Entrepreneurship

Brain Trust: How to Make an Incredible Advisory Board

Strategically add expertise to your business with an independent advisory board.

April 28, 2022

Is it time to consider an advisory board? And if so, why? What skills do you need? And how do you find the right people who are willing to help? Aashish Agarwaal, founder and chairman of the Enerji Group, and Alexey Volynets of the International Finance Corporation share entrepreneurial perspectives and corporate governance advice to help you figure out what’s right for your company.

Rare is the entrepreneur who is an expert at everything. Turning to others outside your company for advice can be essential for success. Formalizing that process with an advisory board is helping Agarwaal strategically transform Enerji Group, the digital publishing enterprise he founded in India. But it took awhile to figure out exactly what he needed, who could help, and how to run the board effectively.

Volynets understands what Agarwaal had to go through to create the ideal advisory board. As an expert in corporate governance at the International Finance Corporation, he has been teaching companies about corporate governance for years.

The most common manifestation of corporate governance is a board — fiduciary or advisory. Whereas fiduciary boards have financial liabilities, advisory boards are simply there to provide expertise that you may be lacking.

“As you are growing, and when you are on the top of the world, it’s important to have a check,” Volynets explains. “External advisers, especially very independent voices, will ask you the right questions and will challenge your assumptions.”

Agarwaal figured out who he needed by first identifying the skill gaps in his company and what strategic initiatives he needed help with and how often. He suggests, “I would say, first, what are the gaps, and second, do you need that help on a consistent basis or intermittent basis? Because, again, you have to decide how much investment you’re going to make in it.”

Finding the right people isn’t easy, either. Volynets suggests the best place to look is your own networks to find the business people you trust with the criteria you need. But Volynets cautions entrepreneurs to avoid adding friends, suppliers, contractors, etc. to an advisory board, even if they have the requisite skills. He says, “The most important characteristic is emotional independence.”

Listen to Agarwaal’s firsthand experience on creating an advisory board and Volynets’ insights on how to do it strategically and successfully when it’s time to tap into the experience and expertise of other business leaders.

Grit & Growth is a podcast produced by Stanford Seed, an institute at Stanford Graduate School of Business which partners with entrepreneurs in emerging markets to build thriving enterprises that transform lives.

Hear these entrepreneurs’ stories of trial and triumph, and gain insights and guidance from Stanford University faculty and global business experts on how to transform today’s challenges into tomorrow’s opportunities.

Full Transcript

Alexey Volynets: It’s really hard to fire people, especially the friends. So you think you are doing yourself a favor by inviting friends, you actually are not. You’re creating problems down the road.

Darius Teter: There’s no shortage of advice out there. And plenty of it is bad, but there’s a secret weapon to get smart guidance without all the baggage.

Alexey Volynets: You need that independence because sometimes you cannot test your ideas in the same way with your management group, for example. Because obviously they are dependent and that will color the discussion. You want strong, independent people.

Darius Teter: Welcome to the second season of Grit & Growth from Stanford Seed, the show where Africa and South Asia’s intrepid entrepreneurs share their trials and triumphs with insights from Stanford faculty on how to tackle challenges and grow your business.

Imagine you’ve got a problem that you don’t know how to solve. It’s not an impossible problem. Other companies seem to have figured it out, but you’re not sure how it applies to the specifics of your business in your industry and at your particular stage of growth. So what are your options? You could ignore the problem and just hope it goes away. You could wing it or make an educated guess. You could drop everything and learn all there is to know about the subject. Or you could just ask someone who knows — knows the subject and knows the industry. Someone who may have piloted a business through a very similar problem. Doesn’t that sound better?

Well, congratulations. You just got yourself an adviser. Advisory boards can be an amazing resource, your secret weapon to access expertise on critical topics. But I’ve seen so many businesses forgo advisory boards because they’re not sure about the value or the logistics or the amount of effort it’s going to take. Or maybe, subconsciously, they fear some loss of control. So we’re here to set the record straight on what advisory boards are, what they should and shouldn’t be used for, and how to construct a great one of your own — one that will pay dividends as your company grows and becomes more complex. But we’re not the only advisory board evangelists. Meet Aashish Agarwaal.

Aashish Agarwaal: So I’m Aashish. I’m the founder and chairman of The Energy Group. And the group is comprised of different companies, largely in the data, design, and content ecosystems

Darius Teter: Aashish’s companies have expanded from Chennai, India, to international markets across the globe. And they knit together complex systems, connecting content, data, production, and design.

Aashish Agarwaal: Think about a book. So right from the manuscript to the final print and digital file, we work with publishers, enabling them through the entire cycle. Editorial layout, indexing, proofing, all of that. And the design side, we work extensively on creative production services. So, essentially, ad agencies, OTT [over-the-top] platforms, helping them with video post-production, working with large brands on their packaging pre-media side. So all of those production-related activities, we help them with. So as a group, we are about 1,500 people across the U.S., U.K., and in India across multiple operational centers. We’ve completely been self-funded. The companies have reached a point where we could speak to external investors, but currently all are self-funded.

Darius Teter: What drove you to decide you wanted to be an entrepreneur and start your own business?

Aashish Agarwaal: I would say joblessness. Meaning I finished my master’s [degree] in the U.S. I came back to India, worked for my father for a couple of years. And he was having a manufacturing setup, something that really wasn’t appealing to me. So I remember I did stock trading for maybe six months. I dealt in trading of writing instruments, so Singapore, Dubai. That didn’t go well. And so I was kind of really frustrated.

And then I remember seeing an article in a magazine at that time in India called Business World. And the article headline was “The Rise of Teleworking.” And teleworking basically meant through telecommunication lines. A lot of work is being done offshore, especially Indian. I knew there’s work to be done in terms of the data side. And so I moved to Chennai. I’m from Calcutta, actually. I moved to Chennai and I had a very close cousin of mine who was running a large software business. So he said, “Look, I’ve got a large team.” And so they connected me to some of their network and the guy I hired, he said, “Okay, you know what, since we are a startup where we don’t know what we are going to do, there’s something called XML coming in publishing. So maybe we should explore that.” So that kind of started Amnet and its service lines.

Darius Teter: In the spirit of the topic. It’s only right that we bring in an adviser to advise us on advisory boards.

Alexey Volynets: My name is Alexey Volynetsi. I lead the SME practice area in the environmental, social, and governance knowledge and learning team of the International Finance Corporation.

Darius Teter: Alexey is an expert in corporate governance and has been teaching companies about it for years.

Alexey Volynets: In as simple as possible terms, we provide various forms of financing to the private sector and also various kinds of advice, including, for example, on corporate governance, environmental, and social issues. So it’s a very long introduction, but the short of it is that we are developing various knowledge products and learning programs and then delivering it to IFC clients and partner institutions worldwide.

Darius Teter: Can you give me just a working definition of corporate governance? That term is used so broadly. How does the IFC define it?

Alexey Volynets: Well, there are multiple definitions. There are two that I personally like the most. One, the simplest, is: Corporate governance is about how companies are directed and controlled. And I like it because it focuses on functions, not on specific institutions like a lot of definitions include, for example, a board of directors as a key player in it. Whereas in the context of small and medium enterprises, that is not often a relevant institution, a board of directors. Or at least not up to a point in their growth. So a definition that focuses on functions, I think, is much more important. It makes it easier to communicate with entrepreneurs.

And the second definition we got: Governance is when the company can run itself. I really like that for, again, in context of SMEs. That just means that you’re creating certain structured policies and practices that you can take vacation for three weeks and not be afraid that your business will fall apart while you’re away. Companies with better governance show better long- term performance. Starting with three to five years, you see better performance. It has been done in multiple markets, including emerging markets. That is the case, especially in crisis. So they would look at, for example, corporate governance rankings in Brazil before crisis and then after. Three, four years after crisis. And they see those companies that had higher rankings actually did much better in crisis than those that did not.

Darius Teter: Alexey would be the first to tell you that corporate governance can look very different for different companies. But the most common manifestation of corporate governance is a board. There are two main types of boards: fiduciary and advisory. Understanding the difference is key to finding the utility of each.

Alexey Volynets: Well, the key difference is: The fiduciary board actually has liabilities. It has responsibilities for shareholders, for the company. And, actually, if you fail at those responsibilities, you can and increasingly will be taken to court. Advisory board is what you want it to be, it’s that simple.

Aashish Agarwaal: The first time I really explored the idea of an advisory board was when one of my cohort members, Karthik, and a big shout-out to him, we were talking. And just like you asked some questions, he was talking about, “Who do you answer to? How do you hold yourself accountable?” And frankly, I didn’t really have an answer where he said, “Look, I’ve used something called an advisory board” And he beautifully explained how the advisory board helped him. He gives some great stories, anecdotes. And so that was the first time when I really kind of started exploring what an advisory board can do.

Darius Teter: The first question you need to ask when considering an advisory board is a simple one.

Alexey Volynets: Why do you need that board? For example, you might want to have just the sounding board to test new ideas. But you fully understand why you need it long term and then you actually think why you need it in the short term. Because when you bring people in, they need to understand what they are there for. So, for example, if your company is thinking about expansion into new markets, that has to be explicit to the people you are bringing in to their working on that problem.

And then once you know what the purpose of the board is, long term and short term, then you can start thinking of the skills, these skill gaps that are inside your company. That’s a very easy way for us, we find, to explain to entrepreneurs why they need advisory boards. All of them can think of some skills that are currently missing. So that idea is to start with that skills metrics, specifically identify what the companies need.

Darius Teter: It sounds like you actually need to have a pretty good sense of what your strategy is before you should start thinking about populating an advisory board. It’s not just, “I’m going to get a bunch of smart people and they’re going to help me think through my strategy.” It’s, “This is my strategy. These are my gaps and this is where I might need a subject matter expert. This is where I might need some mentoring, specific types of experience.” So unless you have a map, you’re not going to get the right people.

Alexey Volynets: Exactly.

Darius Teter: Aashish also suggests assessing your blind spots and simply being honest about the time you have to dedicate to your board.

Aashish Agarwaal: I would say the first is to identify the gaps. And second is, do you need that help on a consistent basis or intermittent basis? Because again, you have to decide how much investment you’re going to make in it. And based on that, I would say certain “dos” that I try to practice would be “know your ask.” What specifically can they help you with?

Darius Teter: This point is key. Strategy is a guide to finding the right people. I asked Aashish what do you hope to accomplish with his board.

Aashish Agarwaal: For us, I knew the starting point, I don’t know the ending point. We have also identified certain other areas where we believe we need to really make progress. So an example of that is strategic HR. A lot of the HR, as you know, is very transactional. And so we kind of said, you know what, like we were discussing, with so many different types of services, there are many different types of skill sets that we have, different types of people. For example, in the design side, the mindset of people, members, are very different than, let’s say, data processing. The skill sets, the experience, the education, a lot of that is very different.

So we said strategic HR is a must where HR is really not human resources, it’s human relationships. So one of the first people we wanted to bring on to the advisory board was someone who comes with that background of having had multiple years of HR experience, not just transactional, but strategic as well.

Darius Teter: Aashish was also looking for board members with expertise in marketing, machine learning, and product integration. But before we get into the weeds of how to build an advisory board, let’s zoom out and discuss why. What are they useful for? What can they do? What can’t they do? Well, as we’ve mentioned, boards are great for filling knowledge gaps in your business. But there’s a whole host of other benefits that you can get from having a group of seasoned professionals in your corner.

Aashish Agarwaal: I think it’s a must in terms of the ability of a company to be held accountable. Now, in our case, as I shared, since we were largely self-funded, we didn’t have kind of an oversight committee. So there wasn’t anyone saying, “Hey, you embarked on this plan, nothing happened. You embarked on this strategic initiative, we haven’t heard anything from you.” So I absolutely think the larger the company becomes, I believe very strongly that there needs to be some form of check in terms of the growth part, obviously the financial management, and so on.

Because I realize with all these companies, what often happens is you do a lot of planning and then you may not be really very hands-on with the execution. And then, because you’re running around with different initiatives, it’s very easy to drop the ball. So we kind of, as a team, identify that, “You know what, we must have an advisory board.” So that’s kind of how it really started.

Darius Teter: Advisers can also help you navigate those tricky situations that might be outside of your personal experience as an entrepreneur.

Aashish Agarwaal: In August 2020, we were acquiring a company in New York in the creative production business. And I remember distinctly I had a good number of questions with regards to the integration, with regards to the existing customers of this company that we were acquiring. How would we or how should we or how should I in this case approach the existing customers so that they don’t feel that a big company has come, acquired, there’s going to be integration.

And he gave me such a wonderful piece of advice. He said, “Look, write to every customer and you ask them specifically, as a result of this acquisition, what are your concerns?” Honestly, I hadn’t thought about asking that question very specifically. And I really talked to him about it. I said, “Look, if they don’t respond, if they feel threatened,” and so on and so forth.

He said, “No, I think you should definitely do that because it shows willingness. It shows openness on your part.” I did. So we wrote to about 21 or 22 of these different customers and it was very interesting. Twenty-one of them responded out of the 22. Almost all of them said, “We love working with this company. We love the relationships and we don’t want a big company coming and suddenly changing the management, changing how we do things, etc.” And that feedback, I kid you not, it was amazing because we said, “You know what, we are not going to do anything different other than try to obviously bring in certain efficiencies, etc” But from a customer interface perspective, we kept all of the relationships as is.

Darius Teter: Right. So if you hadn’t written that letter, you might have walked in there and just tripped over yourself and broken a lot of relationships with these customers.

Aashish Agarwaal: I think so. Because, again, we think very production-oriented processes and ideas, right? Because a lot of the work that we do is built on efficiencies of processes. This is an onshore company working directly with very large brands. And obviously we needed to kind of learn how to kind of direct the ship, so to speak.

Darius Teter: Alexey sees advisory boards as a mechanism to keep entrepreneurs from just getting carried away.

Alexey Volynets: There is quite a bit of literature that says that humans have optimism bias. Most people are overoptimistic. They overestimate good outcomes and chances of the good outcomes. And they overestimate the impact of those good outcomes. There is also literature that says that entrepreneurs are much more subject to that bias. So there is a lot of risk and it’s really good for society that those people are overestimating their chances of success. We are all beneficiaries of their sweat and blood and troubles and all of it.

But as your business starts to grow, it’s very important to not become overconfident. If you are successful, it’s just basic human psychology. We don’t assign it to chance. We assign it to our great skills and foresight and all of that. So as you are growing, and when you are on the top of the world, that’s important to have that check. So external advisers, especially very independent voices, will ask you the right questions, will challenge your assumptions. It’s really, really useful to keep your touch with reality.

Darius Teter: I think it’s also worth noting what advisory boards can’t do, something that got me pretty fired up while I was talking to Aashish. I’ve talked to a lot of business leaders for this podcast and some of them talk about an advisory board as someone who helps you actually make a strategy. That somehow they’re going to come in and save your bacon, which is a very American slang. But they’re going to come and help you do your strategy. And in my professional career, I’ve worked for organizations that hire outside facilitators to help the leadership team make a strategy and it always sucked.

To be totally honest with you, if the leadership can’t lead on strategy formulation, no one else can do it for you. Now, when we left off, Aashish had found some areas where he felt he could use more guidance. But that raises another question. Once you identify a gap, how do you find the right adviser to fill it? Now, I’m going back to playing the role of the entrepreneur. My business has grown to the point where I’m ready. I need more advice. And I’ve identified the key attributes I’m looking for. How do I go about finding these people?

Alexey Volynets: That’s a very hard question. We actually asked it all the time. And unfortunately it’s really country-by-country because it is dependent on what the environment is. In some countries, for example, increasingly in emerging markets, we will have institutes of directors that often they would have databases of directors. So you can actually tap into ready ones. And some of them will be even quite sophisticated where you can have even, say, I need more women on my board, for example. But in other countries you don’t have that. So it’s just your networks. Look at the business people you trust, see if they fit the criteria. Simple as that.

Darius Teter: So I’m curious. So you’ve got strategic HR, technology, visioning, product integration, and marketing. And one of these people had been road-tested as a consultant. How did you find the other three?

Aashish Agarwaal: So with the leadership team, when we identified these areas where we need board members, the HR individual was actually recommended by our COO. He had worked with him. So we met a couple of times. We kind of discussed the scope of work and he was very willing as well. The other two actually was thanks to LinkedIn. So I actually identified from different profiles which of the profiles might be closest to our needs.

Darius Teter: So you searched for specific individuals based on their business profile.

Aashish Agarwaal: I did, absolutely.

Darius Teter: It wasn’t sort of like a call for proposals, “We are looking for advisory board members?”

Aashish Agarwaal: Not at all, not at all. I was very clear in my mind, at least I had a pretty good idea as to what kind of profile we are looking for. And then I just reached out to them, explaining what we are looking for, who we are, and what the goals are.

Darius Teter: According to Alexey it can be just as helpful to know what to avoid.

Alexey Volynets: It’s important to think not only in positive terms, but in negative terms, whom you don’t want to see at the board. You don’t want to see any people with conflict of interest. It’s really hard to fire people, especially the friends. So you think you are doing yourself a favor by inviting friends, you actually are not. You are creating problems down the road. So no suppliers, no contractors, nobody who cannot provide independent advice. You need that independence because sometimes you cannot test your ideas in the same way with your management group, for example, because obviously they are dependent and that will color the discussion.

You want strong, independent people. The most important characteristic is that person is, actually, there is emotional independence. They’re not dependent on your salary. They are not dependent on you psychologically, don’t have connections with you in the same way as they would want to tell you something. Even if you pay them, you normally don’t pay them what they can get otherwise spending the same amount of time. So for them, it’s often these people can be altruistic. They really want to see different businesses succeed, and they also want intellectual challenge. That’s an interesting thing to do.

Darius Teter: And maybe that’s actually another key criteria for selecting advisory board members, is that they need to be passionate about what you’re trying to do.

Alexey Volynets: That’s an interesting criteria because it’s hard to fake passion like that. It’s important that you also think of kind of this reciprocity in that way that you make their life interesting in a good way.

Darius Teter: And just like any team you want it to be more than the sum of its parts.

Alexey Volynets: For the board member, I think, it’s important to see, not only an individual skill set, but also how they fit together. It’s always good to have at least one person who is comfortable challenging the consensus, right? Who is comfortable being contrarian and so forth, but you don’t want to have all the three, five people contrarians because it is not going to be very productive. It’s useful then if you have a strong contrarian to have somebody who is more capable to bring people together and so forth.

Darius Teter: So I’m curious: When you first reach out to the CTO of a Fortune 500 company, what’s your pitch?

Aashish Agarwaal: Honestly, it was a very short message that “we are looking to transform.” And as a part of the imperatives that we have, let’s say, strategic HR, or in this case, cognitive science and analytics is top of mind. So I’d love to have a chat. And if you are willing to be a member on the advisory board, welcome a conversation. He replied, I think within 24 hours, said, that “look, happy to talk to you.”

Darius Teter: I’m curious. What did they ask you? When you approached these four about being on your board, what did they ask you?

Aashish Agarwaal: In the kind of introduction, we specifically mentioned that we’ve created a transformation plan and extremely critical to the execution of the plan are these pillars where an advisory board is imperative. So the ask was not very specific, but nevertheless, we were relatively clear about the direction.

Darius Teter: So I think this is a super-important point — that because you had a strategy, a growth strategy, and you had specific things you wanted to achieve over the next however many years, that was actually the hook, right? The people could look at you and say, “This person means business. They have a plan. They are trying to get somewhere. They have a pretty clear strategy and I can see where I fit in that strategy.”

Aashish Agarwaal: Absolutely.

Darius Teter: The fact that you had a strategy for growth, I think, seems to be what made even total strangers take you seriously.

Aashish Agarwaal: Couldn’t agree more. Absolutely. In fact, in each of the first meetings, we showcased the Transformation Plan in terms of where we started, what we did and where we are going. So that was definitely something we shared, we talked about.

Darius Teter: At the risk of sounding redundant, I want to point out the importance of an existing strategy. The T-plan that Aashish mentioned is their multiyear strategy to transform their business. It’s key to identifying the right people and, perhaps more importantly, convincing them to spend their valuable time on your business. Once you have your all-star team of advisers, you have to figure out: How will your board operate? What should advisory board members expect of you and vice versa? Do you just sit in a room and chat? How often do you meet? How deep in the weeds should they go? The good news is you actually have a lot of options. As Alexey mentioned earlier, one of the major attractions of an advisory board is its flexibility.

Alexey Volynets: Advisory board is what you want it to be. It’s that simple.

Darius Teter: Aashish has gone through several iterations to find the structure that works best for him. So tell me, let’s talk a little bit about how this advisory board functions. I think most listeners will imagine that they get together on some periodic schedule, sit around a conference table with a set agenda, and have a structured conversation. Is that how yours works?

Aashish Agarwaal: I would classify it as version one and version two. So version one was exactly what you said. It was a very generalized approach. So, for example, we would sit in the beginning of the financial year, for us it’s 1st of April. And I would take them through the broad map of what these strategic initiatives are, what topline are we looking at, what’s the margin, etc. And then they would obviously challenge, question certain things, that certain numbers seem very ambitious or the time for the strategic initiative seems to be very short. They would challenge you on the current people and if they are already stretched with the various projects that they’re running. And then I would give them an update every quarter. So we did that for a year. The challenge I found with that approach was it became a very general conversation.

Darius Teter: It almost sounds like the agenda of a fiduciary board.

Aashish Agarwaal: Exactly. So it became very general and they came up with some amazing valid points. So we were jotting all of those points. And then after we would finish the meeting the COO and I would kind of discuss, and we would find there is no way we can implement so many points. So, for example, even if you’re in marketing because of your experience, you can add massive value, let’s say, in an HR challenge. And you want to take that onboard, but you just can’t take so many things onboard. It’s doomed to fail.

This year, I actually reached out and I said, “Look, can we change the format?” And this is my version two, which became very specific. So, for example, at the beginning of the financial year, we sit down and I take them through the plan. And then over the course of the year, I basically fixed up an hour or half an hour every month with each of them.

Darius Teter: Separately.

Aashish Agarwaal: Absolutely. And the idea was I would make a note of all the various points where I need some guidance, some tips, or some suggestions. And we would cover that in that call. And frankly, I find this to be a lot more compelling because, one, I’m able to actually report back on what I did, specifically, on the inputs that they gave. So, for example, if something didn’t work, I would say, “Hey, I tried it with this and it didn’t work.” So they would kind of take you through, “Okay, have you tried something else” For example, when we hired the head of people, strategy, and culture, we first thought we will have this person lead the entire HR.

So we said, “You know what, great. All of the HR team members, even the administration and transactional side, would report into her.” Now when she and I do our weekly meetings or the OKR [objectives and key results] framework that we follow, she’s got strategic initiatives there. But in some cases we found that she wasn’t able to make progress. So when we would discuss, it would be, there’s a lot of time I’m spending on the transactional side, even if it’s guidance.

Darius Teter: She was in the weeds.

Aashish Agarwaal: Absolutely. So I spoke to the board member and I said, “Look, I’m having a sense that maybe we separate her from this entire transactional side, from the administration side. And maybe she can just focus on the strategic side.” And it was amazing for me to bounce that idea off with him because he’s seen the various facets of how these things work. So he said, “You know what, it probably was better off if you started her on the strategic side as well, because the organization and all of the people in the organization would know you seriously mean culture and you’re really putting effort behind it.” So this transition has just happened now. So, that was an example of how it was extremely helpful to get guidance there.

Darius Teter: It’s also important to consider what financial obligations you have to an advisory board. So are your advisory board members, do they get compensation?

Aashish Agarwaal: Yeah, there is a fixed fee every quarter.

Darius Teter: Okay. Some presumably modest compared to their other revenue streams, right? So they’re not really doing it for the money, they’re doing it because they believe in the business.

Alexey Volynets: By and large, it’s a good idea to pay for your board. And it’s really hard to say how much because if you even look at a corporate governance board, there is a huge difference between countries, how much board members are getting paid. There are even huge differences within the same countries and different industries. But there is one rule of thumb that I find really overall good — that you should value time of your board member as much as you value your top executives. We are talking about specific time. So if you know your board member will probably work five days a year, advisory board member, that you pay him what you would have paid for your top executive for a week. Something like that.

And a general idea, it’s good to schedule payment in a way that you pay per meeting, so it incentivizes them to attend those. But you also pay a retainer, essentially so you can call people, your executives can call them for advice, and so forth. If you can pay, if you can afford it, do it.

Darius Teter: Then there’s the question of how much reach advisers have into your business. To what extent does the advisory board have access to your senior managers and vice versa?

Aashish Agarwaal: I would say as of now, the interactions have been limited to me and my COO. And the reason for that is because these initiatives or these challenges are very specific, from my perspective, it’s just been us who have been interacting with the board. I believe they know a lot of the senior leadership team or some of them. There have been some calls, for example, the data labeling side that I talked about. There have been calls where the technology head, the operations head have been involved.

Darius Teter: So you might call in for a specific conversation with a specific advisory board member. You might call in the relevant managers. Although it varies business to business and problem to problem. Alexey has a good rule of thumb for how to handle the question of board access.

Alexey Volynets: The advice that we usually give that kind of helps to — it sounds very general, but actually, people intuitively will understand what we are talking about — is, should the board of directors have their nose in operations? And then we say, no. Here is the way you understand the role of the board. Nose in, but hands out. You need to really understand what’s happening, but you cannot run it. You can tell what needs to be fixed, you can provide the direction to the management and so forth, but your hands are out. And people cannot get it. Okay, nose in, hands out. They get the idea.

It’s normally good practice for board members and advisory board members to have access to executives for needed information. The issue here is that that process has to be clear and transparent because it often creates conflict. It’s one of the typical reasons for conflicts on both types of boards, where board members would go and start soliciting information from the company from different executives. And then the owners or other board members are like, “What are you doing? Why are you doing it? What are you trying to accomplish?” Make sure you actually, whatever you decide, that it’s fully transparent, how the process works. Who you go through to get access for what information. How you disclose your purpose and so forth. Just that transparency will help to avoid a lot of problems.

Darius Teter: Just like any part of your business, there’s a chance an advisory board can go wrong if it’s not done in the right way and for the right reasons. I guess the most common is that it just becomes a tick-the-box exercise and it’s not really doing anything and everybody ends up being dissatisfied. But I’m just curious, what are the common mistakes? How does this all go wrong?

Alexey Volynets: I think what you describe is one of the typical problems and what happens when people push to create a board, either by law or by requirements of some investors or something. Then they go ahead and they think, “Okay, at least I will invite people I trust.” So they go with a trust issue and they create a board that is essentially fully controlled by the shareholder. Most people there will be dependent. And then what they discover is that board doesn’t really add any value. So I would say, if you want to do board of directors, do it right or don’t do it. Just stick to advisory board or some sort of arrangement that gives you much more flexibility. And at least you realize that this is not “corporate governance” that you’re doing something. At least it will keep you from disappointment and leaves you flexibility to change actions down the road.

Darius Teter: And while board members can give companies access to valuable networks, just having a board member for their fame or their reputation can also backfire.

Aashish Agarwaal: I understand sometimes, in these conversations, with some of the cohort members, I got a sense that often or sometimes the advisory board is more for creating a profile of the company. They could be doing a funding round, etc., versus something that’s really instrumental to filling those gaps. For us it was the latter.

Darius Teter: So in other words, they’re picking advisory board members because they think it reflects well on them. It makes them look connected and on a winning track?

Aashish Agarwaal: And I’m sure they’re adding value in some way, but I think knowing your “why” is important because that’s the substance you would draw from them.

Darius Teter: The best way to ensure that your advisory board is a success is to commit to it. After all, an advisory board gives advice. And if you’re not ready to accept that advice, why have a board at all?

Aashish Agarwaal: The only thing I don’t know, and I’ll have to calibrate, is how much will the leaders connect to the idea? Because I do, I really do. I invest time and energy in that, but I think each leader, each individual has a leadership style and some are consultative, some may not be consultative. So I think that’s a calibration I have to do. If the leaders are going to take up a lot of the interaction, a lot of the value-seeking, then I’ll have to figure out whether they buy into it or not. Because I cannot just create an advisory board and then not have interactions happen. that would be rather unfair. So that’s the only thing. If an individual is looking at their business leaders to interact, to be the point of contact with an advisory board, that buy-in has to be there, otherwise it’s doomed to fail.

Darius Teter: It’s worth noting that Aashish has found such value in his advisory board that he’s now thinking of implementing them for all the separate companies within The Energy Group.

Aashish Agarwaal: I would say, having experienced an advisory board, one of the things that I’m very clear about is they add tremendous value. So I definitely see the companies having a board of their own. I don’t know at what point in time, but I definitely see each of these companies benefiting and therefore having an advisory board. I think with the reorganization of the group, one of the things that’s definitely, it’s a strategic initiative for myself, is to assess whether we need to have advisory boards for each of these companies now. Because the creative production side, it’s very high on direct relationships with brands, large multinationals. And there’s a lot happening in the marketplace, technology-wise, data-wise. So the idea, one of the ideas I’m toying with, is, one, having an advisory board for each of these companies. The ecosystems are very different, the technology requirements are relatively different. So I think it would be more prudent to have members for each company.

Darius Teter: Governance can sound intimidating for an entrepreneur who’s used to the freedom and agility and control that come with a startup. But advisory boards are an incredible way to tap into the experience and expertise of other business leaders. They’re also extremely useful in bridging the gap to more elaborate and rigid governance structures that are typically required as you grow and take on investors. So the more you can experiment with them on your own terms, the better position you’ll be in to capitalize on them down the road. Ultimately, advisory boards are just what they say on the box: advisory. The decisions are still yours, but if you use them well, you’ll be able to make more confident and informed decisions with their guidance helping to light the path.

And I’d like to thank Alexey Volynets and Aashish Agarwaal for their time and contributions to shine a light on this topic. This has been Grit & Growth with Stanford Graduate School of Business. And I’m your host, Darius Teter. If you like this episode, leave us a review on your podcast app. It really helps us to share the stories of these incredible entrepreneurs with as many people as possible. To learn how Stanford Graduate School of Business is partnering with entrepreneurs in Africa and Asia, head over to the Stanford Seed website at seed.stanford.edu/podcast.

Grit & Growth is a podcast by Stanford Seed. Laurie Fuller and Erika Amoako-Agyei researched and developed content for this episode. Kendra Gladych is our production coordinator and our executive producer is Tiffany Steeves, with writing and production from Andrew Ganem and sound design and mixing by Alex Bennett at Lower Street Media. Thanks for joining us. We’ll see you next time.

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