Navigating the intricate waters of the business landscape requires more than just a map; it demands a crew of skilled navigators. This is where an advisory board steps in. Much like a trusted crew, an advisory board can chart your course, weather storms, and guide you toward your business goals.
In this blog, we’ll outline how to establish an advisory board that is focused on driving business outcomes (over and above business as usual!).
What is the difference between a Governance Board and an Advisory Board?
Formal Governance Boards are generally focused on:
• Ratifying management decisions and actions
• Certifying that the business is correctly managed and ensures the CEO meets the board's requirements
• Compliance – ensuring the business covers all regulations, legislative, and contractual requirements
• Decisions made by the Board are binding on the Directors and organisation
• Risk mitigation, is a high priority.
Advisory Boards are established to achieve a particular outcome, their advice is non-binding, and advisory board members are not authorised to act for or make decisions on behalf of, the business. In this blog, we will be focused on Advisory Boards which are becoming more common with SMEs in New Zealand.
The Shifting View
Source: 2023 – 2025 State of the Market Report, Advisory Board Centre, advisoryboardcentre.com
Where and when are Advisory Boards used?
Advisory Boards are typically established by entrepreneurs (start-up businesses) and business owners with big ambitions, or who are looking for change in their business The areas that we see advisory boards focused on are business growth aspirations, changing the business model, increasing business value for sale, and succession planning. There are many changes and challenges in today’s business environment which make the establishment of an advisory board a useful tool to support business owners such as AI and the use of emerging technologies, and environmental pressures on industries that require major changes to business models. Having the expertise of skilled advisory board members around the table with you can be a valuable asset to you as you build and execute your business strategy.
Advisory Boards by business owner ambitions and business lifecycle
Source: 2023 – 2025 State of the Market Report, Advisory Board Centre, advisoryboardcentre.com
How to go about establishing an Advisory Board
1. Purpose
The first step in setting up an advisory board is defining its purpose. What specific outcomes are you aiming to achieve? Are you eyeing market expansion, process optimisation, or innovation strategies? Understanding why you are establishing an advisory board will be critical to its success.
2. Identify the skills you want around the table
Think of your advisory board as a skilled crew, each member bringing a unique skill set to the ship. Look for advisors whose expertise directly aligns with your business aspirations. Whether it's international sales, marketing magic, or operational mastery - a diverse team will enrich your decision-making process.
Selection Process Considerations:
• Don’t settle for friends, family, acquaintances, or just anyone who is willing to do it
• Seek supportive and collaborative people
• Select a good Chair! They provide leadership, set the tone and culture, provide structure, independence, and process
Extend an invitation that resonates with potential advisory board members. Express your admiration for their accomplishments and illustrate how their knowledge can contribute to your business' purpose. Make it personal – let them know why their involvement matters.
3. Determine the structure and rhythm
Set your board work plan which outlines the frequency and duration of meetings. Build out your agenda framework so that it is focused on the highest priorities first and makes the best use of the valuable time of your board.
4. Determine the investment required
Set a budget for the investment required in an Advisory Board and ensure the perceived value outweighs the time and energy required to make it work.
5. Draft a board charter
Craft a charter or terms of reference that define expectations, meeting schedules, and commitments. The charter should set out the rules required for governing your business.
Example considerations:
• How will you deal with disputes?
• What is your succession plan for owners, both long-term and in the event of an unforeseen circumstance?
• Can family members approach owners for a job or do they have to go through the normal application process?
• What rules will be adopted for in-laws to hold shares and management positions?
• Should family members, who are active in the business, be treated differently from those who are non-active in the business relative to ownership of the business?
6. Set board objectives
In alignment with your purpose and charter, draft objectives for the board. Having clear objectives will help both you and your advisors set a course for success.
7. Review performance regularly
Foster a culture of open dialogue where advisors feel comfortable expressing differing opinions. This dynamic exchange of ideas can stimulate innovative solutions and uncover uncharted opportunities. Remember, it's not about agreement; it's about progress.
8. End!
Once the purpose of the Advisory Board has been achieved, it should be dismantled. A good Advisory Board should change over time and members should resign their roles if the objectives have outgrown their scope of knowledge, or they have been achieved.
Note: A new Advisory Board can be established by going through the process outlined above again.
As you navigate the challenges and opportunities of running a business, consider an advisory board as your trusted compass and supportive crew. By curating a team of expert advisors, fostering open communication, and focusing on achieving tangible outcomes - you are not just riding the waves of your business economy; you are sailing towards the horizon of success.
The Velocite team are skilled Advisory Board members and Chairs and are experienced in supporting business owners to establish Advisory Boards.
If you would like the support of Velocite GET IN TOUCH or DOWNLOAD OUR FREE TOOLKIT.