For many business owners the thought of accessing non executive advice can seem either premature, a little confronting or a luxury that they cannot afford. For others it may not seem a pressing issue because the business is running pretty well and outside interference “from those who don’t know the business” is regarded as unwelcome or ill-advised. Yet it is these very views that may in fact exemplify the need for independent and objective advice.
Management boards and advisories can take a number of forms but all serve the common purpose of providing a means of accessing external experience and expertise that is not available inside the organization. This article offers a rationale for obtaining this expertise and explains the different types of management boards and advisories available.
The NEED for Insight- coping with a dynamic business environment
Until the GFC many businesses were riding on the back of an unprecedented period of economic growth. As we enter a period of more challenging economic conditions the dangers of business myopia or narrow vision can become more pronounced and critical to ongoing business fortunes.
The issue of business myopia is that we all know what we know and what we do well and we may even anticipate where we lack certain knowledge or have risk, but we don’t know what we don’t know! In this blind spot there can be critical threats/opportunities to future business prospects including ultimate survival. Similarly, the seeds of future failure are often sown in today’s successes. It is not unusual for business decisions formerly considered a great success, to be the shapers of diminished fortunes down the track.
The tell tale signs of business myopia can include:
– Narrow focus –plans and direction are largely dependent on a “steady as she goes” modus operandi with little appreciation of the shifting market conditions and evolving customer needs.
– Complacency or reluctance to change – management does not see a need to challenge the status quo and may be fearful of making decisions that stray from the known course of past success.
– Blind spots and surprises that in hindsight should have been predicted or were already in evidence. Similarly, the storm clouds may have been brewing but no-one expected the arrival to be so threatening or so sudden.
charting unfamiliar waters
In a world of rapid change, we all face the uncertainty of an evolving business environment which can quickly place business in unfamiliar waters.
Critical decisions need to be made to meet these new challenges which creates added uncertainly and business risk. Such scenarios for example can contribute to black holes or areas of organisation and operating failure not apparent to management. For an experienced non executive/ advisory board member these situations are often solvable everyday management issues.
The Need for BUSINES OBJECTIVITY
Even the most balanced and diverse management teams can find themselves blindsided by events or situations because they lose sight of the woods for the trees. To develop and grow, businesses need to challenge the status quo and be open to new ideas and ways of doing things.
An adroit non executive advisor can keep the management decision process objective and honest by asking the obvious or hard questions quite often overlooked or left unaddressed. The strong independent voice can also venture where others feel foolish to do so. It is surprising how many times such obvious questioning yield telling and revealing results.
Reasons for engaging non executive/advisory board member talent
In summary the benefits of having non executive/ advisory board support can typically include:
– Management objectivity and independent feedback to the process of decision making
– Genuine insight and management perspectives –where circumstances and issues arise that may be novel to the incumbent management.
– The acquisition of specialist expertise and knowledge – risk management, corporate governance, corporate finance, industrial relations and strategic brand building.
– Mentoring & business support for the CEO and top team (including providing a chairman’s role to facilitate meetings and management follow through).
– Business contacts and networks of potential strategic importance.
Where can you go to get this advice?
Access to non executive/ advisory board expertise can be sought through various avenues including:
Executive Management Peer Groups –. This involves joining a peer group of executive managers/CEO’s who share common problems and situations. The group is facilitated by a professional chair who guides the agenda of events and discussions. Well run and resourced, these advisory groups can provide a relatively inexpensive but powerful personal development avenue and provide timely professional support at critical career stages. The value and benefit for participants also increases over time by sharing of information and experiences.
Strategic Review Facilitation– this involves using non executive resources to facilitate and guide special purpose events such as business planning, new business direction setting or change & transition management plans. These are short term engagements that can also lead to longer term relationships as described below.
Management Advisory Boards– It is usual to have at least two external members joining to form the advisory board along with the key executive of the company. The advisory board provides a watching brief over the development of events, offering advice and insight as required. Selection of external advisory board members (as with NED below) can also compliment the experience and skill sets lacking in the organization.
Non Executive Directors (NED) – involves appointing external company directors who attend regular management board meetings. This appointment carries onerous fiduciary responsibilities for the NED as well as legally enforceable sanctions for negligence and non compliance.
Management and advisory boards should firstly provide access to non executive business acumen and expertise complimentary to the business. The right talent should help to provide greater business insight and decision making objectivity whilst reducing the risk of business myopia.
In a world of rapid change with evolving opportunities and threats it could be argued that for many businesses it is firstly an investment in self preservation in additional to the ongoing benefits of strategic guidance and development.
Donovan Wearne is an Executive Director of Navorgators Business Advisory, an alumni business group of highly experienced senior business professionals who share a common interest and passion to help businesses to grow and achieve success. His contact details are firstname.lastname@example.org.