Becoming an Effective CEO: Choosing and Using a Board of Advisors

In the past 45 years, I have been involved in helping create Boards of Advisors for many entrepreneurs and have served on more than 50 such boards.  I serve on six for-profit and two non- profit boards. I have a lot of accumulated knowledge and experience in the development and execution of Boards that I will share with you in this blog.

In the past 45 years, I have been involved in helping create Boards of Advisors for many entrepreneurs and have served on more than 50 such boards.  I serve on six for-profit and two non- profit boards. I have a lot of accumulated knowledge and experience in the development and execution of Boards that I will share with you in this blog.

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    Boards of Advisors vs. Boards of Directors

    The two choices (Advisors and Directors) are different from several perspectives.  For openers, a Board of Directors is selected to represent the interests of the shareholders of the company in a fiduciary capacity. Directors can fire officers. Directors are personally liable for errors and omissions of corporate management, whether they know about them. Directors make decisions by majority vote. By contrast, the Board of Advisors does not have any fiduciary responsibilities, serves at the pleasure of the CEO, and acts strictly in an advisory capacity.  


    In many smaller enterprises, the CEO is the majority shareholder. In those instances, Boards of Directors are hardly independent and aren't really Directors. Indeed, if the majority owner/CEO does not like the votes of the Directors, he/she may simply suspend the Board meeting and call an emergency meeting of the shareholders, who promptly remove the impediments to what the CEO wants by firing the recalcitrant Directors. The real way to discover whether you have a Board of Directors or if it is a Board of Advisors is to ask the question:

    "Does the Board have the power to fire the CEO?"  If the answer is "no", it really isn't a Board of Directors.

    Competent, business-savvy outside Directors are becoming increasingly harder to acquire for even modest-sized businesses of all kinds because of the threat of litigation. Although Directors do fulfill an important function, their lack of control in a closely-held company and the cost of Director liability insurance, among other factors, make it increasingly difficult to get outside Directors to serve and satisfy the legal responsibilities of the corporate Board.

    The Advisory Board

    An Advisory Board isn't a substitute for a Board of Directors. Properly constituted, it's a group appointed to advise, counsel and assist the owner/leader/CEO in the personal leadership of the business.  Its specific purpose is to develop advice and information, relying on the Board's collective experience.  The process permits in-depth discussion and consideration by Advisors to arrive at better decisions.  

    The Advisory Board's role is to:

    • Help develop policies, not just individual case decisions.
    • Provide objective, non-shareholder viewpoints concerning financial and other investments in the business.
    • Give advice on major decisions, including large capital appropriations, hiring/firing key people, compensation, extensive financing, strategic plans and long range commitments, as well as input into corporate strategies and tactics.
    • Assist in the transition of the owner or manager from fully active to inactive, and in training intracorporate/family successors.

    While Advisory Boards may fulfill other duties, these are usually the major purposes for the establishment of such Boards. I have seen heroic performance by Advisory Boards in providing emergency leadership and even interim management upon the tragic loss of the owner. This performance doesn't seem to be a "contractual" service of Boards, but rather an unspoken commitment.

    Advisors vs Consultants

    How does the Advisory Board differ from the use of consultants? The Advisory Board usually has a more long-term role in the future of the business, particularly if consultants are used on a confined project basis.  Consultants and Advisors both provide recommendations, but the Advisory Board is usually around long enough to see the fall-out of the recommendations.  

    A Board of Advisors can't ignore the consequences of their recommendations on behalf of the CEO any more than the Board of Directors can. A Board of Advisors is a long-term commitment that necessitates concern for the long-range prosperity of the business. Unlike consultants, Advisors may know the outcome of past decisions and may have a better knowledge of the CEO's performance and personal goals.

    Composition of Advisory Boards

    Advisory Boards that are designed only to assist the sole shareholder or CEO should be comprised only of outsiders. The outside-only Board provides freedom for the CEO to confide in people and to discuss sensitive issues, including compensation, management performance, promotions, organizational structure, divestitures, acquisitions and his or her own personal goals.  

    For other purposes, it may make sense to include key management personnel in at least some of the Advisory Board discussions, especially if training successors is a critical focus of the Board. It's a useful way for the Board to help evaluate key personnel in the company.

    If the company is small, two or three outside advisors may be sufficient. For a larger company, seven is about the maximum to permit free and useful exchange. A smaller company anticipating growth, or one making significant changes in marketing or other strategic directions, might keep positions available to add members as needed.

    Who Should Be on the Board?

    Although not absolutely essential, advisors should possess marketing skills, strategic skills, financial and analytical skills, multi-business experience and a positive interest in the success and future of the business. It is hard, if not almost impossible, to find all of those characteristics stated in the sentence above in a single individual, so individuals should be sought who have demonstrable skills collectively in those areas. People who possess these types of skills and interests can be found in all types of business (within or outside the particular industry).  The best Advisors are typically other CEOs, bankers, business attorneys, accountants (usually at the partnership level), consultants and even university professors if they have practical experience. Retired CEOs and owners of businesses in the same industry who are not competitors shouldn't be overlooked when search for suitable candidates.

    Perhaps an equally important question to ask is, "Who should not be on the Advisory Board?" Poor choices are personal attorneys, suppliers, customers, competitors, friends (if all they bring to the board is their friendship), your banker, and non-contributors (family or not) unless they are specifically being trained for succession. The corporation should have its own attorney; the personal attorney shouldn't double for the business.  

    That does not preclude anyone, including the personal attorney or the banker, from attending meetings or portions of meetings where the agenda is designed to include their perspectives in planning the future of the firm.    

    Some Board Mechanics

    A frank, open discussion between the CEO and the prospective member of the Advisory Board should be held before extending an invitation to join. Chemistry between the CEO and each Board member and between and among Board members is critical. The CEO generally is responsible for selection, keeping that chemistry in mind. I have helped several Boards to arrive at chemistry by also interviewing prospective candidates. Some Boards even "try out" prospective members to test chemistry between and among Board members and the CEO. One Advisory Board I helped create chose a very senior accountant to serve with the explicit understanding that his firm would never be allowed to bid for the firm's accounting/consulting needs as long as he served on the Board.  

    On Boards on which I serve, no one has "tenure" and resignations (undated)—for cause or no cause—are tendered upon acceptance of the invitation to join. As a practical matter, it usually takes a year or more for Board members to become fully acquainted with the problems and prospects of a firm. That's why members are given at least a year or so to "prove" themselves.

    As they like to say, "What goes on in Las Vegas, stays in Las Vegas.” The same must be true for the interactions, discussions, and information sharing in doing Board business. Several Boards on which I have served have a mandatory "confidentiality" statement signed by each Board member.    

    The number of meetings varies as a function of the needs of the CEO and the firm. Advisory groups in rapidly moving companies tend to meet more often than groups in companies having more stable environments. Meetings should occur at least quarterly, and meeting as many as eight times a year isn't uncommon in more turbulent environments, especially in companies experiencing rapid growth. Less than four meetings a year doesn't permit sufficient Board continuity and familiarization with the important issues of the business.

    While some Advisors serve gratis, the more typical arrangement is to pay the equivalent of an hourly rate for professionals used by the firm.  This pay is therefore, normally in the $200 to $300/hour range. That translates into about $500 to $750 per meeting. While most Board members appreciate getting paid, they rarely rank remuneration at the top of their lists explaining why they serve on Boards. It is nice, however, to provide the Board honorarium at the end of the meeting rather than having the Board members wait for the check. That is a further reinforcement that the CEO values the Board's efforts and time. Payment reinforces the "contractual" nature of the mutual business expectations. The CEO has the right to expect Advisors to prepare for meetings. The CEO has the right to expect regular attendance at meetings. Pay also normally entitles the CEO to expect that an occasional between meetings phone call and/or a lunch are welcomed by the Advisors.

    Future meeting dates/times should always be the last item on the current meeting agenda. Many Boards on which I have served do a rolling year, scheduling the four (or sometimes more) meetings for the year at or before the first Board meeting and then extending the schedule so that meetings are on everyone's calendars a year in advance. Does that mean the scheduled meetings always take place at the original date/time? Of course not. But advance scheduling with all present dramatically increases the chances that the Board meets regularly because all Board members have the meetings on their schedules and can usually hold the dates firm. 

    Effective Use of Advisors

    Using Advisors effectively is important, particularly if they have accepted the roles outlined above. The CEO has an obligation to plan the meeting agenda, with a summary of background information to be discussed in a clear and brief manner. Agendas and supporting materials (including financial statements) should be sent to all Advisors at least a week prior to the meeting. 

    Agendas should clearly indicate the time to be allocated for discussion of a topic. This cues the Advisors as to the relative importance of an agenda item in the CEO's mind and helps the Advisors organize their own preparation for the meeting.  The CEO's preparation leads to better preparation by the Board. Often the CEO's preparation is worth as much as the meeting itself. One Board on which I served almost always represented a "second opinion" on issues the CEO wanted to discuss because he found in preparing the agenda, he usually arrived at a conclusion on the issues about which the Board members frequently (but not always) concurred.   

    Meetings should always start at the scheduled time. The meeting should also have a target ending time, which should be respected so Advisors can plan the rest of their day.  Meetings lasting more than three hours are rarely as productive as meetings which are scheduled for two to three hours. Mental (and fanny) fatigue increases much past a couple of hours. Think about how you typically spend your business day and you will see that shorter meetings are generally more productive than longer meetings. That does not mean the occasional meeting will be scheduled for even all day or over a couple of days, but that's unusual and generally reserved for major issues where a lot of information gathering and analysis need to happen. If the meeting is scheduled for a normal meal time, food brought in is appropriate. Meals before or after an Advisory Board meeting are not necessary, but they may be useful as part of the socialization process. The key is to have a mutual respect for the time the CEO and the Advisors require of one another. A meeting should move at a good pace with someone other than the CEO acting as secretary.

    I have encouraged CEOs to sit down within a couple of weeks after a Board meeting to write the Board a brief report concerning what information and discussion from the meeting was helpful. This feedback cues the Board as to their value and helps the CEO to crystallize his or her thoughts and follow-on actions.   

    Some Takeaways

    1. Boards of Advisors are not for everyone.  I know many entrepreneurs who do not accept criticism well and while they do use advisors, they do so one-on-one. That misses the point of bringing collective experience and expertise together to assist CEO decision making.

    2. Choose Board members for the expertise they bring to the table.  If the CEO is weak in a critical area, finding strong talent in that area is paramount to Board success. Likewise, if most of the Board members have talents/expertise similar to each other or similar to the CEO's expertise, the tendency will be to have "group think"outcomes in analysis and advice.

    3. Preparation is key to Board success. Setting the agenda in advance, scheduling Board meetings several meetings in advance of the current meeting, allocating expected times to agenda items, starting and ending on time are really important. If you want to have a great Board, choose people who bring real expertise to the table and respect their time. Even really busy people will find the time to participate in Boards if the meetings are productive and are well paced.

    4. Pay the Board honorarium at or shortly after the Board meeting. That tells the Board members you appreciate their time and thinking about the problems and opportunities the firm faces that you want their input on. Follow up shortly after the meeting with an after-report that tells the Board members what your own takeaways were from the meeting and what actions you are expecting to take as the result of the meeting.

    5. Give your Board at least a year to learn about your business.  However, just as you can usually quickly establish (30 to 60 days) that a newly hired employee isn't going to have a future with your firm (you made a bad hiring decision), you should be able to tell after the first two meetings which Board members you selected are going to be right for your needs. If you made a mistake, correct it earlier rather than later. That's partly why I recommend a resignation letter be submitted when the member is invited to join your Board.  (Full disclosure: that goes both ways. I have fired myself from a couple of Boards because the chemistry simply wasn't there between me and other Board members).


    Jeffrey C. Susbauer, Ph.D. is Associate Professor Emeritus at the Monte Ahuja College of Business, Cleveland State University where he has taught strategic management and entrepreneurship courses since 1970.  A long-time consultant to scores of businesses, a member of the boards of advisors to over 60 companies, he co-founded and serves as the principal instructor for the COSE Strategic Planning/CEO Development Course for the past 36 years. 

    The course is concerned with providing entrepreneurs with education to guide their vision, strategic thinking and execution in their businesses. Learn more about the Strategic Planning/CEO Development course or contact Jeff via email.

    Next up: BizConCLE Spotlight: Live Your Mission Statement

    BizConCLE Spotlight: Live Your Mission Statement

    Erica Javellana joined, Inc. in 2007 as a Human Resources Generalist where she quickly rose through the ranks to lead the team as the Employee Relations Manager. We sat down with her recently to gain insight on what other businesses can learn from Zappos’ unconventional organizational structure.

    By developing a company culture and committing to it, you can make a positive change within your organization. has grown their business because of their unique culture and the service they provide to their customers. Prior to her upcoming keynote at BizConCLE, we sat down with Zappos Insights’ Speaker of The House, Erica Javellana to talk more in-depth about finding your company’s culture and what it takes to bring about organizational change.

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    Q: What is one takeaway you want people to walk away from your keynote having learned?


    Javellana: It’s about finding your culture. And the most important thing about that is committing to it. You can have a mission statement. You can claim to have a culture. But if you’re not committed to that, it’s a moot point. The emphasis has to be on finding your culture. Find what works best for you and what defines your company and culture and commit to that. You can list off all you want from your value statement, but it doesn’t mean anything if you’re not going to live by it.

    It starts with the onboarding process and being transparent to the candidates when you’re bringing them in. If you hire the right people, you get the right culture. People will understand what they’re coming into. You can tell them, “We’re not a company that just says it. We’re going to walk it.” When I first started at Zappos, the hiring manager told me that all of the basic foundations I knew about HR were great and we want that. But everything else, just ignore because what we’re doing here is we’re willing to make exceptions to the rule. It created an environment where autonomy speaks volumes. We hire adults and treat them like adults. Let’s trust our employees to be adults and make smart choices. Autonomy is important. Trust your employees. And tell them when they’re brought on and when they’re interviewing that you’re a company that lives its core values.

    Q: Is it possible to change a company’s culture entirely?

    Javellana: Absolutely. And it depends on scale. I hear people say all the time, “I just don’t have that kind of clout.” Of course you do. Maybe it’s not to go straight to the CEO or the VP or the president, but you can begin making those small changes in your job, or your department, or your team. Be that part of the change. Everyone else is going to be wondering, “What is that department so darn happy?” Those are the small changes you can make in your own power. Change your mindset. Love what you do, be passionate about what you do, and it will trickle over to others. People always say, “I’m just a whatever.” Well, be the best damn whatever you can be. That’s going to trickle down.

    Q: What’s the most important lesson you’ve learned working at Zappos?

    Javellana: You’ve heard of KISS: Keep It Simple Stupid? It’s a cliché, but the most important thing I’ve learned is really simple: You can’t have happy customers if you don’t have happy employees. It’s so simple, but it’s huge. That alone drives the quality of customer service and your company’s brand. We believe if our employees are happy, our customers will be happy. People expect that we have some sort of secret formula at Zappos and it’s not a secret formula. If you follow the simple clichés and commit to them, you will be surprised. I think people overanalyze things.

    Want to hear more about what Javellana has to say about the best way to look at your company’s organizational structure? Register for the BizConCLE show on Oct. 12 to find out.

    Next up: Boot Camp Spotlight: 3 Questions with Jim Gilmore

    Boot Camp Spotlight: 3 Questions with Jim Gilmore

    We sat down recently with Jim Gilmore, who will lead our Sept. 20 Business Growth Boot Camp, to talk about how the simple act of improving your observational skills can help your business grow.

    Inspired by Edward de Bono’s Six Thinking Hats method, Jim Gilmore has created a unique and useful tool to help enhance your observational skills. His “Six Looking Glasses” provide a set of skills to master the way we look at the world around us.

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    These include the ability to:

    • Survey and scan to see the big picture;
    • compare and contrast to overcome personal bias;
    • spot significance in any scene;
    • scrutinize numerous details;
    • uncover potential opportunities; and
    • see what’s in the mind’s eye


    In advance of Gilmore’s upcoming Business Growth Boot Camp session on Sept. 20 (Looking with Fresh New Eyes—A How-to Workshop to Improve Your Observational Skills), we sat down with Gilmore to learn a little more about this process and how the simple act of awareness can contribute to business growth.  

    RELATED: Register for Gilmore’s Business Growth Boot Camp

    1. What’s one thing attendees of the Boot Camp will walk away with, and how can they apply that lesson to their business?

    All who attend will learn to use a new tool, called the Six Looking Glasses. It represents a simple, practical method for anyone to improve their observational skills. Why is this important?  It's important because all innovation begins with observation.  Participants in the Boot Camp will come away equipped as better observers—better able to identify key customer behaviors (and their unfulfilled needs), recognize operational issues (to avoid them becoming pitfalls), detect industry trends (before others see the same), and perceive broader cultural shifts (that may bear against any business strategy).

    2. A lot of business owners, small business owners in particular, have so much on their plate day to day that they might feel it’s difficult to just stop and observe. What’s the best way to manage the myriad of daily tasks you have to manage and take a higher level observational view of what’s going on around the business?

    Actually, the Six Looking Glasses should prove a time-saver. Many executives and managers find themselves struggling to keep ahead of the daily grind precisely because they have not stopped to simply see the time-saving opportunities that exist to be seen—if only one looked!  Stephen Covey once urged managers to focus on the important over the urgent. I'd augment that by saying observation is the most important means by which to minimize the seemingly urgent, so one's organization can focus solely on what truly drives success.

    3. Once you have taken the time to stop and look around, then what? How do you take the observational data you’ve taken in and translate that to something tangible you can apply to your business?

    That is indeed the issue, now isn't it? I propose this simple process: Look, Think, Act. To take any action without first thinking is foolish. And to do any thinking without first looking is frivolous. It all begins with looking. But better observation does not automatically translate into wise action. One has to still do rigorous managerial thinking. But sometimes one says to oneself, "Why didn't I think of that?"—too often in reaction to a competitor's action or some customer shift in behavior. And the answer: Because you were not looking!

    If you would like to learn more and register for the Observational Skills Bootcamp, click here.

    Next up: Build a Billion-Dollar Business in 5 Steps

    Build a Billion-Dollar Business in 5 Steps

    Throughout 2018, Mind Your Business will be reviewing the highlights of the 2017 BizConCLE event hosted by COSE and the Greater Cleveland Partnership. Today’s article focuses on the lessons small business owners can learn from the startup success of CoverMyMeds. Read the other stories in this series here.

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    In January 2017, CoverMyMeds achieved what every startup company dreams of: a billion-dollar valuation and sale to a major corporation.

    Funny thing is, Ted Frank, the CFO of CoverMyMeds, never really thought of the company as a startup. Rather, he and his partners viewed operated the business as a company with a long-term future instead of as a startup simply trying to survive from one round of funding to the next.


    Operating with a sound, long-term business plan in mind was just one of the lessons that Frank, one of the keynote speakers at the Greater Cleveland Partnership’s and COSE’s BizConCLE event, imparted to those in attendance. In fact, Frank laid out a five-step plan that small- and mid-sized businesses can easily adopt that could put them on the same unicorn trajectory that CoverMyMeds has been on.

    Step one: Focus on your distribution channel

    Frank said the reason most startups fail is because their distribution channel is either misaligned or not economically viable. How do you make it viable? You enlist the help of your customers to help you grow.

    It’s critical that businesses understand that their success is linked to that of the business and that your value to them increases as the business scales.

    Step two: Your operating model is not an afterthought

    Too many businesses believe they can bolt on their operating plan after they get funding. That’s a precarious line of thinking, particularly in the Midwest where private equity can be difficult to source and you can’t raise $300 million to build a company as some Silicon Valley firms might be able to do.

    Instead, businesses in this region need to rely on great economics to succeed. And you get to those great economics by being innovative in the way you approach your business and distribution model. When you have these great economics, Frank said, it makes it easier to win because revenue becomes more of a focus instead of costs. And it’s not that profit is unimportant. It’s just that profit is baked into the business model.

    Step three: Win through people

    At the end of the day, the success or failure of a business is linked to the people who comprise the business. Give these employees something to be excited about, Frank said. The focus on revenue, as described above, can create opportunities for rapid growth where staffers can find opportunities to work in emerging areas of the organization.

    Senior leadership should also target specific “star” employees and “connectors” in the marketplace you’re engaged in. These people will help you recruit other Rockstar employees.

    And create an environment that is not restrictive (think one-page explanations of company policies) and encourages instead of punishes risk-taking. You want your employees to feel like they’re a part of something and these are just two ways of accomplishing that, he said.

    Step four: Don’t rely on fundraising

    One of Frank’s favorite sayings is that business owners should be focused on building a company, not a startup. As such, the business has to be one that is sustainable and does not live or die based on the availability of angel investors. If you’re focused on just surviving from the “A” round of capital raising, to the “B” round to the “C” round, etc., you’re not focused on building a company.

    Put another way, if you’re raising money because you need money, you’ve already lost. Don’t worry about your exit strategy. Worry about how your business is going to help people—while also making some money along the way.

    Step five: Set big goals

    Don’t be afraid of setting big, hairy, audacious goals. Again, if your company is all about offense, you’re going to attract valuable heavy-hitter job candidates who want to help you do amazing things.

    BizConCLE is just one example of the many educational events hosted by the Greater Cleveland Partnership and COSE each year to help give the business community the knowledge they need to make their business a success. Check out this list of upcoming events to find one that’s right for you.
    Next up: Cascading and Communication

    Cascading and Communication

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    Next up: Cascading and Communication

    Cascading and Communication

    There’s a great visual metaphor for business related to the concept of cascading. The idea is that you can conceive of your company as a waterfall in which the decisions that are made at each level affect the decisions made as you go down the waterfall into the pool. You can imagine that the decisions made at the top of the waterfall are quite strategic. 

    There’s a great visual metaphor for business related to the concept of cascading. The idea is that you can conceive of your company as a waterfall in which the decisions that are made at each level affect the decisions made as you go down the waterfall into the pool. You can imagine that the decisions made at the top of the waterfall are quite strategic. 

    Let’s say you’re a visionary and decide to start your own company. Given that decision, you might ask these eight questions.

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    1. What are the business’ core values?
    2. What is the business’ core focus?
    3. What is the 10-year target?
    4. What is our marketing strategy?
    5. What is our three-year picture?
    6. What is our one-year plan?
    7. What are our quarterly rocks?
    8. What are our issues and challenges?

    The questions are strategic in nature, and the decisions made further down the waterfall are guided by your answers to these questions. Suppose you decide you will win by manufacturing organic chocolate with superior new product development capabilities. These choices will impact the decisions made throughout the organization:  hiring, sales, marketing, purchasing, operations, product mix, customer service and so on. The employees at these various levels then make decisions within the confines of your upstream decisions. 

    At each level of our expanding waterfall, more and more people are involved in the decision-making, and our choices become more tactical and operational in nature, with everyone working to achieve your vision. 

    One of the tools your team should use to ensure you are achieving strategic goals is a leadership scorecard.  Your leadership team should meet weekly to monitor progress against goals, and identify and solve issues as a healthy, functional, cohesive team. 

    Deeper into your organization, scorecards and meetings can be used as well, but the measurables on the scorecards need to be more operational and focus on the activities and issues the associates in these departments can impact.  For example, no. of new product introductions, no. of face to face sales calls, no. of qualified prospects, wasted dollars, quality of service, on-time delivery percentage, no. of cases shipped, order accuracy, etc.

    The company’s senior leaders must work to create an environment where those accountable to them understand their rationale for making certain decisions.  This requires open and honest two-way communication, always keeping in mind the greater good of the organization.   

    For more information, download our free eBook, “Achieve Your Vision”.  For more information please visit our website at  Be sure to attend my workshop at this year's Small Business Convention on Friday, Oct. 24 at 10:15 a.m. on the topic, “Are you Running Your Business or Is Your Business Running You?”

    Meet Alex

    Alex Freytag, partner at ProfitWorks LLC, helps business owners get what they want from their businesses.  In 1996, he co-founded and built the training and coaching firm to help entrepreneurial leadership teams achieve their vision, traction and healthy and to teach financial literacy to employees.  In addition to his training and coaching work, Alex spreads his mission and message by speaking to audiences of all types.