As we have mentioned in previous articles in Rough Notes magazine, many agency principals spend too much time working in the business and not enough time working on the business. In this article, we discuss the use of advisory boards as an effective method to help you work on the business by gaining the advice of experts outside your agency.
Advisory boards have existed throughout recorded history, either as informal groups of close friends or family, or as formal groups with highly structured procedures and reporting requirements. However structured, the general purpose of advisory boards is usually the same--to assist a person or organization in recognizing, evaluating and taking positive action on a personal or business imperative.
The primary purpose of an advisory board
An advisory board provides certain advantages to agency principals. The advisory board supplements the board of directors and provides a forum for the agency to bring to the surface, discuss and resolve a variety of business issues. An advisory board does not take the place of the board of directors. This means that agency principals are free to place before the advisory board any business topic of their choice. It also means that agency principals are not bound by recommendations of the advisory board.
Advisory boards also provide a method for agency principals to network with experts within and outside the insurance industry. And they provide the opportunity for agency principals to gain a broader perspective of their business, by bringing related experience and knowledge to bear on agency strategic and management issues.
What is the structure of an advisory board?
First, we need to make a clear distinction between a board of directors and an advisory board. A board of directors is elected by the shareholders of a corporation, established and operating under specific legal guidelines and corporate bylaws. An advisory board is an unofficial entity, established and operating under those guidelines and procedures an agency principal deems appropriate to his/her purpose.
While there are no official rules or regulations governing advisory boards, there are some practical guidelines that help facilitate their formation and function.
Advisory boards may be comprised of anyone the agency principals think may help the agency. This could include individuals at any position level within any company no matter where located. However, members are usually from the senior executive ranks of those companies having significance in the marketplace. Examples of typical members include executives or professionals such as:
* National or regional senior officers of the agency's lead insurance carriers
* Senior executives from major commercial clients
* Personal clients that are leading professionals in their field
* Community business or labor leaders
* Senior officers of a major university
* Partners of leading consulting firms
* Senior officers of non-client corporations
In selecting members from any group, there are certain considerations to take into account.
Since the agency will probably pay travel, lodging and meals, it may be more economical to choose board members who are within daily driving distance of the agency. Also, some amount of compensation may be appropriate in order to make it worthwhile for certain members to attend meetings. Any such compensation issues should be discussed first before committing to asking someone to be on the board.
However, there may be compelling reasons why you would want to recruit certain people to your advisory board that might fall outside these practical considerations. Therefore, you must evaluate each situation on its own merits and determine the cost/benefit accordingly.
Roles and responsibilities
There are three primary roles within the advisory board--chair, facilitator or recorder, and individual members.
Chair--The chair is responsible for recruiting members, and organizing agendas and any related activities, such as restaurants or entertainment during nonworking hours.
Facilitator or recorder--The facilitator is responsible for leading a structured discussion process that keeps the group on track and achieves results. To accomplish this, the facilitator may use a white board or flip chart, or any other tool to track the discussion.
In addition, the facilitator provides members with a project report covering, as a minimum:
* Date, time, place, agenda, attendees
* For each agenda item: the person responsible, the results expected, the results achieved and any amplifying comments
* Background or reference information as required
Members--The members are responsible for reading and understanding all advance material, and for fully participating in all discussions.
Setting the agenda
Advisory board agendas may cover any topic of importance to the agency, including issues such as hiring professionals, education and training, expense control, marketing and sales and product development.
However, keep the following points in mind when setting agendas.
* Everyone's time is valuable, so ensure that topics are of high importance and critical to success of the agency. Don't waste time discussing irrelevant issues.
* Don't structure an overly ambitious agenda. Cover only what can be accomplished in a particular session.
* Think outside the box. Focus on strategic issues. You don't need high-level executives to deal with operational implementation.
Facilitating discussions
High-level executives have strong egos and usually attempt to lead meetings they attend. Accordingly, Harbor Capital Advisors recommends use of the Nominal Group Technique, or NGT. This technique essentially seeks consensus by allowing "facts" to dictate the outcome. Facts, for the purpose of NGT, consist of substantive input from each member. The art of NGT is to ensure that each member contributes facts on each topic and that no member distorts the discussion through force of personality.
One of the tools of NGT is the white board, or flip chart, which allows the facilitator to summarize the discussion as it moves forward. A skilled facilitator also applies subtle techniques to direct discussions and keep the meeting on track.
Groups take on their own personality and evolve over time. Therefore, it may be appropriate to change members more often early on in order to achieve the best fit and working relationship. Also, changing members from time to time allows new ideas and thoughts into the group and enhances the network circle for all members.
Getting started
1. Start with a small group of friendly business executives who are well known to the agency principal and preferably to each other.
2. Limit the initial meeting to a few hours and one or two topics that can be dealt with in that time period.
3. Refine the approach and techniques, then expand the membership based on the group's comfort level.
4. Make certain that everyone knows in advance that attendance may be for the one meeting only. With that approach, the agency principal reserves the choice of who is asked to return and avoids the embarrassing task of asking someone not to return.
5. Make sure accommodations are first class.
6. Make each meeting an enjoyable, memorable event!
An advisory board is a powerful business tool. Don't be afraid to use it. Obtain permission of members to use their name and company name on your letterhead. Ask to also participate on their advisory board or even their board of directors. Ask for referrals. Expect to gain at least one new major client from the relationships. Focus on measurable results for the long-term, strategic objectives as well as the short-term, tactical objectives. Consider the advisory board your partner.
Harbor Capital Advisors has recommended establishing advisory boards to a number of our clients. When executed properly, establishing and maintaining an advisory board will broaden your perspective and help increase your growth and profitability. And for many agencies,
it is the step needed to start the journey to the next plateau. *
The authors
Paul J. Di Stefano, CPA, CPCU, and G. Edward Kalbaugh, MBA, are managing director and director of management advisory services respectively of Harbor Capital Advisors, Inc. Harbor Capital is an investment bank and consultant to the insurance industry. They can be reached by e-mail at harborcapitaladvisors@banet.net or by phone at (800) 858-2732.
©COPYRIGHT: The Rough Notes Magazine, 1999