02/25/2013 11:57 am ET Updated Apr 27, 2013

About Leadership: Getting Advice -- The Advisory Council (Part 2)

In my previous column, I discussed the principle and rationales for corporate advisory councils. This week I want to deal with some of the practical aspects. But before we go any further, we need to populate the council. A first question is the balance between external and internal members. For the Technology Advisory Council of BP we started with a structure that was about an equal number of internal and external as regular attendees. The leaders of technology in all parts of the company attended, and we had six external members. Later, we changed this so that only two internal executives were members, and we had 10 external members. By contrast, I am on an advisory panel for a company where there are only 3 external members and 8 internal.

Anything is possible, and there is no right answer. But the dynamic of the meeting will be very much determined by this choice. What sort of discussion, who gets how much air time, what sort of actions and follow up occurs, all of these will be pretty much decided when you settle this question. On balance, I prefer a small internal group, strictly limited by logic behind the choice, and a larger external group. But that is a personal preference.

How does one pick the external members? I think there is one key rule, and that is that they need to be a peer group. You cannot have Nobel Prize winners sitting with second tier industrial representatives. But you can have leading people from academia and industry on the same panel, as long as they see each other as peers. Again, there is not a single answer as to what level person to have, but if, for example, the advisory council is going to meet regularly with the CEO of the company, then it would be a good test to think about that meeting and imagine the potential member in that setting. Amazing how easy it is for potential candidates to fail that test.

A key quality that I look for in advisory council members is breadth of interests. I am quite happy to have a member on an oil company council from the pharmaceutical industry, as long as he or she is really interested in learning new things, and is insightful about applying knowledge from one industry to another. Academics particularly need to be screened for the breadth of their interests, unless the company is so focussed on one business area that they will only hear about a narrow range of topics. I like academics that have chaired a really successful department, or have been dean of a group of departments, and can speak about what is going on across those areas. People with a lot of curiosity.

Once we know who we want for members, is there anything else to think about? Yes. A few things.

First, who is going to chair this group? Again, no right answer, but what seems to work is bridging the internal and external, and that bridge is provided by a non-executive director. We did this in BP, and I chair an advisory council for a company where I am a non-exec today. This person should have the right sort of insights and judgement about what is important to the company - strategically and financially; be able to represent the outputs of the advisory council to the Board, and be able to discuss issues with both the functional leadership and the CEO.

Second, how long should members serve? One of the most common mistakes is to appoint advisory council members without specifying a term. I have observed that if you choose the right people they have a lot to give, but after a while you are hearing the same advice that you heard three years ago, sometimes in a different context, but basically the same advice. So a challenge is to continue injecting fresh ideas and perspectives into the advisory group. To me a three year term, with an unstated (but occasionally exercised) option to renew for one or two additional years, is the best bet.

Third, frequency of meetings. Four a year is ideal. It does not create an overwhelming burden on the internal leadership in terms of organisation and content, yet gives the advisory group regular contact with each other so as to build their ability to work together productively. It allows coverage of a range of company activities. One of these meetings can include a debrief of the CEO and executive directors.

Fourth, attendance. We choose busy, active people for members, but unless they commit to coming to the meetings it is hard for them to add value. If we have four meetings a year, we expect everyone to try to attend them all, but to at least make three of the four, and not to miss two in a row. It is good practice to tell members when they are appointed that if they miss too many meetings we may ask them to leave the council.

Finally, pay. Yes, members should be paid, and the amount should be commensurate with the size of the company, the time commitment expected, and the level of people chosen.

About Leadership:
About Leadership is a series of 52 columns on corporate leadership - essential skills, leading teams, managing your career, the strategic and business practices to make a company and its leader distinctive from competitors. These columns will be of interest to people leading small and medium sized companies today, many of whom have not had much formal training in management skills and techniques; for the many people in big companies who aspire to senior management; and for anyone who thinks: Give me a hint, how can I do this better?