, Inc. in Westlake Village. To help meet challenges such as changing economic conditions and short product life cycles, an advisory board keeps CEOs stimulated and challenged so they can respond to the marketplace. "My advisory board is continually challenging me with new ideas about how to increase the effectiveness of my entire team," says Tamiyasu.

Strategic input. Unhindered by emotional involvement, an advisory board asks tough questions that bring absolute clarity about future direction, exit strategy and succession planning. "I can always count on my advisory board members to call it the way they see it and that helps me avoid blind spots and to reach clarity on critical business issues," says Hayes.

Prestige. Advisory board members can bring the prestige and credibility a company needs to obtain large contracts and attract capital or financing.

Accountability. An advisory board keeps CEOs focused and disciplined because they have someone to report to on a regular basis. "My advisory board helps me stay accountable for strategies that will enhance the value of my company," says Tamiyasu.

Contacts. A very powerful benefit of advisory boards is the contacts and networking opportunities they can bring to the table. Enhanced access to competitive intelligence, management resources and talent, vendors and suppliers helps a company break through barriers, tap into markets and open the door to strategic partnerships and acquisitions. "Having access to our advisory board's personal networks has tremendous value," says Hayes.

Mediation. In family-owned or closely held businesses, an emotionally uninvolved advisory board can mediate conflicts between owners or company officers to ensure that leadership is pursuing the best strategies for value creation.

The Right Advisors

Since an advisory board's focus depends on the needs of the company, the first step in determining the mix of members is clearly defining leadership's long-range objectives. Members should be experts in their industries or in their professional disciplines. Further, only a group of independent thinkers, not cronies, will empower and inspire the leader and the management team. While too much inside familiarity with the company may deprive a member of objectivity, an outside professional--e.g., a CPA or attorney--who has a long history with the company, can offer valuable perspective.

Keeping an advisory board customized to the enterprise as it changes over time calls for term limits or a mechanism for replacing members. Being able to change the mix of members is also an effective way to keep the group active and engaged. Each board needs a lead member who serves as a liaison between the CEO and the board, coordinates and administers meetings, encourages participation and makes sure that each meeting results in action items with follow-up. The ideal size of an advisory board is from four to six or seven, depending on the company's size.

Productive Meetings

For a new advisory board, monthly meetings are the most effective frequency for the first quarter. Thereafter, quarterly meetings are generally sufficient. To familiarize board members with the daily issues and personalities the CEO is dealing with, it's useful to invite managers to each meeting to discuss their key accomplishments, departmental challenges and needed resources. It also helps the managers feel part of the process and gives the CEO some leverage with management.

Ensuring Accountability

Since an advisory board has no legal control over the company, it is a non-threatening, objective sounding board for the CEO. However, if the CEO does not listen to the board's input and seriously consider its advice, board members will become disillusioned with their roles. Further, full disclosure is extremely important. That includes sending board members monthly financial statements, sharing marketing and strategic plans and keeping them posted on litigation, significant transactions and any other events that could impact the company's strategic direction or financial strength.

A critical component in advisory board effectiveness is mutual accountability. The CEO has to have a mindset that he or she is accountable to its members, just as if it were a statutory board. The board in turn accepts the responsibility for holding the CEO accountable and commits itself to giving honest and objective opinions. That includes "tough love" if the CEO is not following through on commitments.

People Power

The creation of an advisory board is a sound strategic decision for business owners and CEOs. The right team of advisors keeps the business moving in the chosen strategic direction. It contributes experience and expertise and serves as an objective outside sounding board for the lonely at the top. Advisors bring contacts. and provide access to competitive intelligence, management resources, talent and lucrative business opportunities. When properly designed and managed, an advisory board may just be the most cost-effective and powerful secret weapon in the CEO's arsenal.

Mark Lefko is President of Tegra Executive Group, based in Westlake Village, California. For further information, call 805-371-0788 or email [e-mail]