Compensation Strategies for Advisory Board Members Without an Exit Strategy

When a company lacks a clear exit strategy, appropriately compensating advisory board members can become a complex task. This article delves into the challenges and provides strategic guidance on how to structure compensation for advisory board members under these circumstances.

Understanding the Challenges

Compensation for advisory board members often hinges on expectations related to the company's future growth, potential exit, and the tangible contributions they can make. On the professional services side, these senior advisors typically fall into two categories: actual experts in specific topics and those with broader industry knowledge or personal connections.

Evaluating the Target Audience

To effectively determine the right compensation, it's crucial to first define who the primary beneficiaries would be. This involves assessing the target audience and identifying potential incentives that align with their motivations. Here are some key incentives to consider:

Professional Credibility

Reputation and professional credibility are significant incentives, especially for experts in specific fields. If an advisor can enhance their standing by associating with a respected company, they are more likely to agree to the terms.

Domain Expertise and Learning

For individuals looking to expand their expertise in an area of interest, the opportunity to gain domain knowledge is a considerable motivation. Exposure to deals, customer deployments, and strategic insights can significantly contribute to an advisor's professional development.

Visibility and Networking

Visibility into market trends, deals, and customer segments of interest can provide valuable networking opportunities and exposure within the industry. This can be particularly appealing for advisors who seek career growth and visibility in a specific geographical or domain segment.

Assessing the Perceived Value

Not all advisors will be motivated by the same incentives. A simple exercise is to ask whether the incentives offered pass the "sniff test" - that is, whether they are meaningful to the advisor. For the compensation strategy to succeed, it must resonate with the motivations of both the company and the advisor.

Identifying Absentees and Friends

Financially, the absence of an exit strategy can be a deterrent for many advisors. As such, the only individuals who may still sign on are those with little to offer (other than their name) or friends and family. It's critical for the company to clearly understand the motivations of each potential advisor and tailor the compensation accordingly.

Conclusion

In the absence of an exit strategy, structuring an effective compensation plan for advisory board members requires a thorough understanding of the potential advisors' motivations. By assessing the professional significance of the role and offering meaningful incentives, companies can attract and retain top talent, even in challenging circumstances.

Keywords: advisory board compensation, no exit strategy, senior advisor compensation