An Advisory Board provides an independent source of information and advice to business owners and executives concerning the strategic issues and risks relating to their companies. Establishing an advisory board provides a structured methodology to accessing valuable wisdom and experience and then applying it to the benefit of the organization.
The duties and responsibilities of an Advisory Board are exactly as you define them through a written role description that helps prevent misunderstandings and establishes the level of commitment you expect. Typical responsibilities include:
- Understanding your business plan, industry trends, and market conditions that impact your company
- Providing wise counsel on issues raised by the owners and executives
- Encouraging the exploration of new ideas and markets
- Acting as a resource to company executives
- Monitoring business performance and challenging the executives/management to consider options for improving the business
The authority of the Advisory Board is identified by planning the tasks they will perform and how their role is described. An Advisory Board is not governed by legal statutes, so it can operate in any manner that meets the needs of the business. The Advisors need only the amount of authority required to fulfill the role and responsibilities you have defined for them. At a minimum the Advisors should expect:
- To receive a written agenda in advance of each meeting
- That management provide performance metrics and background information on strategic topics and challenges in advance of each meeting
- That the company provide a written document that clearly describes the role of each advisor
- While Advisory Board members have no legal fiduciary duty, they should receive written indemnification to protect them from potential liability
Think about your own business and how it would benefit from an Advisory Board, by asking yourself these questions:
- What would you expect an Advisory Board to do for you?
- What are the expectations that Advisors would bring to the table?
- For each of your other stakeholders groups, such as employees, spouse, family, bankers, bonding agent, vendors, CPA, etc. – what would they expect?
How could participation in an Advisory Board help you and your business? Please let me know if I can help.