Thought Leadership Articles
How to build high performing advisory boards
How to build high performing advisory boards
Thought Leadership Articles
Published 22 January 2019
One comment from the owner of an $18m engineering export firm with a staff of 65 sums up the problem.
“I feel as an owner I have nearly exhausted all of my expertise and to grow the business past its current turnover, we need some outside expertise from people who have been in the same position as we are right now.
“We have been looking for the right advice structure to support us long term and tap into the right people globally.”
It’s a phenomenon Louise Broekman, CEO of Advisory Board Centre, knows all too well.
As the latest research shows in the Advisory Board Centre’s State of the Market Report 2019, firms that are changing and growing are looking for external support.
In this report a massive 74 per cent of surveyed businesses cited growth as the main reason for establishing an advisory board.
The growth of formalised Advisory Boards as a management discipline will continue to grow internationally
The report reveals 41 per cent of businesses were needing to, or going through, change. A further 33 per cent were at the start of a growth spurt when they appointed an advisory board.
An advisory board is a group of professionals brought in to assist an organisation with internal decision making. It has a problem-solving rather than governance role so it differs from, and has more flexibility than, a board of directors.
Its flexibility makes the advisory board the perfect tool for dealing with growth challenges like entering international markets. Used well, the advisory board will provide strategic advice and experienced market insights that deliver results in tandem with management and an executive board.
Broekman says “The last decade has seen an increasing emergence in the popularity of Formalised Advisory Boards within the business community.
“It is anticipated the growth of formalised Advisory Boards as a management discipline will continue to grow internationally – to specifically target business with the potential for high-growth and those navigating change,” she says.
At the top end of town, financial institutions such as Bank of America, JPMorgan Chase and Deutsche Bank have appointed advisory boards to boost sales, markets, and global expansion.
The Bank of America, for instance, formed an advisory board of multinational business, academic and public policy leaders. The purpose was to gain insights into global trends and business potential.
According to American Banker, CEO Brian Moynihan said at the time “Bank of America has relationships with clients who compete in every region of the globe.”
He went on to say the advisory board’s perspective, experience, and judgement would “help make us a better partner for the clients we serve”.
So there’s undoubted value in experts who can offer valuable insights into the processes that will accelerate an organisation’s growth.
In 2019 the number of professionals worldwide working on advisory boards is estimated to be about 1.3m. However, getting access to such expertise can be a minefield for businesses.
Easing the process is something the Advisory Board Centre has done since 2002.
This independent industry group was set up to help organisations engage effectively with advisors. With a best practice focus, the Advisory Board Centre is the leading resource for businesses and professionals engaging in formalised advisory boards.
For businesses seeking to expand their global footprint, a formalised advisory board provides access to advisors with global corporate expertise and in-market knowledge and connections to support the businesses ambitions and strategy execution.
The support and knowledge sharing can take many forms depending on the individual business’s needs, their product or service range and market(s) they are entering. There is no one size fits all approach. An effective advisory board that delivers tangible value requires careful curation and a best practice foundation.
Because of its precise remit and the expertise of advisors, an advisory board may be able to shine a light on particular business dilemmas: for instance, would a master license, a joint venture or a subsidiary prove the most efficient and reliable business model for expansion into a market? Advisors with global corporate expertise can bring their experience to bear on issues that may underlie seemingly simple decisions.
As an example, China is an attractive source of investment interest for many companies, and particularly popular with Australian business. With a dizzyingly large population and an extraordinary capacity for development and consumer spend, the nation is a tantalising export proposition.
China is a complex and diverse market. An understanding of this market, including varying demographic, economic and cultural characteristics, is crucial to any businesses success.
As Dr Anne Holmes points out in the Australian government briefing publication ‘Australia’s economic relationships with China’: “as China moves production to more sophisticated goods and services, it will require high-quality human resources, well-developed infrastructure, a well-developed financial sector and a good regulatory system. Australia has the expertise to help to develop these.”
Holmes writes “Australia’s public sector works very efficiently; in a number of areas such as budgeting, health administration and social security, it is a world leader. Already, China is the biggest market for Australian education services.”
According to a January 2019 report by abc.net.au, in 2017-18 China contributed $194.6 billion worth of imports and exports to the Australian economy. One-third of Australia’s exports (worth $123.3 billion) are delivered to China.
But for many firms investing in and tapping into the Chinese system proves a challenging process.
The Department of Foreign Affairs and Trade cautions in its country brief on China: “Increasing numbers of Australian businesses are entering the Chinese market with great success. However — like all cross border commercial activities — the benefits of doing business in China are coupled with considerable risks.”
The potential is there; avoiding the pitfalls is crucial.
Companies doing business with China need to understand the market complexities, to recognise what attracts Chinese buyers, to navigate the rules and regulations shaping China’s business framework and to be alert to political and legal boundaries and restrictions.
Jack Brady, CEO and Executive Director of AustCham Shanghai, the peak body for Australian business in China, says “China is a complex and diverse market. An understanding of this market, including varying demographic, economic and cultural characteristics, is crucial to any businesses success.”
AustCham Shanghai recently launched the 2019 Westpac Australia-China Business Sentiment Survey on partnership with Westpac and chinaskinny. The survey found that “Brand Australia” is a strong competitive advantage as “China perceives Australia as a global leader and supplier of high-quality fresh produce, goods and services.” The survey found that 71% of respondents doing business in China had optimistic outlooks over the coming 12 months and nearly 80% were forecasting profitability in their China operations in 2019.
The sentiment is overwhelmingly positive but to successfully capitalise on this advantage requires careful consideration, targeted investment and a long term focus. A well structured advisory board can help a business take a broader view of the market, objectively consider opportunities and provide connections and insights to establish in-market partnerships.
As an example, a major financial institution adopted an advisory board specifically to provide support and insights into its expanding Asian operation.
To access these contacts is very important to a foreign business in markets like Asia which are very relationship-based and foreign companies do not generally have deep well-established local contacts.
In the Advisory Board Centre’s State of the Market Report 2019 a key international banking executive explains how this came about.
“The Asian business had been operating for a number of years however it was embarking
on significant growth post the global financial crisis and the board had committed to grow the footprint, and the business by committing more capital, capex, and headcount to the region.”
The leadership team was tasked with executing an ambitious growth strategy. The appointment of an Asian advisory board was designed not only to assist the team but to provide reassurance to head office senior management and the main board.
The banking executive says the advisory board brought numerous benefits to the overall business.
“From the local management perspective, the advisory board provided a strong sounding board to test new ideas, obtain guidance on the direction of the business and the markets – something that the leadership team could not get from head office.
“The advisory board also validated management’s thoughts and ideas which made getting approval from head office more streamlined, and a faster process.
“In addition, the leadership team were able on many occasions to tap into the advisory board members’ contacts from a client, government, and regulatory perspective, which proved invaluable on many occasions and particularly when we had specific issues that needed to be dealt with.
“Being able to access these contacts is very important to a foreign business in markets like Asia which are very relationship-based and foreign companies do not generally have deep well-established local contacts.”
The advisory board provided an independent view of the performance and operations of the Asian business which gave head office management confidence that the business was being well managed.
It also served as a channel to test theories on the Asian market with advisory board members, on an ad hoc basis rather than through the more formal meetings.
A global stage brings greater scrutiny. Performance levels that are acceptable, even first class, in a domestic setting may prove unwieldy, sub-standard or irrelevant in an overseas environment.
A tailor-made advisory board structure can deliver targeted results for businesses working on their next level of growth.
Any organisation with international ambition will face significant challenges in effecting its goals.
An advisory board is very much a 21st century way of accessing independent expertise without the restrictions of a traditional board structure.