Everything You Need To Know About Advisory Boards
What is an Advisory Board?
The definition of an Advisory Board is a structured, collaborative method for organisations to engage advisors and/or stakeholders. A longer definition can be found here.
Advisory boards can take many forms, but typically the members include:
- Representatives from the business or organization itself,
- An independent Chair, and;
- 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.
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 solve problems that the internal executives or business owners need resolved and especially where there is a requirement for external expertise in order to solve them.
What is the difference between an Advisory Board and a Board of Directors?
Both 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 in nature 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.
As the professional body for the advisory sector, the Advisory Board Centre advocates and educates on the creation of structured, formalized advisory boards built on best-practice principles as outlined in the ABF101 Advisory Board Best Practice Framework™. We also recommend that Organisations seek quality Advisory Board members that are credentialed, current in their professional knowledge and committed to ethical engagement. Professional advisory credentials include Approved Advisors and Certified Chairs.
WARNING SIGNS FOR INFORMAL ADVISORY BOARDS MAY INCLUDE:
- A lack of clear structure or purpose
- A lack of documentation that supports the Advisory Board like a Charter, Advisor Agreements, Meeting Minutes and Reports
- Poorly defined priorities and objectives
- Inexperienced or incorrectly selected Advisory Board Members
- A lack of commitment or misaligned expectations from the business and/or Advisors Board Members
- Poor meeting facilitation
- A lack of planning, preparation and communication protocols
- Conflicts of interest, personal agendas or loss of independence
- No investment in establishment, facilitation or engagement of Advisory Board members
- No measurement or review processes for the Advisory Board purpose, structure and impact
The Best Way to Start an Advisory Board
If you are thinking of implementing an Advisory Board, start off on the right foot by following these steps:
1 – KNOW WHO YOU ARE AND WHAT YOU NEED
Start off by carefully evaluating your current business situation and priorities for the future. Where are the gaps in knowledge, skills or expertise in your current business, executive team and external support providers? What is your current governance structure? An Advisory Board is a flexible and highly effective support tool but it is also a serious undertaking.
The complimentary Advisor Concierge service from the Advisory Board Centre was created to be a resource to business owners and Executives to gain clarity on the “starting point” for an Advisory Board.
2 – BUILD YOUR ADVISORY BOARD ON A BEST PRACTICE FOUNDATION
Taking the time to carefully establish your Advisory Board structure including Charter, agreements and protocols do not need to be a lengthy or onerous process if you get the right support. Options available to you include exploring the ABF101 Advisory Board Best Practice Framework™, completing your own professional development such as the Advisory Board Technical Foundations program or connecting in with an experienced Certified Chair that can help guide you through setting up a tailored Advisory Board structure that is fit for your business needs.
3 – ENSURE ADVISORS ARE THE RIGHT FIT
Consider exactly what you’ll need from your Advisory Board and ensure the Advisors you choose can fulfil your needs. Rather than just selecting high profile people, carefully evaluate your own business priorities and what type of knowledge or experience you need to tap into.
Are they someone that you respect, has the same values as your organisation and right motivations to be engaged with your business? Will you expect them to make introductions to investors or clients/customers? What else might you need your Advisors to do? Are they committed to their own professional development and currency in the market?
4 – CHOOSE ADVISORS WHO HAVE ALREADY ACHIEVED WHAT YOU WANT TO ACHIEVE
There’s no point in choosing people who are at the same level as you. You want advice from people who have been through the trials and tribulations you might encounter in the future and by tapping into their lived experience and expertise, they can effectively advise you on how to avoid pitfalls and achieve success. Don’t just limit yourself to your current networks- often tremendous value can be created by seeking out people from new locations and networks.
5 – BE PREPARED
Compile your Advisory Board documentation (Charter, Advisor Agreements, etc) and your meeting schedules. Work with your Chair to prepare your board report and information such as your mission statement, values, strategic plan, marketing strategy, customer profiles or any other relevant information to show Advisory Board members who you are and what you’re trying to achieve as a business. Set an agenda and have a clear plan at each Advisory Board meeting of what you hope to gain from the meeting and topics you want to explore. Preparing your Advisory Board members prior to the meeting means you don’t have to waste time talking about the past but instead focus on future strategies and priorities.
Choosing the right Advisors is vital to achieving success with an Advisory Board, in the same way that choosing the right employees is crucial to business success. Ensuring your board members are aligned with your goals and values and are the right fit will improve your chances of achieving growth.
Need Professional Assistance with Your Advisory Board?
You can recruit Advisory Board members by reaching out to other members of the business community; however, the easiest way to get started is to contact us for a confidential discussion about your needs. We are the leading professional body for Advisory Boards in the world.
We can easily connect you with independent Certified Chairs and board-ready Advisors through our complimentary Advisor Concierge service to create a best-practice Advisory Board that can assist you to solve problems and overcome challenges.
If you still have questions, our Frequently Asked Questions page is a goldmine of information which will answer other questions you may have.