As an entrepreneur who has started a business, I have personally wrestled with the decision of whether or not to form a board of directors.

On the plus side of having a board, the directors provide a fresh perspective, the benefit of their own past experiences and maybe some assistance in finding capital and making contacts.

The cons for a board are another administrative layer within the organization of the business, cost in time and resources in recruiting and compensating board members and the annoyance of people who are evaluating the business and may find fault with what management is doing.

My conclusion after having started and sold companies, served on several boards of directors and advisory boards and as an angel investor: Go for it! Form a board of directors and an advisory board. Both will benefit the company and the founder/CEO.

It is important to understand the different roles boards of directors and advisory boards may play. The directors, in addition to providing counsel and advice, are expected to hold management accountable in reaching goals and creating shareholder value. Advisers provide guidance, counsel and a reality check. They believe in the company, the team and the idea. They are mentors who may fill gaps in the management team. Their role is less formal, and they do not vote on legal matters affecting the business and organization of the company.

Following are a few guidelines in building director and advisory boards.

First, for a board of directors:

• Include a majority of outsiders.
• Use five to seven members.
• Recruit roles. Members should represent different capabilities (industry expertise, customer orientation, product knowledge, financial oversight, etc.).

• Manage the board. Provide information in advance of the meeting; make assignments and hold them accountable.
• Compensate strategically. Granting stock options will motivate members to focus on growth and increasing company valuation. Guy Kawasaki ("The Art of the Start") suggests "0.25-0.5 percent, but for an absolute superstar ... 1-2 percent of the company."
• Meet at least quarterly.

• Use three to five members - all outsiders.
• Recruit expertise - accounting, finance, legal, industry, product, sales, etc.
• Stock options can be used as compensation, but often no formal compensation is required. Offer dinner during meetings and other perks (i.e. a license to utilize the product, promotional items given to customers - shirts, hats, etc.).
• Meet as needed (at least quarterly) and build the kind of relationship that allows you to call on the phone or e-mail for quick advice. Do not abuse their donated time.
• For additional information see "Advisory Board Can Help a Business Bloom," published in the Deseret Morning News, Dec. 12, 2002.