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This article was published 20/3/2014 (1069 days ago), so information in it may no longer be current.
Jean-René Halde has long been an advocate of the benefits of advisory boards for small businesses.
As the CEO of the Business Development Bank of Canada (BDC), Halde is all about figuring out ways to help small business succeed.
With 29,000 small-business clients, it's a group that's obviously important to the BDC.
As opposed to a board of directors, advisory boards do not have legal or fiduciary responsibility. In most cases they would be unpaid, probably numbering only three or four. The idea is such boards can provide advice based on experience that would aid the entrepreneur in seeing the forest instead of their predisposition of concentrating on the trees.
But when it comes to any kind of governance issues related to small business, Halde is a realist.
"Let's call a spade a spade. When you talk to entrepreneurs about governance, they head for the hills," Halde said in a speech in Winnipeg on Thursday where he revealed the results of a BDC-commissioned study called Advisory Boards: An Untapped Resource for Business.
He said he knows that despite the testimonials about how beneficial it is for entrepreneurs to get the foresight and insight from independent advisory boards, it often does not resonate with entrepreneurs. When it comes down to it, they are interested in three things -- increasing sales, decreasing costs and making money.
But Halde said his staff at the BDC urged him to dig deeper to get beyond the anecdotal evidence that businesses who had advisory boards really did benefit.
The study released in Winnipeg on Thursday -- the first of its kind -- shows small and medium-sized businesses that implement advisory boards do experience a significant impact on the business's financial performance.
"We just received the results last week and I was crossing my fingers," Halde said. "We were big believers but it is very nice to see the results."
The study features both qualitative and quantitative analysis, the latter produced by Statistics Canada using a large control group to compare the financial and productivity performance between advisory-board companies and non-advisory-board companies.
The results are significant.
The survey showed only six per cent of Canadian small and medium-sized businesses use an advisory board.
But it also showed that for those that do take the trouble of setting up advisory boards, there are good results for the companies.
For instance, sales grew 67 per cent on average in the three years after companies created an advisory board, almost triple the 23 per cent rate of the previous three years; productivity rose six per cent in the first three years with an advisory board, double the three per cent rate in the previous three years; and from 2001 to 2011, average annual sales of businesses with an advisory board were 24 per cent higher than those of a control group of other businesses, while productivity was 18 per cent higher.
Perhaps the best selling point in the piece is 86 per cent of the respondents said advisory boards had a significant impact and 58 per cent said it was very significant.
You might think that would prompt all small and medium-sized businesses to rush out and set up their own advisory board.
But Halde realizes the hard work may now be at hand.
"It's nice to know the facts have now shown that there is genuine benefit to having an advisory board," he said. "But as a development bank we now have to convince entrepreneurs to do that."
Despite the fact the BDC has obviously done the legwork to prove the thesis, he said it is not something BDC has to own.
(The BDC is a federal Crown corporation that provides a number of lending services to small and medium-sized businesses. It does not provide lines of credit and is not a deposit-taking or chequing institution.)
Halde spoke to the Winnipeg chapter of the Institute of Corporate Directors on Thursday and called for them to become advocates. He said he will talk to all the bank CEOs and get them on board as well.
He said the BDC was definitely going to pursue some process of developing a consulting or coaching template to assist small businesses in setting up boards.
"We'll see what we can provide as a service," he said.
That could be designing a matrix of skills a company is looking for, showing how to prepare the meetings, what kind of information they need to provide or explaining how to do an orientation session.
He's also convinced there are seasoned business people out there who could join those boards, and it will be a gratifying experience for them.