How to Build and Utilize an Advisory Board (Shortened for printing from an Article Authored by Patrick E. Donohue of Toptal Finance – toptal.com) NOTE: Private Directors Association of Colorado suggests you avail yourself of additional information on how to build a “high impact” advisory board by going to Advisoryboardarchitects.com and clicking on Contact Us. The Private Directors Association, The Bailey Program for Family Enterprise, and the Liniger Center on Franchising both at the DU Daniels College of Business do not subscribe to the effectiveness of either of the two firms shown above.
ADVISORY BOARDS Advisory boards are undoubtedly controversial. The truth is that advisory boards are usually not silver bullets. Still, they can be powerful tools and yield strong ROI—if executed properly. At its simplest, advisory boards are groups of subject matter experts providing a company's leadership team with guidance on company vision, innovation, risk management, and profitability. •
The research found that annual sales at businesses with advisory boards were 24% higher than those at the control group. Productivity was also 18% higher for those with advisory boards.
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According to a Wall Street Journal article, 50 of the Fortune 500, including General Electric, American Express, and Target, have set up digital advisory boards, typically comprised of six experts under the age of 50.
Economics of an Advisory Board •
Compensation. Per advisory board best practices, the company should always provide something—whether it be paying for meals, travels, an honorarium, or even offering equity at some juncture. Startups should pay $100 to $500 per meeting, host a meal, and cover any incidental costs.
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In large corporations, the annual compensation paid to advisory board members is normally between a third and half of what's paid to regular board directors.
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A global survey conducted by the Advisory Board Architects found that 15% of private company boards paid no compensation, 25% paid only cash, 43% only equity, and 17% paid cash and equity.
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