A Simple Guide to Creating an Advisory Board

Depending on its specific purpose, an Advisory Board can have a broad focus or a narrower one. It is important to make some important decisions:

• Who do you want to be on the advisory board?
• What are the terms of the membership? 
• Will the board offer informal advice or more structured, formal advice?
• What is your meeting frequency and structure?
• What is the mandate?
• What are the primary topics of the focus of the board?
• How long will the original board be in place before you reassess?

Selecting the size of the advisory board, the selected expertise and the relationship between the board and your business are all essential. Once these issues have been decided upon, you are ready to begin the construction of your advisory board. 

After sourcing and recruiting your candidates, you will need to finalise contractually. Don’t be afraid to set targets and goals – successful advisory boards are clear about their purpose. If you would like to see some examples contact me and I can point you to several resources that will help you get started.

The annual compensation paid to advisory board members is generally under half the package paid to regular board directors. A global survey conducted by the Advisory Board Architects (ABA) found that 15% of private company boards paid no compensation, 25% paid only cash, 43% only equity, and 17% paid cash and equity. The important thing is to discuss how an advisor relationship will work best for the company and the advisor.

Tip: If you want to attract an experienced advisor, remember that so will others! Their time is limited and they will likely have to prioritise working with companies that can compensate them.

A business may draw upon an advisory board to strengthen its understanding of a myriad of topics. An advisory board creates value by exposing the management and the main board to new thinking, thereby broadening horizons, improving understanding of a company’s markets, risks and future drivers of growth, challenging assumptions and helping businesses avoid the perils of groupthink. 

With a clear mission and the right composition, a board of advisors can be a powerful, value-adding asset in a changing business environment. If you are considering establishing an advisory board and would like some help please feel free to contact me.