Boards of Advisors in Small Businesses

The literature on Boards on Boards of Advisors has been sparse, mostly focused on discussing the benefits of Boards of Advisors for large and small firms. Boards of Advisors differ from Boards of Directors with respect to purpose, oversight, formation, liability and responsibilities. Morkel and Posner found that managers whom they interviewed had positive experiences with Boards of Advisors. This study confirms the fact that small businesses make very little use of a Board of Advisors, with only thirty of the 258 responding firms having a Board of Advisors. The main reason cited for this limited use was lack of awareness on the part of managers of small businesses.

This article represents one attempt at reaching small business managers by informing them of the values of Boards of Advisors, providing a profile of the existing Boards of Advisors at small businesses and encouraging promotion and further study of Boards of Advisors. This study examined several aspects of Boards of Advisors, gathering data on size and composition of such boards and how they are used. We found that almost all (97%) responding small business managers are satisfied with their Board of Advisors, characterizing their relationships with their Board of Advisors as "Good" or "Excellent".

We found that, although the most frequent reason for use of such board was "suggested by management"; the most frequent reason for not having such board was unawareness by management. We also found that 67% of the members of Boards of Advisors are male, suggesting the potential for including more females. Perhaps, women who have business experience but are no longer in the work force would also be a good source of supply. In addition, retired business managers might also be a good source. Our study did not obtain age of board members: however, since most (53%) of the firms in our study do not compensate their advisors, retirees, not dependent on income might be good candidates for the boards. These experienced, retired managers might want to keep active and involved by serving as advisors, while avoiding the increasing liability exposure that members of Boards of Directors are facing.

Small business organizations might consider offering seminars or informational materials describing the nature and purpose of Boards of Advisors. People with experience as members of Boards of Advisors might participate in the design and/or delivery of such programs. In addition, programs on Entrepreneurship might consider covering the topic within their programs.