The COVID-19 pandemic exposed new risks and existing weaknesses within organisations, specifically around supply chain, cyber security, workforce management and the ability to rapidly respond to changes in regulation. Gaps in knowledge, skills, or currency of information are a key area that increases both complexity and risk for boards. This is where execution risk is critical. Directors have the responsibility – and personal exposure.
The Directors and Officers (D&O) insurance market is strained by increasing exposures to “known unknowns” such as climate change, cyber security, corporate social responsibility challenges, and of course, pandemics. Volatility can however create a growth opportunity for some market segments, which was witnessed in 2020 with dramatically heightened merger and acquisition activity. Organisations may discover new growth or exit options but must carefully consider the impacts, and as such are seeking support to complement their existing executive team and/or board of directors.
So, with good governance under the microscope…how do advisory boards fit in? In this environment, an advisory board (or in this instance, better known as a corporatised advisory board) can provide insight to governance boards, executives, or both. A corporatised advisory board in an organisation with a well-articulated formal governance structure can provide a distinct, yet complementary, support structure as part of the governance ecosystem.
Corporatised advisory boards generally have a specific purpose such as innovation, growth, international operations, supply chain ethics, market consultation, diversity, or oversight of a specific strategy. With a focused scope, such a board must have clearly defined protocols outlining the advisory board operation, ensuring it is distinct from the board of directors.
Corporatised Advisory Boards on a Global Scale
The market for advisory boards is constantly shifting as organisations find useful ways to adapt the model for many different purposes. In the last year, we have seen corporate giants, including Adobe1, Aon2, Salesforce3, and Deutsche Bank4, utilise the advisory board structure for strategic guidance and support, ultimately informing board-decision making.
In some instances, advisory boards have been utilised at a project level, to pursue a particular focus that will affect that company at large. This was the case for Alex Dayon, Salesforce President and Chief Strategy Officer, who in response to the pandemic’s major boost of the digital world, having a ‘Global Advisory Board’ became instrumental in Salesforce’s ability to accelerate their customers’ success – anywhere. “Overnight, digital became priority #1 for every company. Our customers are looking for trusted advisors to help digitally transform and deliver exceptional customer experiences.”
International President at Adobe, Paul Robson, continues that line of thought, “As business leaders, it’s our responsibility to constantly evolve and help drive our organisations forward, especially during transformational periods.” And that’s just what Adobe did by creating the first ‘Adobe International Advisory Board’, a team of highly respected industry leaders that joined together in a commitment to helping Adobe’s customers adapt to a new era in digital experiences, and partner with their own leadership team to address the changes affecting each of the sectors and markets they serve.
With the increased utilisation of advisory boards within a governance framework5, boundaries are being tested, and a lack of good governance will be exposed. Unlike governance boards, there is a lack of formal regulation in the advisory board sector and thus self-regulation becomes all the more important. Adopting a best practice approach will assist public organisations in providing transparency of purpose and role clarity, as well as to the market. This is where the ABF101 Best Practice Framework™ plays an important part in driving effective advisor engagement with a principles-led foundation that is purposeful, flexible, and agile for the lifetime of the advisory board.
Reshaping the Future
Advisory boards are more than just a collection of exceptional minds with unmatched perspectives, they are a platform where experienced leaders provide unique insights into specific needs and help shape solutions towards superior outcomes or experiences.
It is apparent that organisations are rethinking their strategy and governance structures for the longer term. Advisory boards have become an interesting and flexible intervention providing support and a safety net from rethinking to reshaping. As reported earlier in the year by the Financial Times6, organisations are starting to reduce the size of their governance boards and create specialised advisory boards as an eco-system of advisors within one organisation. Corporatised advisory boards will continue to build as a bona fide business practice to enhance good governance through ethical and independent input, safeguard corporate executive teams, and protect the social integrity of business, brands, and people.
Does your organisation need independent expertise or help to get through a specific stage? Our complimentary Advisor Concierge Service can help connect you with credentialed advisors.