As a company grows and evolves, it will have an increasing need for experienced stewardship and support to deliver on its strategic direction. Having access to high-quality advice and guidance can greatly enhance an organisation’s performance. One of the best decisions a business leader can make, is the creation of an Advisory Board.
Both distinct and complementary to a Board of Directors, Advisory Boards are growing in popularity in New Zealand and increasingly being created to gain knowledge and insight, introduce specific functional skill and expertise, diversify thinking and perspectives, and broaden connections and networks.
What is an Advisory Board?
While it may function in a similar way to a Board of Directors, an Advisory Board has no formal legal standing and only exists to provide expert advice, either to the CEO (business owners/founders, management team) and/or the Board (if the organisation has one in place). They don’t have governance authority or statutory responsibilities like a Board, which gives them more flexibility both in terms of how often they meet and also what issues they focus on.
Similar to a Board of Directors, an Advisory Board consists of a group of individuals external to a business. This is different to a Shadow Board for example, which is a group of non-executive employees that works with senior executives on strategic initiatives.
We have a Board, why do we need an Advisory Board?
For companies with an established governance structure in place and fully functioning Board of Directors, there are benefits to be realised through Advisory Boards that can provide significant impact to business. There is a perception that large companies with a Board have no need for an Advisory Board, or that they are only needed for start-ups, tech companies or young entrepreneurs. However, some of the largest organisations globally have created Advisory Boards, including for example Facebook and Toyota. In this instance, Advisory Boards are typically created to fill knowledge gaps or add to strategic thinking – particularly relevant in the current complex and unpredictable global landscape.
We have no governance in place, why should we start?
In the absence of a Board of Directors, establishing an Advisory Board provides business owners and leaders with access to the knowledge and guidance of experienced professionals. This may be particularly beneficial when tackling a specific issue that requires specialised and targeted advice (for example, sustainability or diversity initiatives); when an organisation is going through a period of significant change (i.e., operating in a post-pandemic world); or, to gain insights and connections when entering new markets or developing new products/services.
Because of the reduced time commitment and absence of fiduciary responsibilities, Advisory Board members are usually paid between a third and a half of what a board director is compensated. They are also generally less costly than hiring consultants, which makes them a cost effective and attractive option for businesses new to governance.
What are the first steps to creating an Advisory Board?
It’s important to truly consider whether an Advisory Board is suitable for your particular need – is it worth the effort both time and monetary? Without a clear purpose, you will extract little value from your Advisory Board. Setting up the operational structure – including the mission, size, meeting frequency, compensation, term of membership etc – will provide a solid starting point and help clarify who you need in the team. This is an important step and requires considered thought as to prospective advisory board members that will best suit the business need. The more experienced and knowledgeable your advisory board members, the better the advice your advisory board will produce. Finding these people and convincing them to be part of your business journey, can however be challenging.
With a clear purpose and the right composition, an Advisory Board can be a considerable asset particularly in a changing business environment where there is a need to strengthen understanding on any number of topics or issues. They add value to management and existing Boards, and also widen the networks of contacts and opportunities available. Introducing an Advisory Board can be a game changer.
Need help? Decipher Group has a proven track record of sourcing chairs, non-executive directors, and advisory board members for a range of organisations. We can also provide guidance on the right structure and composition matched to your business. Let’s talk.
The Decipher Team
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