Who you recruit to your board is critical. One overall criteria should be people you respect and are willing to listen to. You may not do what they suggest but you need to respect their opinions and be open to their advice.
HOW MANY: Aim for three to five outsiders. This is a number that will not be so cumbersome as to slow down progress and will encourage individuals to speak out. Make sure there’s no duplication in areas of expertise (for example, you don’t want two or three operations people). Bring different sets of expertise to the table.
HOW DO YOU ATTRACT THEM:*: Existing relationships may come on board with just a phone call. We brought on four advisors that way. If you are soliciting relative strangers, have some kind of short prospectus that describes the business. It needs to explain why you are putting a board together and what you are looking for. Include how the board will operate and compensation. (Boards can meet formally on a quarterly basis or through ad hoc conference calls.)
WHO TO AVOID: Don’t put consultants or firms you’ve hired on your advisory board. If you bring on a professional advisor, make sure they are in your field. Usually you are looking for someone who is working full-time somewhere else or is intrigued by your company. No famous names you want to hang with. No family, friends, or anyone who has an emotional interest in the company – this last group shouldn’t be retained as professional advisors either. That’s just plain looking for trouble.
COMPENSATION: Board members should have some kind of contract with cash compensation, stock, equity in the company or some combination. You might start out with a nominal offer and let it grow as the business does.
*An interesting resource for sourcing board members: www.boardmybiz.com.
Sandra Holtzman teaches CEO 035: Licensing.