When Do You Need an Advisory Board?

Are you ready for change? A good time to have an Advisory Board is when you are going through a change process. It may be that you are scaling up, taking on new markets, struggling through a tough economic climate, changes in management, succession planning. You need to spend time working on the business instead of in it.

It may be that you need additional skills in marketing, finance or people management, but can’t afford a full-time person in that role. Or you are new to the industry or business ownership. Perhaps you have toughed things out on your own, and you are struggling to get traction on your plans.

An Advisory Board is supportive of the business owner, but also challenges them in a way that managers and employees can’t do. An Advisory Board brings a sense of structure and independent thinking to strategic planning. They are sounding boards, support during change, truth tellers, devil’s advocates at times.

What Is an Advisory Board?

An Advisory Board is a “committee of people selected by a business (or a board in the case of larger companies) to provide defined advice and information in an informal and flexible manner”[i]. It is not a formal governance structure like a Board of Directors, but you can leverage the skills, experience and networks of the board members in the same way.

Advisory Members are not Directors

Directors make decisions and are responsible for the legal aspects of running the organisation. Advisory Board members make recommendations and give advice, but they are not directors. Advisory Board members sign up to a Charter document which sets out purpose, responsibilities, meeting conduct and conflict resolution.

What is the Time and Dollar Investment?

Advisory Board members usually meet every 1-2 months, for 1-3 hours. Members should be paid monthly, whether they are meeting or not, because they will spend time outside the meeting, reading the agenda and Board notes, researching and brainstorming ideas, and follow up activities.

Board members’ fees vary depending on the expertise and requirements of the role. But it is typical for the fee range to be between $1,000 and $1,500 +GST for Board members and $1,500 to $2,000 +GST for Chairman plus travel expenses.

Who Do You Invite on an Advisory Board?

Advisory Board members should help you fill the gaps in your knowledge, skills, background and leadership styles. They bring years of experience and inspiration with them. They are good at communicating, clear on purpose, innovative and encouraging.

They are two to four independent members, plus the business owner/director or CEO. Choose people who are willing to challenge how things are, are passionate about the business and committed to helping the business succeed.

Membership of the Advisory Board can change as the needs of the business changes. This ensures that the Advisory Board is still responsive and independent.

Selecting the Chairman

The chairman of the Advisory Board should not be the business owner. They set the tone and culture of the board, ensures independence from management and provides governance and structure. They manage discussions effectively, drawing opinions from others, managing conflict and encourage open communication. Look for someone who has experience with diverse people and personalities, rather than industry experience for the chairman role.

What Does an Advisory Board Do?

The Advisory Board meets regularly and follows an agenda. In the early stages, the Advisory Board will develop a strategic plan. The strategic plan includes a SWOT Analysis, defining a vision, success parameters and setting short-term and long-term goals. Goals are turned into action plans. Subsequent meetings will track progress, deal with challenges and amend the plan as required.

It helps the Advisory Board if clear expectations are established up front. What is the business owner hoping to get from the Board? What does business success look like?

An Advisory Board Drives Change

An effective Advisory Board will have a positive impact on all areas of the organisation, so you need to be prepared to make changes. It involves an investment in time, budget and energy.

Have an action plan and regular reviews. Appoint Advisory Board members who respect each other but are also willing to challenge the status quo and keep you accountable to your plans. Surround yourself with inspiring, experienced A players on your Advisory Board so your business team can succeed.

-       Serena Irving

Serena Irving is a director in JDW Chartered Accountants Limited, Ellerslie, Auckland. JDW is a professional team of qualified accountants, business consultants, tax advisors, trust and business valuation specialists.

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An article like this, which is general in nature, is no substitute for specific accounting and tax advice. If you want more information about the issues in this article, please contact your adviser or the author.

  [i] Institute of Directors NZ website https://www.iod.org.nz