I have been extremely fortunate to have served on the boards or advisory boards of 19 different firms in the talent development industry. These have included, among others, small $1.5 million skills training companies, larger $15-30 million compliance education businesses, a private secondary school system, and even a $100+ million college. Each experience was phenomenal, and I hope I added value to each organization in return.

But what is the role of an advisory board, and when is one needed? This post will help you determine whether your talent management business would benefit from creating some sort of leadership board, as well as how you might go about forming and evaluating one.

To be clear, the difference between boards of public and private companies is relatively simple. Boards of public entities include not only fiduciary responsibilities, but also legal accountability. Meanwhile, boards of private companies must only offer advice and do not have any legal obligations. The advisory-only capacity for a privately held company, however, might cross over into a stronger fiduciary role when board members are also investors or own stock in the business, or when the company has been formed under certain legal parameters such as an ESOP.

For now, let’s focus on private businesses in the talent management industry that are contemplating either forming a board or rethinking their current one. For these organizations, there are three overarching steps to creating and managing an advisory board:

1. determining need

2. identifying advisors

3. evaluating performance.

Determining Need

Why does your company need an advisory board? This is, of course, a very important question to answer because having a board typically requires the expenditure of additional time and commitment—and sometimes money.

The simple answer to this question is that a board can provide outside strategic guidance. What’s more, a board will theoretically hold the CEO accountable by periodically monitoring the performance of the business.  Your answer to this question should not be that a board can assist with guiding the day-to-day operations of the business. Admittedly, though, your board should fully understand how the business works.

Bottom line: A truly value-added board will keep its firm from making costly mistakes—so that it can actually help grow the business. Most companies in the talent management industry, particularly those led by founder-entrepreneurs, tend to outlive their ability to grow the business without the guidance of either very capable internal leaders or outside experience and expertise.

Identifying the Advisors

How do you select a board? The short answer: You want to select advisors who have “been there, done that.” In order to truly help the business, you want people on your board who either have deep expertise in a deficient area of your business, extensive talent management industry experience, or a successful track record growing a business in a similar or adjacent industry.

For example, many firms often lack the back office systems necessary for growth, such as financial management systems and customer relationship management systems. Fortunately, there are many software solutions that integrate most of these back office processes, but it may be helpful to have someone on your board who actually has experience implementing or integrating them. Other expertise gaps that may benefit from an outside board perspective include social media and internet marketing, international expansion, sales and channel distribution, and legal and compliance issues.  

Bottom line: Filling a board with outside expertise that closes some of these leadership gaps is a strategically sound investment.

Evaluating Performance

How do you evaluate a board’s performance? Whether it is a new or long-standing board, it should be prepared to undergo periodic scrutiny and assessment to determine whether the business is getting what it needs from the board as a group, as well as from individual members.

Here are nine potential areas for board evaluation—in other words, areas of need that a board should help the business fulfill.

• Access: providing connections to relevant people and organizations that can deliver information conducive to the effective operation and growth of the business.

• Accountability: holding the CEO and senior leadership team to their business commitments by periodically reviewing and challenging progress status.

• Advice: offering strategic insight and perspective on operational, business development, talent management, and overall growth challenges—based on the board’s varied experiences that the business hasn’t yet entertained or even fathomed.

• Action: encouraging and supporting positive movement toward growth objectives that are aligned with the business’s mission, purpose, and values.

• Acceleration: challenging the business to think innovatively by facilitating rapid, yet thoughtful, decision making and growth.

• Achievement: challenging the business to not only reach, but exceed, all of its measureable goals and objectives in a predictably frequent manner.

• Advantage: ensuring the business is continually competitive in its marketplace through intelligent decision making and forethought.

• Assessment: evaluating periodically the organization’s individual talent, culture, and overall performance.

• Alignment: monitoring the consistency of the organization’s vision, mission, and values with its daily operating activities and decisions.

Bottom line: Keep in mind that your board may not be involved in all of these areas. Your senior leadership team will need to determine which areas are most important to the business at the time of the evaluation, understanding that business needs will undoubtedly change over time.

What business needs would suggest the creation of an advisory board at your talent management firm? Which of the board performance criteria discussed in this post are most important to your business right now? Please share your responses—experiences and ideas—in the Comments below.