Home / Opinion / So, you want to create an advisory board?

Faced with increasing headwinds, many multinational companies (MNCs) in India are setting up advisory boards. It’s not just MNCs that are using advisory boards; some Indian listed companies are also experimenting with such boards, albeit with a more narrow focus on issues such as family matters or research and innovation. While advisory boards are all the rage currently, the chances are that most will be ineffective and eventually be wound down to much disappointment. How do you avoid this? Should you have an advisory board? If you do, how do you really make one effective?

The fundamental question of course is whether you should create an advisory board. For MNCs, such boards are useful in several ways:

Policy, regulation and access

If your business is complex and faced with lots of difficult policy and regulatory challenges, it can be very advantageous to have a good set of advisers to help you think through these issues. For instance, in 2005, Microsoft was confronting multiple challenges in India such as high rates of software piracy, the challenge of free and open source software such as Linux, difficult relations with the government on matters ranging from taxation to software pricing. It was also the quintessential American MNC and therefore an “outsider" with very limited access to policymakers and policy influencers. In such a situation, an advisory board can be invaluable as indeed it was.

Local business models

A second area where a board can add value is in localizing the business model. The biggest challenge for most MNCs is deciding how much to bend the global market to fit local needs in large and complex markets such as China and India. Should you enter on our own or through a joint venture or an acquisition? What products should be introduced? What should the pricing strategy be? How should products and offerings be adapted for India? What about branding and distribution? The mistake that even well-run MNCs often make is rigidly replicating the global model; an insightful advisory board can be of tremendous value in finding the right balance between being “mindlessly global and helplessly local".

Influence on locals

A third very important function of an advisory board is providing confidence to and influencing the global chief executive officer (CEO) and senior leaders at headquarters. Face it, India is a tough market with a reputation for being difficult. India ranks about No. 134 globally in terms of ease of doing business and No. 94 on the corruption index. A lot of what senior leaders hear from their India team can sound either like excuses or naïve optimism. A credible set of advisers serves as an extra set of eyes and ears on the ground and can provide an invaluable calibration of opportunities, risks and challenges.

For Indian firms, the issues are different. If you have a statutory board that, quite frankly, is a “rubber stamp", then the CEO could benefit from having a parallel advisory board. It can indeed be quite lonely at the top, and having a trusted and competent set of thought partners who can serve as a sounding board on matters ranging from family matters to business can be invaluable. Even well-run companies can benefit from having a focused advisory board that provides advice and perspectives on a specific challenge such as technology and innovation, sales and marketing or globalization. An advisory board is well worth considering if these are relevant challenges for your company.

Now that you have decided to create an advisory board, how do you make this effective?

The single most important determinant of success is the commitment of the CEO and senior leaders. Much of the value of the board lies in shaping thinking, so if the CEO and some of the executive management aren’t committed to coming down twice or thrice a year to spend time with the board, it simply doesn’t make sense to start. At Microsoft, chief technology officer Craig Mundie would religiously anchor every board meeting while others include CEO Steve Ballmer or chief operating officer Kevin Turner might attend a particular meeting based on the agenda. At agri-business firm Bunge, CEO Alberto Weisser and his entire team participated in every single meeting of the Asia advisory board. To be of value, the principal client and sponsor for such a board has to be the CEO or someone on the leadership team.

The composition of the board is another critical success factor. The great temptation is to stock the board with some big names. This is a mistake. Instead, members must be thoughtfully chosen for their particular expertise. Members must also be willing to make the time for this. Advisory boards meet only two- four times a year, but when they do meet, it’s vital to have all members participate. If someone isn’t willing to make this time commitment, it is a good idea to pick someone else. Since this can be a tricky matter, it is prudent to make one of the independent advisors the chairman. This makes it easier to run meetings, moderate a discussion among “very influential people", and to select and drop members as necessary.

How do you attract such valuable experts on to the advisory board? How do you compensate them? Most of the people you would want as advisers are incredibly busy and sought after. The fundamental way to attract good advisers is a mission or a cause and the promise of great learning. At Microsoft India, the convening theme wa: “Driving IT adoption in India" or what the firm could or should do to help promote the usage of IT and computers in education, in government, and among small businesses. Such an over-arching mission created a broad canvas for discussions; it also ensured that we didn’t get lost in tactical short-term business problems. A well-constructed mission encompasses business strategy, policy and innovation. Company experts should be brought in for each session and this creates exciting learning for everyone. The sense of contributing to a nationally relevant agenda, learning and exposure to global leaders should be the fundamental proposition of an advisory board.

Financial compensation is a delicate matter. You must compensate people adequately for their time, but the compensation shouldn’t be so substantial that is perceived as buying influence.

Finally, though such boards are strictly advisory in nature, members still need to feel that there is seriousness to the process, that their inputs are heard, and the discussions aren’t academic but actually shaped the strategies and actions of the company. Therefore, some of the disciplines of a statutory board must be adopted. For instance, an annual meeting calendar must be established. The agenda and reading material should be circulated well in advance. The main ideas from each discussion and actions to be taken must be documented. Most of all, there should be regular updates on past discussions. It is fine to “say this is what we did, this is what we didn’t do but here’s why". But you shouldn’t leave people wondering what ever happened to something important that was discussed.

Advisory boards represent a substantial commitment of time, energy and effort, but a good one can be worth its weight in gold in a turbulent and rapidly changing country such as India. And it’s not just MNCs that can benefit from good advice and counsel. Indian companies facing complex challenges can, too.

Ravi Venkatesan is a former chairman of Microsoft India and Cummins India Ltd. He serves on the boards of several public and private companies, not-for-profits, start-ups and advisory boards. He is the author of Conquering the Chaos: Win in India, Win Everywhere.

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