Why it's in an electrical contracting firm's best interest to put a board of advisors in place
The CEO of an electrical contracting firm was in the throes of a company meltdown. The recession had pinched his revenue, and his staff was becoming frustrated — with many already looking at other employment options. The CEO needed guidance from his board of advisors — a group of independent thinkers that was tasked with the responsibility for providing sage advice. As the CEO prepared to meet with his board, the only thought going through his mind was: “I hope they can help me save the company.”
All business owners need periodic advice from outside counsel. Some owners choose to discuss their issues with other business leaders in formal networking settings — with the understanding that any issue they encounter has already been resolved by at least one person at the table. Alternatively, others form boards of advisors — selected individuals that can provide guidance on all business matters — allowing the owner their independent assessment of the issues and potential resolutions. The very worst scenario is the business owner who goes it alone and does not rely on the advice from anyone.
As the owner of an electrical contracting firm, from whom do you obtain your advice? Do you use a formal process of problem analysis or informally look for answers in the marketplace, hoping to latch onto the right solution? Maybe it's time for you to form an effective board of advisors.
Do I need a board? You are not required to maintain a board of advisors. You are also not required to maintain an automated accounting system, use cellular phones, or drive a vehicle. You do these things because they make your job easier. The same is true for relying on a board of advisors.
Think about how many times in the last year you were forced to resolve a company issue. Invariably, problems arise with employees, contracts, difficult customers, banking relationships, and new competition. As an individual, the onslaught of issues is daunting — for as soon as you make one “corporate” decision, another rears its ugly head. You have a business to run and money to make. You can't afford to waste your time or make the wrong decision.
In a recent discussion with a retired owner of an electrical contracting firm, I asked him why he chose to retire so early, as he clearly had several more productive work years in front of him. His answer didn't surprise me: He indicated that he no longer recognized his business. The job had become more about company issues than his chosen profession. When he realized he was no longer doing what he loved, he knew it was time to quit.
For many, that evolution from day-to-day contractor to business owner is a difficult transition. Sure, associations try to teach business owners the rudiments of running a company but can fall short in providing the same level of expertise as they do for the technical nuances of the contracting profession. How can you expect to be a businessperson if you were never trained in the field? This is another reason for having a board of advisors.
The FASM approach to board composition. FASM is an acronym that will help you assemble your board. FASM, which stands for finance, administration, sales, and marketing, encapsulates all of the non-core functions of your business. Your business is made up of three primary components: sales and marketing, operations and production, and finance and administration. The only core component to your business — the aspect that makes it unique — is your operations and production activities.
Does your firm do payroll? Your payroll activities are identical to the payroll activities of every business in the country. That's the reason payroll outsourcing firms, such as Paychex and ADP, have been in business for decades.
Following the FASM approach, the professionals that should be represented on your board of advisors include a lawyer, accountant, and human resource specialist. These individuals are schooled in advising you on all aspects of your financial and administrative activities. For sales and marketing advice, many boards also include public relations and online marketing experts. The combination of these skills provides you with guidance on non-core business components.
Board process. Your board of advisors operates at your direction. Some contractors find comfort in calling board members when specific issues come to the forefront. Unfortunately, this approach minimizes the value that a board can bring to your company as the other members may have conflicting or complementary advice that answers peripheral questions you never considered. Instead, to get full value from your board and the interaction that ensues, it is recommended that your board meetings be formal affairs — complete with agendas and a full list of issues for discussion and resolution.
For most electrical contracting firms, board meetings occur on a quarterly basis. Approximately one to two weeks ahead of the meeting, you (or someone in your office) should put together a board package and agenda. Typical items to include would be new supplier contracts, the most current financial statements, any new banking relationships, and the update on recent new company initiatives. In addition, include a list of questions for discussion. Providing this information to your board ahead of time allows members to formalize their answers as opposed to trying to address your concerns “off the cuff.”
Recently, I participated in a newly formed board of advisors meeting for an electrical contracting firm, the owner of which had amassed a strong group of outside talent — with a full complement of FASM skills. Prior to the initial meeting, he provided all members of the board with a complete board package. However, it lacked an agenda for outstanding issues for resolution. As the meeting started, the owner began giving a full-scale PowerPoint presentation on topics that had already been explained in the package. Fifteen minutes into his presentation, one of the advisors held up his hand and asked: “What problems do you need to solve?” Remember, board members are not your audience; they are your advisors. The message was clear from all of us: “Don't waste our time on flourish; we're here to help you answer the tough questions.”
At the end of the board meeting, it's useful to have someone put together a recap of the discussion, helping you to remember the outcome of each issue presented as well as reminding board members as to the direction of the conversation so issues are not re-hashed at the next meeting. Finally, because the individuals helping you are usually professionals in their own right, some form of compensation is appropriate. For many electrical contracting firms, advisors are paid based on their meeting attendance — usually a nominal fee of $250 to $500 per meeting. While this amount may seem high at first, you'll find these individuals cost you far less than employing outside counsel.
Don't even think about it! Who should be on your board of advisors? Some contractors make the mistake of putting together a group of friends — people that will naturally agree with you on any issue — for their board of advisors. Although this group may be great for social gatherings, it falls short of providing you with the real guidance necessary to run your company. What you need are people that will challenge your assessments, provide you with alternative points of view, and not disparage you if you decide not to accept their advice.
Remember the CEO of the electrical contracting company that was in the throes of a meltdown? Unfortunately, the board was comprised of friends of the founder and the founder himself, who had retired from active operations three years earlier but still retained a partial ownership position. The board dynamics were such that all of the board members would acquiesce to the founder on all company matters — thereby negating the contribution of the CEO. After spending a couple of years fighting the good battle, he was left to pursue other interests and, within a period of six months, the company went bankrupt.
As an owner, you want advice that will help you grow your business. Stacking the board with friends may make for a casual environment, but difficult issues never get fully discussed, and counter-options are never pursued. Are you willing to forgo the value of outside advice to the detriment of your company? Or do you recognize that you don't know all the answers, and outside intervention may provide you with additional valuable information? As an owner, the choice is yours.
However, having a board of advisors does not preclude you from rejecting their advice when you're convinced it's not in the best interest of your company. Your board of advisors is there to provide you with information — not decisions. The decision to act rests with you. Never give up that authority, and dismiss advisors who require strict adherence to their advice. There is only room in every company for one decision-maker — you.
Alternatives, if necessary. What if you're convinced that a board of advisors is really not for you? Is there an alternative way for you to find informal advisors who can help you resolve company issues? The answer, of course, is yes. In many metropolitan areas, the advent of CEO support groups have emerged and, for electrical contractors, your industry associations provide opportunities to “post” questions electronically for other members' input. The downside to these alternatives is that your “advisors” are not vested in your business, making their advice helpful, but not tailored to your company nuances.
CEO support groups have become an interesting way for owners (usually from different industries) to share common business problems. The founding philosophy of these groups was the recognition that, as a business owner, you really don't have anyone else within your company to effectively “share” your problems. The CEO support groups allow owners to realize the problems they are experiencing are not unique. Someone, somewhere has already seen and hopefully resolved your issue. Sharing the information often provides a ready resolution to the troubled business owner.
Associations have also begun to realize the value of knowledge contained in their member base. Many industry associations, including those that support the electrical contracting industry, have instituted online forums that allow members to seek answers to their questions from other members. Invariably, someone in your industry community has a resolution or, at a minimum, a host of other questions that can help resolve your current dilemma. Again, the downside is that all members share a common characteristic — they all own their own electrical contracting firms. Just like your board of advisors needs to be from outside your industry, the information you receive from industry members might lack the perspective of broader corporate views.
Do these alternatives really replace a fully functional board of advisors? In a perfect world, the board approach provides you, the owner, with the best advice to move your business forward. Lacking such resources, the CEO support groups and association forums allow you, at a minimum, to get someone else's perspective — a helpful action when faced with a difficult situation.
As the owner of an electrical contracting firm, your plate is full of difficult issues on a daily basis. To truly maximize the potential of your firm, it's in your best interest to surround yourself with a board of advisors. The alternative — doing everything by yourself — can be a lonely and costly decision.
Dawson is managing director of LTV Dynamics, an international sales management and business-consulting firm in Washington, D.C. He can be reached at BLDawson@LTVdynamics.com.
Sidebar: Where to Find Advisors
Not sure where to find qualified individuals to join your board of advisors? Some of the best candidates are actually through your personal and professional networks. If you belong to a local Chamber of Commerce (or other similar group), you probably already know several lawyers, accountants, and marketing specialists. Look at local businesses you admire, and ask them to refer individuals to you that may be a good fit for your advisory needs. If all else fails, look to those individuals who align themselves with your local electrical contracting association chapter. While they may be unknown to you, these individuals have strong industry knowledge and can be validated through other association members who have used their services.
Ask candidates what they can bring to your board. Let them know where you anticipate needing advice and areas where you feel weak. Setting expectations before they join your board goes a long way toward ensuring a productive relationship.
Older owners and more established electrical contracting businesses are more likely to have an advisory board than their younger counterparts. It makes you wonder whether advisory boards are one of the reasons young firms are able to become “old” firms.