| However, despite these benefits, certain situations can arise if a board member is not performing up to par or is hindering the progress of the company. These dillemmas can cause serious problems for emerging companies, which rely on effective boards and strong counsel to be successful. In such cases, there might be only one efficient way to remedy the situation: removal.
Unlike a board of directors, advisory boards serve at the pleasure of the CEO or business owner. A CEO can hire or fire a member of an advisory board or the entire board itself. However, because many companies lack any formal plan for regularly selecting and rejuvenating their boards, ineffective advisors often hang on for years. The following are some example situations where removal might be appropriate.
Disruptive board members: Whenever you put strong personalities in a room, problems can arise. The purpose of an advisory board is to get business leaders to express their ideas while also being objective. Board members must always remember that it is never about being right or wrong, it’s about hearing and expressing ideas to improve the company.
Unfortunately, if a board member consistently disrupts meetings, ignores different points of view of even puts down fellow board members, it may be necessary to remove that person. This can be a common occurrence for advisory boards that lack planning or strategy and limited power to effect change.
Deadwood directors: Advisors who occupy seats on a board but who rarely provide feedback, attend meetings or keep abreast of company matters are also a real problem. Emerging companies rely on their boards to provide insightful counsel and proactive solutions and strategy. If advisors are not holding up their end of the bargain and are collecting fees for limited work, dismissal should be considered. Private companies rarely have so much cash they can waste it on ineffective advisors. Every company should expect all advisors to provide valuable feedback and participate in all board activities.
Conflicts of interest: In the past, many companies created advisory boards by adding family members and personal friends. However, this scenario seldom leads to effective boards and can actually create significant inefficiencies. Family members or friends rarely provide the independence and specific industry knowledge that are keys to successful boards.
Removal: Although board removal is difficult for everyone, organizations should provide for these situations by having basic tenets in their bylaws. The following strategies are the most common ways to remove ineffective board members:
- Direct intervention
- Evaluation
- Term limits
A one-on-one intervention by the CEO is the most common solution to managing a problem board member. If a board member has failed to attend several meetings, has become an impediment or has not provided significant feedback, the CEO can meet with the board member and ask for improvement or a resignation.
By privately confronting the troubled adviser, CEOs can voice their concerns and be proactive about improving the situation. A formal letter should be included thanking the member for his or her services and outlining the reasons the board is looking in a new direction or requiring improvements.
In recent years, many companies have started to ask advisors to evaluate the company as a whole, as well as provide insight on other advisors, the CEO and themselves. This method creates a valuable peer-review process, one that ensures that board members are accountable for their efforts and that a healthy board turnover is created.
Finally, many boards decide to use term limits to avoid poor advisors. Therefore, a board member can only serve the maximum term before a forced “break” from the board is required. Term limits provide a non confrontational way to ease ineffective members off the board. An alternative to setting strict term limits is to use a rotation policy. A rotation policy can eliminate conflict when trying to get rid of a poor performer while bringing in fresh ideas on a consistent basis.
Regardless of how an adviser is removed, it is important to ensure a positive relationship. It is vital to try to ease an advisor out gracefully and keep their interest in the company, not only because it is a good move politically, but also because they could be valuable in the future as the company’s business, needs, goals and methods change.
Jeffrey S. Davis is chairman and founder of Needham-based Mage LLC, a business, organizational, and management consulting company.
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