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Advisory Board Essentials – Everything You Need To Know About Advisory Boards
What is an Advisory Board?
An Advisory Board refers to a structured collaborative method for organisations to engage external advisors. In practice, this usually involves business representatives, an independent Chair, and carefully selected Advisors who provide objective advice and mentoring. This advice ranges from how to grow or scale your business, to helping support a key transition within a company, tackling business challenges, managing crisis, leading expansion into new markets and other strategic or technical advice.
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 readily available. Unlike a Governance Board of Directors, an Advisory Board does not make binding decisions and does not have any fiduciary responsibility.
Advisory Board members are generally external professionals who are appointed by a company (not by its shareholders) due to their specialisation (e.g., legal, financial, growth, supply & logistics, technology, marketing,, sustainability etc.) or experience in the company’s industry sector. 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.
What is the difference between an Advisory Board and a Board of Directors?
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. In simple terms, a Governance Board is a decision-making model where decisions are binding on individual directors and also on the organisation.
An Advisory Board provides non-binding advice and member are not authorised to act for or make decisions on behalf of the organisation. An Advisory Board is a problem-solving model to provide critical thinking, robust analysis and strategic insights to inform the business owner, executives or directors.
What can go wrong with an Advisory Board?
Advisory Boards are an effective solution for a number of companies, but things can go wrong if the Advisory Board is not carefully implemented, managed and reviewed. Highly informal Advisory Boards that lack clarity of purpose, structure and carefully selected members are often ineffective and struggle to deliver value for the business and the Advisors.
Some warning signs for Advisory Boards may include:
- No clear structure or purpose
- 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
- Lack of commitment or mis-aligned expectations from the business and/or Advisors Board Members
- Poor meeting facilitation
- 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
How do I start an Advisory Board?
If you are thinking of implementing an Advisory Board, you can start off on the right foot by following these steps:
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.
Build your Advisory Board on a best practice foundation.
Taking the time to carefully establish your Advisory Board structure including Charter, agreements and protocols doesn’t 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.
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?
Choose Advisors who have already achieved what you want to achieve.
There’s no point 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.
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 meeting and topics you want to explore. By preparing your Advisory Board members prior 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.
Where can I go to get help with my 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 the Advisory Board Centre – who are the leading professional body for Advisor Engagement – for a confidential discussion about your needs.
We will connect you with independent Certified Chairs and board ready Advisors through our complimentary Advisor Concierge service.