Decision Vision Episode 137:  Should I Form a Company Advisory Board? – An Interview with Karen Robinson Cope, Mara6

Intro: [00:00:01] Welcome to Decision Vision, a podcast series focusing on critical business decisions. Brought to you by Brady Ware & Company. Brady Ware is a regional full-service accounting and advisory firm that helps businesses and entrepreneurs make visions a reality.

Mike Blake: [00:00:21] Welcome to Decision Vision, a podcast giving you, the listener, clear vision to make great decisions. In each episode, we discuss the process of decision making on a different topic from the business owners’ or executives’ perspective. We aren’t necessarily telling you what to do, but we can put you in a position to make an informed decision on your own and understand when you might need help along the way.

Mike Blake: [00:00:42] My name is Mike Blake, and I’m your host for today’s program. I am a director at Brady Ware & Company, a full-service accounting firm based in Dayton, Ohio, with offices in Dayton; Columbus, Ohio; Richmond, Indiana; and Alpharetta, Georgia. My practice specializes in providing fact-based strategic and risk management advice to clients that are buying, selling, or growing the value of companies and their intellectual property. Brady Ware is sponsoring this podcast, which is being recorded in Atlanta per social distancing protocols.

Mike Blake: [00:01:11] If you would like to engage with me on social media with my Chart of the Day and other content, I’m on LinkedIn as myself and @unblakeable on Facebook, Twitter, Clubhouse, and Instagram. If you like this podcast, please subscribe on your favorite podcast aggregator and please consider leaving a review of the podcast as well.

Mike Blake: [00:01:29] Our topic today is, Should I form a company advisory board? The Business Development Bank of Canada did a neat study a while ago showing the companies with advisory boards enjoy stronger growth than those without. And you can look that study up on the internet.

Mike Blake: [00:01:44] Interestingly enough, there’s actually not a lot of empirical study that’s been done on the impact of advisory boards, yet there’s a lot of interest in them as well. In addition, I’ve learned over the years that I’ve been doing this, whatever this is, that a lot of people have a misunderstanding of what it is that an advisory board does. But I think it’s something that’s on people’s minds.

Mike Blake: [00:02:15] I know of companies that have never considered advisory boards that are now exploring that question because the world simply, as we all know, has changed so much from what it was nearly two years ago now. That companies need an outside perspective or at least feel that they would benefit from outside perspective to understand how to survive and thrive in this new normal.

Mike Blake: [00:02:42] And so, joining us today is Karen Robinson Cope of Mara6. Mara6 is an advisory and consulting firm that helps young companies and entrepreneurs identify needs, develop scalable business models, and drive innovation strategy and revenue. She especially enjoys driving customer and shareholder value.

Mike Blake: [00:03:00] Karen Robinson Cope is a visionary and inspirational leader who takes ideas and disparate teams and builds great companies. As evidenced by her successes as a CEO of multiple early stage fast growth companies and numerous boards, she can identify a new market opportunity and then develop a clear strategy to quickly become a market leader. She is a decisive leader who is not afraid to take risks, appropriately utilizing strategic financing partners, and developing sound financial metrics to keep new initiatives on track. She’s been recognized numerous times over the last 20 years by multiple organizations for her excellent leadership skills.

Mike Blake: [00:03:38] In three prior companies where she was CEO or board member, Karen was able to successfully build great companies generating tens of millions of dollars in annual revenue, drive new markets and industries, and provide shareholder, employee, and customer value.

Mike Blake: [00:03:52] Karen holds a Bachelor of Science in Political Science and Economics from the University of Redlands. And she serves on several boards of directors where she is helping to identify new opportunities, drive innovation, and expand businesses globally. In her spare time, she and her husband, Rick, also a CEO, like to travel to out-of-the-way places, experience wild adventures, and mentor young entrepreneurs. Karen Robinson Cope, welcome to the Decision Vision podcast.

Karen Robinson Cope: [00:04:19] Mike, it’s so good to hear from you.

Mike Blake: [00:04:22] So, before we get started, I have to share with you something that I don’t think that I’ve ever told you, but I’ve told numerous other people, and you need to be let in on it. You actually taught me one of the best lessons I ever learned about valuation. And it was years ago when you and I were sitting on a panel together and somebody asked about valuation. I chimed in and I said something, I don’t know if was smart, dumb, or somewhere in between.

Mike Blake: [00:04:51] But you said something which I’ve never forgotten, and I don’t know if this is your original thought or not, but I attribute it to you happily. And that is that, “You can name any valuation that you want as long as I get to name the terms.” And someday I’m going to do a podcast on that topic exclusively and maybe try to cajole you back in. But I now use that all the time when I teach classes, advise clients, whatever the context, it comes up all the time, and I make sure to give you full attribution for that.

Mike Blake: [00:05:23] So, before I get started, I want to, on this public forum, to thank you for that bit of wisdom because it really has made me a better advisor and better practitioner.

Karen Robinson Cope: [00:05:32] Well, I appreciate your kind words. You know, as many years as I’ve been doing this, and you and I have been doing this together for many years, I’m more convinced than ever that terms are so critical. And I’ve had some great successes where the valuation made may have been really great but the terms were not and, vice versa, where the valuation was off the charts and yet the terms weren’t. And I can tell you that it’s all about the T, the terms, the terms, the terms. So, I’m glad you’ve been able to use that because I find it so valuable.

Mike Blake: [00:06:02] Well, it just comes up all the time. And I promise everybody in the audience, actually, we’ll cover the promised topic today. But in particular, as I see unicorns come to market, and one of the things you recognize and I suspect you sense this as well, not all unicorns are created alike. And some unicorns are legit unicorns and some unicorns got there because the founders felt like they wanted or needed that headline number, and they gave away the store in terms of terms so they could go to market with that headline number.

Karen Robinson Cope: [00:06:37] You are so correct. And, again, you see this more and more. Quite often, again, it’s very exciting – and, Mike, you and I, I think even met back then – when I was first raising money in my first company and our first valuation was a couple of hundred million and then it got to a billion dollars and we were so excited. And I got to tell you that the terms is what it’s all about. And I’ve seen it again and again. If you don’t fully understand what that cap table looks like in those contractual terms, you can be blown away when you’re thinking about a great exit. And by the time the founders are counting their pennies, it’s only pennies because they’ve given it all away through the term.

Karen Robinson Cope: [00:07:15] So, you’re exactly correct. It’s a great topic, and you and I should have that conversation again, definitely over drinks or on a podcast.

Mike Blake: [00:07:22] Maybe both. I mean, we’re not FCC regulated.

Karen Robinson Cope: [00:07:26] It sounds like a great idea.

Mike Blake: [00:07:29] All right. So, let’s dive into it because our audience is expecting us to cover advisory boards. And so, let’s start off as I do with most shows, provide us, please, with a definition of what an advisory board is and how is an advisory board different from other kinds of boards, such as a board of directors?

Karen Robinson Cope: [00:07:49] What a great question. I get asked this all the time. Let me start by saying, a board of directors, contrary to what you may have read or heard, it’s got a legal and a fiduciary responsibility. It literally is responsible for representing all of the shareholders interest. Compare that to a board of advisors, and a board of advisers has no legal, has no fiduciary. They’re really there to advise. And I think it’s important to recognize, if you’ve got investors that are expecting a return, that it’s important that you legally and from a fiduciary perspective, make sure that you have directors that are representing the interest of all your shareholders.

Karen Robinson Cope: [00:08:33] However, if you own the company 100 percent or it’s a tightly controlled company, then a board of advisers may be the appropriate direction for you. And this is another one, I think, Mike, you’ll enjoy this – I like to say that a board of advisors can help you opine. You ask the big questions. They talk about esoteric. They talk about the big picture. They talk about strategy. But when it comes right down to it, all they’re doing is giving advice. Compare that to a board of directors when they literally have a fiduciary and a legal responsibility to ensure that the shareholders interests are protected. So, they’re very different, and I would suggest, have a very different role.

Mike Blake: [00:09:16] So, I’d like to riff on this. I’m going to kind of tear up the script here a little earlier than I normally do, because I think that distinction you just made is really important. Because my observation – and please correct me if you think I’m wrong – is that, because of its nature, a board of directors in many ways is going to have an incentive structure that is fairly defensive in nature.

Mike Blake: [00:09:46] Whereas, a board of advisors might be able to encourage more risk, encourage more of an expansive offensive nature. Because there is no fiduciary responsibility, you can afford to dream a little bit bigger, if you will, and encourage more risk taking. Whereas, perhaps a board of directors, because of that fiduciary responsibility, and nobody ever gets sued for taking too much money, but you sure can be sued if you lose a lot. Is there that kind of dynamic there between the two? Is there that kind of different personality, if you will?

Karen Robinson Cope: [00:10:22] Absolutely. And we’ll talk a little bit later about the program that I actually developed is a nonprofit organization to help companies develop board of advisors. I think you said it so well. Think about of a board of advisors, it’s almost like spitballing. You can kind of sit around, brainstorm a little bit. Their job is – I literally mean this word – opine. To think about the big picture, think about what could, what couldn’t, why, why not. It’s not to ensure that you do it. It’s really to get you to thinking about, where the board of directors has a very defined legal set of responsibilities. And part of that is to make sure that you manage risk.

Mike Blake: [00:11:04] So, I think another distinction is kind of the relationship with the founder and the CEO, right? And I think we’re just kind of expanding upon that last part of the discussion, which is, an advisory board might be thought of as a resource, but a board of directors could very easily be simply defined as the boss of the CEO.

Karen Robinson Cope: [00:11:26] I think that is so well said and that is exactly correct. When you own your company 100 percent or it’s a tightly controlled company, you might want some advice, but bottom line you’re responsible for those decisions. Conversely, when you have a board of directors, the CEO reports to the board of directors. And they, therefore, in most cases or many cases, have the ability to actually fire the CEO, even if you’re one of the largest shareholders.

Karen Robinson Cope: [00:11:53] So, it’s a very different mentality. And you’re correct and I think you said it really well, Mike. One way is to kind of think big and one way is to think of all the things that could go wrong and let’s make sure we manage against them. Very different perspectives.

Mike Blake: [00:12:09] Yeah. And from my vintage, anyway, maybe the best example of a board firing a CEO is Apple’s board firing Steve Jobs.

Karen Robinson Cope: [00:12:19] A hundred percent correct.

Mike Blake: [00:12:20] Which he said – by the way, interestingly – he thought that was actually one of the best things that ever happened to him because it made him a much more mature leader when he came back.

Karen Robinson Cope: [00:12:29] Absolutely. Because, as you know, once you take on shareholders, it doesn’t really matter what you want. It matters what’s best for all the shareholders. And especially when you have multiple rounds of funding and in each subsequent round, as you said, we talked about earlier in the conversation, there’s different terms for each one of those. And you as a CEO, if you have outside investors, it’s incumbent upon the board to make sure that every one of those shareholder groups and shareholders is being treated fairly.

Karen Robinson Cope: [00:13:01] Whereas, if you own your own company, you can make decisions. And with a board of advisors, you can make decisions that are in your best interest that may not be in your employee’s best interests, it may not be in your customer’s best interests. But, again, if you don’t have outside investors and you don’t have that outside board, you have tremendous flexibility. And like Steve said, as a board of directors, I think that it really helped him to, again, not only be a more mature leader, but obviously helped him to, unbelievable, what has happened to Apple over the last 20 plus years. An amazing story. And part of it, I think, was because Steve came back as a much more thoughtful leader.

Mike Blake: [00:13:46] Yeah. And he realized that he had friction and he realized that Apple is no longer sort of his personal playground. And that does force you to think in a different way. And, frankly, that’s what a board of directors is supposed to do, too.

Karen Robinson Cope: [00:13:59] Absolutely correct. Whereas, the board of advisors, again, I don’t want to say it encourages the CEO in their worst proclivities, but I think providing advice allows you to really think outside the box and do some what ifs.

Mike Blake: [00:14:14] So, since we’ve identified now that a board of directors and a board of advisors serve two different purposes and really have two different personalities and responsibilities, is it out of the question that a company might have both?

Karen Robinson Cope: [00:14:29] Absolutely. And I think that’s a great question. Again, part of it is the legal and the fiduciary responsibilities. Part of it is – and I think you said it’s so well, your question a few moments ago – about risk management. But also think of it as almost like the advisory board is there, as you think about your dreams, how might you be able to do that. Which is, again, a board of directors would take that same topic and say, “Okay. What could go wrong? How do we mitigate against that? How does this improve overall shareholder value?”

Karen Robinson Cope: [00:15:05] The board of advisors almost gives the CEO or the executive team a chance to almost role play or do a trial pitch, if you will, and think about what might happen. Remember, when an executive team or CEO is presenting to the board, they’re literally being evaluated, potentially for compensation, potentially for other opportunities. Whereas, an advisory board is really there to help you dream about that, help you think about it, and bring in that necessary expertise that you might not have in your executive team.

Mike Blake: [00:15:40] So, let’s drill a little bit down to this, because I think in some cases it may seem strange that a CEO, founder, and executive team that maybe one of the reasons they founded the company in the first place was not to have to be answerable to anybody, would suddenly choose to give up, if not their independence, but at least sort of share the wheel, if you will, a little bit or share the sandbox with somebody else. So, what are the benefits that you typically see that advisory boards offer that are attractive to companies?

Karen Robinson Cope: [00:16:16] Great question. Again, you and I have both been entrepreneurs and both CEOs and so forth. When you think about it, you’re running so hard, you’re so involved in the business, you’re thinking about, How do I sell? How do I collect? How do I build? How do I deliver? How do I manage my supply chain? You’re so focused on so many things, especially early on in the company’s lifecycle.

Karen Robinson Cope: [00:16:43] Typically, what a board of advisers can do is they’ll literally step outside. You almost think you have your own little bubble as you’re the CEO, and you’re the executive team, and you’re running 24 hours, or 28 hours a day nonstop. And I like to say you focus on the urgent, because that’s what you have to do. You have to worry about how am I getting my customer to pay so I can pay my employees? And that’s an urgent issue. Long term, is that an important issue? Probably shouldn’t be. And so, I like to say that an advisory board can help you think about the important, not just the urgent. Does that make sense?

Mike Blake: [00:17:18] Yeah. It does. And it’s something I’ve mentioned on other podcast before, there’s a third dimension to that now – at least that I’ve heard of that I learned through a TED talk a while ago – which is impact. And I think one of the things that a board can do also is help guide an entrepreneur or a team to ensure that whatever time or investment they’re making in X, that X is also not only addressing something important, but also impactful.

Karen Robinson Cope: [00:17:50] Absolutely. Great comment.

Mike Blake: [00:17:51] It has not just a long term outlook, but long term and sort of fundamental implications.

Karen Robinson Cope: [00:18:00] Absolutely. Great. And that’s a great comment. The other thing – and, again, we think about entrepreneurs as young. And you and I both know that’s not the case. Entrepreneurs can be any age – quite often, especially in an early stage company, they can’t afford to get the best. Potentially, they can’t afford to get the best talent out there. If you’re in a software company, you might be able to get some good software, but you may not be able to get the best person in cybersecurity or the best person at e-commerce.

Karen Robinson Cope: [00:18:32] And quite often what an advisory board member can do is bring in that really kernel of information or expertise that you need that you couldn’t afford to get. And what you’ll find, especially in a city like Atlanta – and you and I’ve talked about this before, Mike – successful people really do want to give back. They really do want to help this next generation. They really do want to help entrepreneurs succeed. And I think you’ll be very surprised to see so many successful entrepreneurs or corporate executives that are more than happy to give back, especially in an advisory board role, because they don’t have the legal and the fiduciary responsibilities and the headaches that come with being a board of director.

Mike Blake: [00:19:16] I mean, I think this will be the case, somebody who is going to be listening to this in a couple of weeks when we publish it is sort of taking inventory about maybe themselves, or company, their team. What are some signs that a company might benefit from an advisory board? What are some triggers that might get a wise founder to start thinking in that direction?

Karen Robinson Cope: [00:19:42] Great question. So, I think the first one is you’re kind of stuck and you’re trying to figure out what to do next. And, again, one of the things that I will say, and, again, I look at it from both being an advisor as well as a board of directors, but being an adviser, but also coaching companies on this, you’ve got to be a CEO who’s willing to listen and learn.

Karen Robinson Cope: [00:20:06] If you’re in a position where you think you know all the answers, if you’re in a position that you don’t think you need any help and you’re just adding a board of advisors to check off a box, wrong answer. For you to get a really good board of advisors, you need to be coachable and you need a position where you say, “Here’s what I need. You know, I’m kind of stuck here. What do I need to do to go to the next level?”

Karen Robinson Cope: [00:20:28] The second thing, I think, is when you’re thinking about going into a new market or kind of changing direction, again, if you’ve got both an advisory board and a board of directors, it’s almost like the advisory board is an opportunity to kind of brainstorm – I call it spitballing – to think about what could happen, and kind of think through the ramifications, and help you to solidify your plan before you actually present it to your employees, your shareholders, et cetera, your board of directors.

Karen Robinson Cope: [00:20:57] I think the third thing would be, if there’s some regulatory – and in this world that we live in, there’s so many new regulations coming on, on a regular basis. It’s hard to keep up with them – if you want to understand – again, I’m not talking about replacing your counsel. That is not what we’re talking about. This is not expensive advice that you’re trying to get free. It’s really about that word I use, opine.

Karen Robinson Cope: [00:21:21] A very dear friend of mine is the CEO of a very large real estate firm. And she and I were together just a couple of years ago and we were kind of brainstorming about the impact that regulatory could have on her. And, again, her lawyer gave her all the issues. Her lawyer told her, here’s the legal issues that are coming, here’s the regulatory issues, here’s what the law and the regulations says. Our job was to brainstorm about it and say, “Well, what could that mean? What might that mean for agents? What might that mean for contracts? So, does that make sense as a kind of a different approach than your paid advisers will give you?”

Mike Blake: [00:22:04] And, you know, that actually segues nicely into the next question, which is that – in fact, I think this is true because I think I’ve observed it – some founders struggle with the distinction between an advisory board and paid advisers, and what you can expect of one versus the other. And I wonder if you see that too. And if so, can you help the listeners understand where is the distinction? Where do you draw the line where you might be either asking too little or asking something that your professional advisers maybe ought to defer to the advisory board and vice versa?

Karen Robinson Cope: [00:22:50] Great question. And I know I’ve said this word now twice, and I promise I won’t say it again, Mike. And my friend, Fran Dramis is the one that told me about this word opine. I just think that really goes right to the heart of what it is an advisory board. Their job, again, is to opine and think about the what ifs. I like to say that a good advisory board is probably going to ask you more questions than give you answers.

Karen Robinson Cope: [00:23:20] Again, like my girl friend, we were sitting down and talking about the impact of regulations on real estate. And, again, her lawyer gave her all the specifics. What we did is she and I said, “Well, what if this happened? Okay? What would happen if this happened?” Whereas, a paid adviser’s job is really to get it, roll up their sleeves, and help you get the job done. Again, typically, because there’s a financial transaction that’s occurred, there’s probably more of a tactical or an implementation. Not always, because clearly you can hire a strategic advisory company. But, again, I think the difference is more of thought provoking questioning and an advisor is more of an answering. Does that make sense?

Mike Blake: [00:24:10] Yes, it does. So, what are some things that might be unreasonable to expect of an advisory board? What might be trying to ask too much of them or taking it too far?

Karen Robinson Cope: [00:24:23] Great question. And a lot of that goes back to kind of the agreed upon terms, if you will, the compensation. There’s a lot that goes into it. And if I could just digress for a minute. One of the things that’s so important if you’re thinking about advisory board is – two things. The first one is, Why do you want that? And I like to say, write it down. And the reason I say write it down is because it forces you to be very specific.

Karen Robinson Cope: [00:24:51] So, an example would be, “I need an advisory board because there’s so much going on with sustainability. I need to better understand how that impacts my business. Therefore, I want to bring in some experts from both ESG. I want to bring in some experts on these various things to help me better understand that.” Go ahead.

Mike Blake: [00:25:13] So, you know, I’m curious if you’ve seen the same thing. I think some entrepreneurs, or managers, executives have been disappointed in the past with some of their experiences with advisory board simply because, I think, they are hoping an advisory board could fill a gap left by a fundamental weakness or hole in the company’s management or in their professional advisers, for that matter. And, consequently, they’re asking people to fill a role where they might hire and fire them. But that’s not the role for an advisory board to fill, is it?

Karen Robinson Cope: [00:26:02] And that’s exactly the point, I think, for a couple of reasons. Number one, again, it’s unrealistic. And to be frank, it’s disrespectful to go to someone like you. If I were to go to you and say, “Mike, I really want you to be on my advisory board.” And the first thing I do is say, “Mike, can you do a full blown evaluation for me?” It’s disrespectful. It’s kind of like when you have a party and your neighbor comes over and they’re a dentist and you say, “Hey, what do I need to do with my teeth?” It’s disrespectful.

Karen Robinson Cope: [00:26:32] I think that part of it is defining exactly what you’re looking for, but recognizing that the adviser’s role is really to advise. And, again, I’m going to keep going back to this point, ask questions. The advisor’s role is to say, “Have you thought about X? Have you thought about Y?” Not, “Here is the answer to X or here’s the answer to Y.” If you want the answer to that and you want someone to go through – I don’t want to say the heavy lifting – and roll up your sleeves, you need to hire someone for that role.

Karen Robinson Cope: [00:27:09] And, again, I’m sure you go to parties and people say, “So, Mike, what do you think my company is worth?” And it’s fun over a cocktail to maybe spitball. But if they say, “No. No. Give me specifically what it’s worth,” that’s disrespectful.

Karen Robinson Cope: [00:27:23] And whether you’re an advisor or someone to want that from you, they need to be prepared to pay you for that service. And so, to me, part of it is understanding exactly why you want the advisory board, recognizing that these are probably people. In many cases, your advisors are people you probably couldn’t pay to get on your board. In many cases, when I try to match advisors with companies, they are people, typically the CEO, even if they ever knew them, would never be able to get them on their board.

Karen Robinson Cope: [00:27:55] And part of it’s because we have a very specific definition of – what I call – the rules of engagement. And again, to the extent you can define those upfront, agree on those up front, and even go so far to say, “Hey, Mike. I really want you on my advisory board because you’ve seen a lot about how the financial markets react to X, Y, Z. I’m thinking about next steps and I’d love to have your guidance as we kind of think through the questions I should be asking.” To me, that’s a perfect role for an advisory board, which is very different from, “Hey, Mike. I really need you to tell me exactly what my company is worth and what are the three things I need to do to make it more valuable?” Is that distinction kind of clear?

Mike Blake: [00:28:41] Well, it does. I’m also amused at the the image of somebody asking me for advice and what their company might be worth, as I’m literally holding a martini with three olives in my hand. If you really want to make a $20 million decision with me in that state and you’re not even paying me, I don’t know that you really want to go in that direction.

Karen Robinson Cope: [00:29:07] That’s a great comment. I hear you.

Mike Blake: [00:29:09] So, let me ask this, 44would it be crazy for a company to even have multiple advisory boards if, maybe, boards that have a specific discipline in which they’re experts and you may just need separate resources?

Karen Robinson Cope: [00:29:28] It’s a great question. I don’t know if I have got a very good answer. Let me give you my initial thought of that. On the surface, I say absolutely. Because you see this quite often with health care companies, they might want a technical board, which again helps them with, really, the technical – again, I’m going to go back to questions. It’s very different than like a customer advisory board. Many people have successfully brought in their customers. It’s a chance to hear firsthand what customers think about not so much current product, but about the future product roadmap.

Karen Robinson Cope: [00:30:05] And it’s very possible that you could have multiple advisory boards. The thing that I would caution a CEO, especially a younger – and I don’t mean younger in age – but younger in tenure of the company to pull together is to really make an advisory board work, you’ve got to be prepared to spend some time on it. And let me tell you what I mean by that, and I’m not sure you could do that if you have multiple advisory boards. Does that make sense?

Mike Blake: [00:30:32] It does. And let’s go into that because I didn’t want to ask that question. What are the best practices to maximize the value out of the advisory board?

Karen Robinson Cope: [00:30:42] I think that’s probably one of the most important questions, if not the most. The first thing is, again, clearly define what you’re looking for, and that includes wanting to solve these couple of issues. And I usually think it’s the big issues that you don’t have time to solve on a day-to-day basis of the company. Figure out the term, how long?

Karen Robinson Cope: [00:31:03] I’m going to try to get together once a quarter – I’m not going to try. We’re going to have a meeting once a quarter. Here’s the meeting. Let’s go ahead and get the calendar set up at the first meeting. It’s going to last for two years or your term is for two years. What I’m looking for you, Mike, to bring to the table is I want you to bring X, Y, Z to the table in terms of your thought process. That’s what I’m looking for you to bring. Which, by the way, I’m asking Karen to bring a different set of expertise, if you will.

Karen Robinson Cope: [00:31:32] Then, when you put that together, the most important thing is to make sure that you use the time diligently. That involves two things. The first thing it involve is get information to the company directors or the advisers in advance. This nonprofit that I’ve started, we put together a binder which, basically, you have to provide some financial information, some customer information. There’s a set of legal questions. Basically, you put together your planning, if you will. You get that to your advisors in advance and then you say, “These are the things I want to cover. I want to cover these two questions.”

Karen Robinson Cope: [00:32:14] Typically what I like to say is, the things that keep the CEO up late at night especially in your first meeting. What are the things CEO that you really have a hard time sleeping because you were thinking about that? Get that meeting, get the board presentation put together in advance, and run it as if it’s truly a board of directors meeting. And by that, I mean you make sure that you start at a certain time, there’s a formality to it, and then you follow up with action items.

Karen Robinson Cope: [00:32:46] And so, that’s important for two reasons. The first reason is, it helps the CEO and the management team learn how to work with the board. Quite often, I use advisory boards as almost an intro before they get a fiduciary board. We teach the discipline, the cadence of that. Again, especially if you own the company or its closely held, it teaches you some accountability. Because even though the board can’t fire you – I don’t know about you, Mike – but when I’ve been in advisory board meetings and somebody asked me a question and I have a bad answer, I feel accountable. So, I think the board of advisors, if you can run it in that way, it teaches tremendous accountability.

Karen Robinson Cope: [00:33:30] And then, I think the other thing is, even when your board advisors have left the board and moving on to other things, keep them abreast of what they’ve done and how they’ve helped you. I so appreciate you starting this call today saying, “You know, Karen, something you told me years ago has really stuck with me.” I can’t tell you how good that makes me feel. And you’ll find that your advisors – again, people that you didn’t think you could ever get as an advisor – you can get them and keep them if you are diligent about keeping in track with them. Don’t just call them when you need them. Have that formalized meeting schedule. Follow up with meetings.

Karen Robinson Cope: [00:34:13] And even after they’ve gone onto other things, say, “Hey, one of my favorite ones is I was able to get the CIO of the Southern Company, again, a very high position, into a company that was literally $20 million in revenue. This person would have never joined that. To this day, they still speak positively about it because, to this day, the CEO continued to give them updates.”

Karen Robinson Cope: [00:34:36] So, that’s kind of, I think, the right way to structure advisory board. It’s the right way to get the most value from it. And it’s the right way truly – and back to the Steve Jobs comment – it really helps that CEO in the executive team grow, and grow into their next level, it helps them grow to be a better executive. And then, hopefully, at some point they’ll be in a position to give that expertise back to a younger, if you will, CEO or executive team.

Mike Blake: [00:35:06] So, there’s so much to unpack there, and there are two things I do want to unpack. One, the thing you just mentioned, which I hadn’t really thought of, but it makes all the sense in the world now that you articulate it. And that is that there’s a long tail element to an advisory board if done right, particularly if the company is successful. If it’s not, it’s not so great. But there is this unique opportunity to develop relationships that could theoretically help you for the life of your company, even over the life of your career.

Karen Robinson Cope: [00:35:42] So well said. And I love the word long tail, that is so correct. And I’ve seen it again and again when you watch these relationships that form. And quite often, if you’re one of the companies that got a huge amount of money at a ridiculous valuation, you may not have the challenges to get that A-plus team. And you and I might know, most entrepreneurs don’t end up with that $100 million out of the gate cash infusion. And so, for them to be able to get great talent, sometimes the best way to get it is an advisory board.

Karen Robinson Cope: [00:36:15] And if you go in there and say, “Mike, this is what I need. I would be honored if you would consider to be on my advisory board. I’m only going to ask you to sit in on four meetings a year. I’m going to bring in two or three other great people. And here’s who I’m thinking about bringing in, Mike. I know you like those people. And oh, by the way, I’m only going to ask 25 hours or 30 hours of your time per year because each board meeting is going to be four hours. I’m going to give you four hours to prepare for it.” Wow. Who’s going to say no to that?

Mike Blake: [00:36:44] And that leads into the other part of this that I wanted to unpack, because you said one thing which I’m going to take slight issue with and I think you’re going to agree with it the way I frame it. I actually think an advisory board can fire a CEO because you can just decide, “Look, this person doesn’t have their stuff together. And I’m not making an impact. And I’m going to put my time someplace else.”

Mike Blake: [00:37:09] And I don’t know about you, but there have been a couple of boards that have agreed to be on that I wound up regretting because the founder simply didn’t use us very well. They didn’t give us information in advance. Or the things they said they were going to do between meeting one and meeting two never seem to get done. And, again, if that’s happening and why are we doing this, right? And so, I do think there is a need for a founder or a CEO to be mindful that that advisory board, even if you’re compensating them, they’re not making so much money on that board that they’re going to stick around just for the money.

Karen Robinson Cope: [00:37:53] Exactly. Correct.

Mike Blake: [00:37:55] They are going to walk away if you don’t sort of have your stuff together and take that seriously.

Karen Robinson Cope: [00:38:00] You’re right. I absolutely agree with you on that one. And, again, especially in a city like Atlanta, which I think is just very friendly, the folks that have been there, done that. I find so many cases are willing to give back. But they’re only willing to give back if, as you said, they’re respected, their time is respected, and the CEO is truly learning and becoming a better CEO because of the advisory board.

Mike Blake: [00:38:31] And I think that takes a certain kind of mindset. You know, in my experience, I’ve walked into a couple of boards where, to me, it became clear the CEO is looking more for validation than they were for guidance. And some people maybe want to do that, that is not my bailiwick to just provide validation for no reason whatsoever for just gratuitous validation. I don’t think you’re really about that either.

Karen Robinson Cope: [00:39:00] No, I’m not.

Mike Blake: [00:39:01] I know you can dish out the tough love.

Karen Robinson Cope: [00:39:04] You could just put some cool thing on social media and get millions of likes, and that’s the validation you need, 100 percent agree. If you really want to use an advisory board, you’ve got to use them, and you’ve got to respect them. And, again, part of what I think is so good about starting with an advisory board is it really teaches you the process.

Karen Robinson Cope: [00:39:25] So, it’s the process of thinking about spending some amount of time. Because if you know you’re going to have your advisory board meeting next Tuesday, then you’re thinking, “Okay. What are the big issues?” It causes you to get outside of the urgent. It causes you to think about the important. It causes you to get prepared. And being prepared for somebody else means you’re prepared for yourself.

Karen Robinson Cope: [00:39:48] So, when I think about all the positives, again, I am surprised people don’t use, I’m surprised every company doesn’t use advisory board. Because if you really want to get better and you’re coachable, to me, it makes all the sense in the world.

Mike Blake: [00:40:02] And you think about it, there’s some business models out there or some companies pay quite handsomely to have a board of some kind. For example, these peer advisory boards – and I’m not saying anything against them, by the way. I think in certain cases, they had quite a bit of value. But there are companies that pay $100,000 a year to have a peer advisory board. But in some cases, I wonder if they need to actually do that. If they were a little bit more diligent about their networking or simply willing to make the ask they might be able to have a very competent board advise them for a lot less than they’re paying.

Karen Robinson Cope: [00:40:40] That’s a great comment. And, again, I think there’s a great role and a great application for peer advisory. You and I are both visual people, so you’ll get this. I think a peer advisory board is a bunch of little baby sparrows in the nest and the moms trying to feed them all. And they’re all saying, “Feed me. Feed me.” Because everybody wants attention. And it’s difficult. Again, it’s very valuable because you and I are both CEOs, we’re struggling, there’s camaraderie. And for that, I think it’s a brilliant idea.

Karen Robinson Cope: [00:41:17] But I think I will go on record to say, a peer advisory group, in my estimation, if you’re trying to really grow as a CEO with an external board, it’s best for the board to be focused on you as opposed to you and all your 10 or 11 or 15 other baby birds that are trying to be set at the same time. It’s not in any way suggesting that CEOs are that way, but you can get the picture of everybody saying, “Feed me. Feed me.” Whereas, if you’ve got your own advisory board, they’re all about, “How can I feed Mike? What can I do to make sure Mike’s healthy?”

Mike Blake: [00:41:55] I like the sound of that. So, I think we made a pretty compelling case for the value of an advisory board. And some of our listeners now are thinking, “Well, how do I start to put this together?” In your mind, what’s a good process for starting to recruit and assemble this advisory board?

Karen Robinson Cope: [00:42:21] Great. So, I think first off, the first thing I would do is, again, in your quiet time, in you’re quiet space, what exactly am I trying to accomplish? And you need to get real with yourself, because if you’re fortunate enough to be able to pull together an advisory board that really is top notch executives, people that you really admire, very quickly you’re going to get tired if all it is, is about reaffirm how smart I am or reaffirm how cool I am because I got Mike Blake to join my board. That’s not what is it.

Karen Robinson Cope: [00:42:51] Think about, really, what you’re trying to accomplish. Make sure you’re prepared to commit the time. Again, I can give you example after example of companies that I’ve watched that bring on advisory board and I’ve watched just the growth, the progress, and even the CEO themselves. But make sure that you really know what you’re trying to accomplish. Make sure you’re prepared to spend the time for it. And then, based on that, say, “Okay. What then are the skillsets I’m looking for?”

Karen Robinson Cope: [00:43:25] And, again, when I’m being asked to be an adviser, when someone comes to me and says, “Hey, Karen. I need you to be an adviser because I know that you’re pretty open about talking about your failure as a CEO and what you would have done differently. I want to learn from that.” That’s very different example than somebody says, “Hey, Karen. I’ve read about you in the press. I want you to be in my advisory board.” You see, it’s very different.

Karen Robinson Cope: [00:43:51] So, when I can come to you and say, “Mike, I would ask you to consider being on my advisory board. I’m trying to accomplish this. I’m looking for X amount of hours per year. And, by the way, the reason I want you, Mike, specifically is because of the experience you’ve had with X, Y or Z.” That’s, to me, a compelling argument. Then, you need to think about, “Okay. How do I compensate them?”

Karen Robinson Cope: [00:44:20] Now, everybody thinks if I’m going to get, you know, a C-Suite executive or successful entrepreneur, I’ll have to pay them a lot of money. But as you said yourself very well, Mike, they don’t need your money. You cannot pay a person enough, someone of that caliber, to make it worth their while. Most times people will give to the advisory boards will be available to be an advisor is because they really want to see the CEO or the company succeed. Maybe they believe in the mission. Maybe they just believe that I want to hang around with other really cool people like Mike, because it’d be fun for Mike and I did together to strategize about this company.

Karen Robinson Cope: [00:45:05] So, once you’ve got those and you’ve identified who you want, the skills you’re looking for, what you’re trying to accomplish, then, I think, absolutely either through a third party or reach out to that person and say, “Hey, I’d really love for you to consider to be an advisor. Here’s why? How much money?” Typically, early stage companies, you’re going to pay some equity. And, again, I’m not a lawyer, so I don’t want to go down the the legal issues. But, typically, there’s some warrants or some options that are based on some sort of timing or performance.

Karen Robinson Cope: [00:45:42] Sometimes it’s cash, and quite often what I’ll do is say, “Hey, give some money to a certain charity,” and that makes everybody feel good. Sometimes it’s just going to and having a board meeting at a really cool place. And, you know, whether it’s a round of golf, or a sailing adventure, or fishing for the day, whatever it might be, quite often a board member will agree to be an advisor just for that fun experience.

Karen Robinson Cope: [00:46:16] But, again, the most important thing, I think, is being very clear with yourself, your executive team, and the board member of the expectations on both sides. And that, of course, includes compensation.

Mike Blake: [00:46:32] Is there an optimum size in your mind for how many members a board might have?

Karen Robinson Cope: [00:46:37] That’s a great question. I think it should be an odd number.

Mike Blake: [00:46:43] I agree.

Karen Robinson Cope: [00:46:43] And it can’t be no more than, probably, seven at the most. If you’re an early stage company, probably, no more than three. And I think part of that is, again, your purpose in doing this is just to get some vigorous discussion going, some debate going, some strategizing. And I think when it’s too big, especially when you’ve got some high profile people, they kind of want their voice to be heard. And I’m not sure that if you had chief sales officers or CIOs or even established executives that they’re going to want to be in a meeting where there’s six other people that are chirping for their comment. So, I think for a couple of reasons, it’s easier to manage, probably, three to five is what I think is probably the best.

Mike Blake: [00:47:31] And how often do most advisory boards meet in your experience?

Karen Robinson Cope: [00:47:37] Well, I think once a quarter. I’ve heard people say once a month. But, again, at some point, it feels like I’m trying to get your expertise free. If I have a meeting every single month, then part of me feels like, “Wait a second, you know, if you want to pay me to do consulting for you, I’m happy to do that.” That’s why I feel once a quarter feels right. I’ve heard some people do it once every six months. But I think once a quarter just feels right to me. Again, a three to four hour meeting with either a dinner or a lunch, maybe an afternoon of golf, or whatever, just feels right. And most executives say, “You know what? I’m prepared to commit that amount of time to a young entrepreneur that I believe in.”

Mike Blake: [00:48:25] I’m talking with Karen Robinson Cope. And the topic is, Should I form a company advisory board? Just a couple more questions before we let you go and help some other companies I know that you’re advising. But one question I have is, let’s say, somebody out there – in fact, it’s a certainty. Somebody in our audience is listening right now and maybe they have an advisory board, but they don’t feel like it’s working that well. It’s not clicking. They’d like to have one, but for whatever reason, they’re just not getting the value out of it. What questions would you ask that person to diagnose kind of what may or may not be wrong or dysfunctional with that advisory board?

Karen Robinson Cope: [00:49:10] Great question. And, boy, let me think about that. I think one thing is, if the CEO or the executive team is not seeing the results, then my guess is you probably have some frustrated board members as well. And so, I think that’s a good sign. I would go back to, again, hopefully it’s been written down what the goal of the advisory board is. And I would go back and say, “Let’s talk about this.” Why or why not? Is it the wrong goal? Is it the wrong people? Is it the wrong subtopics we’re talking about?

Karen Robinson Cope: [00:49:48] I think going back to the preparation, again, if, in fact, you’re running your advisory board meeting just as if you would a true fiduciary board, at the preparation for the meeting, you’re going to have notes at the meeting, they’re going to follow up. And if the follow up is not occurring, then, again, you need to say why or why not? So, I think those are a couple of things.

Karen Robinson Cope: [00:50:12] It’s funny – if I could just take just a moment to digress, Mike -I started something called Council of Board Advisors, which is, again, a 501(c)(3). I was a judge for the Ernst and Young Entrepreneur of the Year for a number of years, and I was surprised because part of the process – and this is, again, the gold standard for entrepreneurial business companies and so forth success. And one of the first ones – every year, literally, get to sit down and talk to the management team. And I was surprised again and again when I’d see these great companies that look so good on paper. But then, you start to drill down and you realize, “Wow. There’s really some cracks underneath this veneer,” if you will.

Karen Robinson Cope: [00:51:00] And let me give you an example. One company I remember in particular, they were an entrepreneur, they were a finalist, and we were talking to them. And then, afterwards they said, “Karen, can you help me? I’m having some cash flow problems. I think I just need a short term note. A short term loan would fix this.” Again, not telling them anything, just asking them questions, it was clear. It was not a cash flow issue. They had a strategy issue. They had no customer diversification. I mean, their products became obsolete quickly. So, there was just a number of strategy issues.

Karen Robinson Cope: [00:51:33] But this great company on the surface had thought they had a cash flow problem. That got me thinking and I said, “Boy, I don’t even know anything about this industry. But I was able to help this company just asking some questions.” So, I started something called Council of Board Advisors.

Karen Robinson Cope: [00:51:48] At the same time, I had a group of my executive friends who, once they sold their company or retired with their big pension, they would go to Florida, because Florida has no taxes and Florida has great weather. And I said, “We need to somehow figure out a way to keep these executives engaged.” They didn’t want to give full time. They did not want to be in a startup company. They didn’t want to be hit up for money all the time. The CEO said, “Boy, I’d like to get some help, but I don’t know what to do.”

Karen Robinson Cope: [00:52:17] So, I put this process together where we get great companies that are coachable, typically 5 million to 150 million, which is a pretty big range. But they were coachable CEOs, profitable companies that were kind of at a stalemate. And I’d match them, talking to them and say, “Hey, what are the things that keep you up at night?” And then, find advisors for them that really fit their needs.

Karen Robinson Cope: [00:52:40] And, again, we were able to get one of my favorite advisors, which is one of a well-known executive here in town, who was the president of one of the fastest growing companies in America. He had sold a company. He was tired of playing golf. And he said, “I don’t want to get involved, so I’m doing the business, but I’d sure like to get in and opine.” And it’s just been a great experience. We’ve probably helped – I don’t want to guess how many companies. But that’s what got me so excited about this whole advisory board because it is coming into view. It is becoming more important. And I think people are realizing the real need for it.

Mike Blake: [00:53:14] Karen, I was going to give you an opportunity to mention your nonprofit, so I’m glad you did that. Because it’s important that people know there’s resources out there and what you’re doing. We could have easily had another hour in this conversation, but, unfortunately, our time is running out. There are probably questions we either didn’t cover or might have covered in more depth for somebody. If somebody is listening and has as a question they like to ask you to follow up, can they do so? And if so, what’s the best way for them to contact you?

Karen Robinson Cope: [00:53:43] Well, thank you. Again, I appreciate it. And I always love to talk with you. And I just kind of hit myself because we’ve let too much time pass. But I’d be delighted to help in any way. There’s a number of some good organizations. I actually put my nonprofit under TiE, The IndUS Entrepreneur, which is a great worldwide entrepreneur organization. And we’ve got a very successful program where we work with these great companies.

Karen Robinson Cope: [00:54:12] If someone wants to call me, I’m more than happy. krobinson, K-R-O-B-I-N-S-O-N, @mara6. By the way, Mara after the Maasai Mara, and our daughter’s middle name, Alexandra Mara Cope. So, it’s krobinson@mara, M-A-R-A, the number 6.com. And I’m more than happy to opine, give some free advice. And, again, anything I can do to help because I really do believe that the Atlanta community is becoming so fulsome and so exciting. But we clearly need to make sure that we can give guidance to these entrepreneurs and these companies as they go to the next level.

Mike Blake: [00:54:53] Yeah. We need to send the elevator back down. But I think the good news is – at least as long as I’ve been here about 20 years or so – I think Atlanta’s been a town that does that. And, hopefully, for our listeners that are in other areas of the country or the world, really, that can find communities like that as well.

Karen Robinson Cope: [00:55:11] Absolutely.

Mike Blake: [00:55:12] That’s going to wrap it up for today’s program. I’d like to thank Karen Robinson Cope so much for sharing her expertise with us today.

Mike Blake: [00:55:18] We’ll be exploring a new topic each week, so please tune in so that when you’re faced with your next business decision, you have clear vision when making it. If you enjoy these podcasts, please consider leaving a review with your favorite podcast aggregator. It helps people find us that we can help them. If you’d like to engage with me on social media with my Chart of the Day and other content, I’m on LinkedIn as myself and @unblakeable on Facebook, Twitter, Clubhouse, and Instagram. Once again, this is Mike Blake. Our sponsor is Brady Ware & Company. And this has been the Decision Vision podcast.