Advisory Board
A “board advisory” or “advisory board” is an advisory body that provides strategic support to companies or organizations by bringing in expertise from outside. In contrast to a supervisory board, advisory boards have no legal decision-making powers but make recommendations.
1. Main Function and Characteristics
Advice:
Advisory boards advise management on strategic decisions, often during critical phases of the company.
Expertise:
They contribute specialist knowledge and experience from various areas to support the management.
Independence:
Advisory boards offer an independent perspective and can raise critical issues.
No decision-making power:
They make recommendations, but not binding decisions.
Extended staff:
Advisory boards can act as an extended staff that is set up on a situational and temporary basis.
2. Advantages of Advisory Boards
Strategic advice: Enables sound decision-making.
Expert knowledge: Brings in specialist knowledge and new perspectives.
Independence: Enables an independent point of view and critical questions.
Increasing potential: Strengthens the impact of managers.
Risk mitigation: Can help to minimize risks in decision-making.
3. Why create an Advisory Board
Most businesses decide to create advisory boards when it is apparent that there is a subject area where expert outsiders can augment the knowledge, understanding and strategic thinking of the board and management team.
Experienced advisory board members can provide technical or specialist advice and extend the range of
skills and understanding of management and the board in areas beyond their day-to-day fields of expertise.
4. Composition of Advisory Boards
Who Should Serve?
The composition of the advisory board will depend on an organisation’s goals and priorities. The main consideration for the composition of any advisory board is absolute clarity about what role it is intended to fulfil. Regardless of the expected role of the advisory board, it should be expected that every director will have a real enthusiasm for the business.
“Advisory board members can open doors and provide connections. But to make it successful, there has to be some genuine association with the company.”
5. How to make Advisory Boards work
Successful advisory boards are clear about their purpose. We have seen examples of companies forming advisory boards and
only then thinking about how they wish to use them. This is unhelpful to all parties, and usually results in the organisation
extracting little value from the board.
Clearly setting and communicating the roles and expectations of individual advisors and articulating the mandate and purpose of the board is essential.
“The advisory board must have an unambiguous mission and definition. The structure, research background and financial arrangements must be clear.”
The organisation and advisory board must establish how they will work together. It should be clear who from the company’s side can make contact with the advisory board, and on what issues. To ensure contact is kept focused and at a high level, it may make sense to restrict informal contact with the advisory board to the chair and chief executive.