Advisory boards for farmers
The owner of a growing business has many pressing issues to think about. As a business expands and matures, the importance of a Board of Directors becomes increasingly common and can even be mandated. While roles and responsibilities may vary, the general function of boards is fairly well understood. The whole Enron situation has resulted in heightened awareness to the responsibilities and risk for directors.

Smaller businesses often find it difficult to see the value of formal directors. Yet as a business grows, there is an increasing need for external advice by independent advisors, who are there only to help the business succeed.

There are many issues that farm businesses face as they grow, including:

• larger and more diverse farm businesses.
• understanding and adopting strategic business direction, that may include off-farm investment.
• increasing complexity in ownership and related decision making processes.

A recent presentation on advisory boards to a farm audience witnessed two farmer participants who thought they had created and were utilizing advisory boards.

One had a group of farmers he would talk to when faced with a management challenge.  This is a peer to peer structure or network. The other said he had four or five individuals he respected and with whom he consulted when faced with a management issue. This type of support more closely correlates to advisory boards but is in fact really a mentoring group. Peer to peer groups and mentoring groups can be an excellent functional resource for farmers. But, they are not advisory boards.

So, if these structures differ from advisory boards, then what exactly are advisory boards and how do they work?

Like a Board of Directors, an advisory board is a formal group, which meets on a regular basis and helps owners and senior management with the decision making process. The advisory board holds management accountable to targets and benchmarks and helps to establish goals.

Advisory boards really differ from other boards in three ways:

•  There is no fiduciary responsibility – that is they are not legally liable for the decisions made.
• The structure and function is completely flexible and can be designed to meet the needs of the business.
• Owners or managers are not required to act on recommendations made by the board – they offer experienced guidance in an advisory capacity.

A major advantage of the an advisory board is the flexible structure, which allows you to have options. Here are some examples of where advisory boards can often help farms:

• Help owners agree on a business strategy, mapping the future direction of the farm and guide management decision making.
• Help owners allocate farm resources to produce the best financial return.
• Independent assessment and evaluation of senior management, especially useful when multiple family members are involved in management.
• Help choose and develop the next general manager for the farm. The advisory board can bring stability during the transition period.

An advisory board:

1. helps map the future direction of the farm but will not write your business plan.
2. relationship differs from a client relationship and has a flexible structure.
3. is formally organized with terms of tenure and clearly stated roles.
4. meets on a regular basis, if only semi-annually.
5. includes a diverse group of members with business experience.

This is only a brief introduction to a concept that has been around for a while, but is only now starting to become of interest to leading farmers.

By Reg Ens, Agriculture Consultiung Manager. Originally published in West Coast Farmer. For more information, please contact your local MNP advisor or Reg at 1.877.853.9471.

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