Everything you need to know about advisory boards

Everything you need to know about advisory boards

An advisory board is a structured, collaborative method for organisations to engage advisors and/or stakeholders. In this article by The Advisory Board Centre, find out what advisory boards do and what the difference is between an Advisory Board and Board of Directors.

Advisory boards can take many forms, but typically the members include:

  1. Representatives from the business or organisation itself
  2. An independent Chair
  3. A set of carefully selected Advisors

The members of the advisory board help provide objective advice and mentoring to the business representatives. The scope of this advice is generally defined prior to the first meeting with guidance from the Chair. More detail on the roles and responsibilities can be found here.

Common Characteristics of an Advisory Board

  • Independent Certified Chair
  • Fit-for-purpose charter
  • Fit-for-purpose advisors
  • Structured meeting schedule, agenda & communications
  • Commercial engagement & remuneration of members
  • Problem-solving conversations

What Do Advisory Boards Do?

Much like their name alludes to, advisory boards exist to provide advice to the business or organisation. The advice sought will differ but may include topics from anything such as:

  • how to grow or scale the business;
  • how to support a key transition within a company;
  • tackling business challenges;
  • managing crisis;
  • leading expansion into new markets; and
  • other strategic or technical advice.

Advisory board members are typically professionals external to the organisation who are appointed by a company (not by its shareholders) due to their skill specialisation or experience in the company’s industry sector (i.e. legal, financial, growth, supply & logistics, technology, marketing, sustainability, etc.).

Advisory boards generally meet on a semi-regular basis (four to six times per year) and are particularly useful for high-growth businesses, family companies, businesses going through a change, or corporatised organisations seeking support to complement their existing executive team and board of directors.

They help with problems that the internal executives or business owners need to be resolved, especially where there is a requirement for external expertise.

What is the difference between an Advisory Board and a Board of Directors?

Both types of boards are very different and should not be confused.

An advisory board acts as a sounding board for the owners, directors, or shareholders of a company to bounce ideas off and get access to expertise that might not ordinarily be available. Unlike a board of directors, advisory boards do not make legally binding decisions and do not have any fiduciary responsibility.

A board of directors, or governance board, is a group of individuals who are legally responsible for the governance, control, direction and management of the organisation. Directors have a fiduciary duty to govern the organisation on behalf of the shareholders or members of the company. A governance board is a decision-making model where decisions are binding on individual directors and also on the organisation.

Conversely, an advisory board provides non-binding advice and members are not authorised to act for or make decisions on behalf of the organisation. Instead, they are a problem-solving model which can be used to provide critical thinking, robust analysis, and strategic insights to inform the business owner, executives, or directors, who in turn will make decisions.

Advisory boards are known in the market by many different names including advisory panel, advisory council, steering committee, think tanks, board of advice and startup boards.

What can go wrong with informal advisory boards?

Things can go wrong if the advisory board is not carefully implemented, managed and reviewed.

Many advisory boards are informal and can lack clarity of purpose, structure or overlook the importance of being very careful when selecting members. What often happens with informal advisory boards is they become ineffective and struggle to deliver value for both the business itself and the Advisors themselves.

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