Advisory Boards and Why You Should Have One

At its simplest, an Advisory Board is a group of subject matter experts who provide high quality, objective advice to business leaders in areas of strategic importance. Sometimes advisory boards are controversial, with many articles singing their praises and others condemning them to merely headshots in a pitch deck. The truth is that an advisory board can be a powerful, value-adding asset if used correctly.

Unlike the board of directors, the advisory board does not have the authority to vote on corporate matters or have any legal or fiduciary responsibilities. A company calls upon the advisory board only when they seek advice; the purpose of the advisory board is not governance, but to provide the leadership team with the advice to help the business address business and growth challenges.  

Although the overarching focus can sometimes be loosely defined, advisory boards help with specific aspects of a business that the current board would benefit from. This can range from marketing advice to fundraising, to recruitment, to strategies for growth etc. Inherently the role of board advisors is not to make decisions but rather to provide expertise and evidence to increase the confidence of the decision-maker.

Why should you adopt an Advisory Board?

Advisory Boards are an often-under-utilised resource for strategic, high-value information and guidance. Considering the pace of change and complexity in today’s business environment – external guidance could be the difference between making the correct decision or falling behind.  

It’s a common perception that Advisory boards are only valuable to startups and young entrepreneurs. But this is far from the truth. Some of the largest companies (Toyota, General Electric, American Express, Target) in the world have advisory boards in addition to their board of directors.

If you are an established business then an advisory board is like engaging multiple management consultants for a fraction of the cost who provide longer (and less transactional support) and if you are a startup it can be like having your very own peer group of co-founders who have already successfully been on the journey. 

Advisory Boards can:

• Provide new perspectives
• Bring a wealth of networks and resources
• Hold directors to account, ensuring efficiency of performance
• Ensure a company avoids groupthink
• Assist with priorities and focus on big picture issues
• Use their experience to alleviate pressures around big decisions
• Allow a business to address the realities of operations and changing circumstances without any loss of control
• Help a company adapt to different cultural and business norms
• Provide expertise on technical and complex topics
• Provide safe harbours for executives who want to test options before they are forced to be more definitive and assertive before a board of directors

It’s important to know when it is appropriate to create an Advisory Board. Below are some typical examples of scenarios when an Advisory Board might be of maximum benefit to a company:

• Guiding start-up companies in a rapid growth phase
• Creating a new product line
• Moving into a new market segment or industry
• Moving into a new geographic area
• Making the transition from private to public and perhaps listing on a stock exchange
• Restructuring and repositioning a company in the market
• Implementing major new technology within the organisation
• Staving off a serious competitive threat
• Analysing a potential takeover target
• Advisory boards may also be needed, as a practical matter, in certain deal structures.