Advisory versus Governance Board – What are the key differences?

There is a famous saying A star wants to see herself rise to the top. A leader wants to see those around her become stars.

 business management, human resources

What is better a governance board or an advisory board? Seeking advice from a group of people that are experts in the field is one of the best ways to keep your business thriving on a long-term basis. The question here arises but from where do you get these pieces of advice? How do you find your go-to plan in uncertainty? To solve this question let’s compare both the aspects and also let’s actually look at the purpose of both of them.

 

Primary Functions

 

When you have a look at the traditional governance board, its primary function is that the governing board is a decision-maker and it’s about being conformance-oriented. If we have a look at the professional advisory board, that’s about problem-solving and being performance-oriented.

If we have a look at a governance board from a relationship and management perspective, it’s about command and control. Whereas, an advisory board is about support and service. The modus operandi of the governance board is about focusing on, well, what happened and why? Whereas, a professional advisory board is about focusing on, well, what’s next and why not?

The role of a traditional governance board is that the directors set the strategy and monitor performance and then the management team implements the board’s decisions. Whereas, in a professional advisory board, the advisors recommend solutions to problems and then the directors or business owner makes the decisions.

The duties of a traditional governance board are fiduciary based, follow the companies’ act and relevant legislation and they’re responsible for the governance of stakeholders. Whereas, an advisory board has independent advisors. They’re guided by an advisory board charter and the advisors are engaged to define and solve problems. Advisory Board create a culture where the work expectations are brought into life with thorough discussion and people participate in bringing creative ideas to the table for covering up the prior loopholes and foster better working relationship between members of the organization.

 

Selection Criteria 

 

A traditional governance board selection criteria is that they’ve been there and done that. Whereas, a professional advisory board is about having advisors who are out there doing it now.

The appointment term of a traditional governance board is usually three years. Whereas, an advisory board appointment is anything from one month through to 36 months until the problem is solved. It could be one month, it could be three months, it could be six months. An Advisory Board with sound professional skills can serve as a savior in succession planning and inculcating a good working relationship.  

 

Formalizing advice 

 

The competence of a traditional governance board is that they have an independent chair and between three and five permanent and non-executive directors. Whereas a professional advisory board has an independent advisory board chair and up to two at-will problem relevant advisors that are moved on and off the advisory board depending on the problem that needs to be solved.

The traditional governance board meeting is typically a full board meeting every month. Whereas, the professional advisory board meets with the chair every month and the full advisory board between four and six times a year. The flow of information in the advisory board 

However, the advice delivered by the board of directors is based on more strategic planning and the focus points revolve around shareholders. For any company, shareholders hold major importance and that is why strategizing the plans to get a hold on them for a longer time upholds prominence. On the contrary, advisory board advice deals in bringing changes that become effective ways for the overall working of the organization on an operational level. Moreover, the free flow of information in the Advisory Board meetings because the decisions revolve around the improvement in the overall workflow of an organization and hence don’t need any certain preparation like any other formal Board meeting.

 

Expenses and compensation

 

The compensation for a traditional governance board is the chair will be four to $6,000 a month plus directors $3000 a month. Whereas, a professional advisory board is between three and $5,000 a month and the advisors are anywhere between one and $3,000 per meeting.

So, you can see that the difference between a governance board and an advisory board is very different. A governance board is about minimizing risk and being about conformance. Whereas, a professional advisory board is about solving problems and being performance-oriented.

The interesting thing is that they can compliment each other perfectly. The CEO can report to the governance board and then have a professional advisory board to seek advice from. The purposes of both are very different.

One case study is one of the businesses that we work with. They have a governance board made up of high-performing governance board directors, which is then also complemented by an advisory board. The CEO gets advice from the advisory board and then implements and makes decisions based on that advice because advisory boards do not make decisions, they’re not a decision-making body, and then the CEO implements those in the business. The CEO then also is able to then let the governance board know what decisions they have made and implemented as a result of their advisory board. They can compliment each other nicely.

However, other businesses that we worked with have a governance board. Even though, it’s made up of managers who are also directors who are also very inexperienced from a governance board perspective. The governance board and the business owners are happy with how their governance board functions, and they compliment this with an advisory board that the CEO works with to set strategy and then to seek advice on relevant aspects of the business.

Would you like a 67% revenue increase over a three-year period? If so, advisory boards are definitely worth investigating. The research shows that there is a 67% increase in revenue growth for businesses with advisory boards. 

 

The metaphor is that it’s like the difference between sailing in a calm river versus the wild ocean. When you’re sailing in a river, you’re often, or rowing in a river, you’re often looking back seeing what happened, or rowing in the one direction, all on the same page, it’s nice and harmonious. That’s what a governance board is like. Whereas, an advisory board is like being in the ocean with waves crashing down on you, what about this and what about this, and really ensuring that you’ve got the right advice at the right time depending on what wave is about to come crashing down.

 

So, think about your own businesses and where you’re at, and could an advisory board compliment your governance board plan.

 

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