Informal Advisory Boards can leave companies feeling like they bought box seats to an All-Star game of experts, but instead got a scratch team of Advisors playing pick-up. The irony is most of the Advisors feel the same way.
In this era of unprecedented business volatility, uncertainty, complexity and ambiguity, it seems counter intuitive that company governance boards are spending less time on strategy and more time on compliance and regulatory issues. This is however, the reality across public and private companies.
As a result, business owners, CEOs and their governance boards are facing more strategic and operational business issues that fall beyond their day-to-day fields of expertise. Those that acknowledge this growing capability gap in their leadership are actively searching for ways to augment the company’s knowledge, understanding and strategic thinking.
This increasing demand for specialists is matched by a growing supply of internationally connected subject matter experts ready for advisory engagements. Realising the enormous potential of this resource however, requires the professionalisation of Advisory Boards.
Historically, Advisory Boards have ranged from paid endorsements by heroes of industry to provide a “halo effect” over the company, through to Advisory Boards assembled from conflicted related parties. There are success stories, but many of those have been a product of good luck rather than good planning. The reality is informal Advisory Boards can leave companies feeling like they bought box seats to an All-Star game of experts, but instead got a scratch team of Advisors playing pick-up. The irony is most of the Advisors feel the same way.
Well managed, outcome designed, expert-stoked and professionally compensated professional Advisory Boards are however, set to become a key weapon in company’s strategic arsenal. The trend of governance board activities towards compliance and the now permanent condition of industry disruption, is driving the professionalisation of Advisory Boards to fill company capability gaps. The defection of some governance board directors to Advisory Board positions where they can better exercise their specialist skills for the benefit of the company, will only accelerate this process.
An Advisory Board does not make decisions or replace a governance board. By its very nature, this is the Advisory Board’s strength in the current business environment. An Advisory Board can focus on developing options for solving the companies most difficult problems or creating new opportunities without the constraints of time and the compliance mandate imposed on governance boards. A well facilitated Advisory Board can change the agenda and membership to fit with the company’s current priorities without difficulty, market disclosure or speculation. And because the governance board maintains ultimate decision making authority, the company doesn’t loose continuity in its risk management or strategic objectives.
There are however, some pre-conditions to Advisory Board success. Advisory Boards must be established and facilitated by an experienced Advisory Board Chair, and follow a process that defines the boards objectives and therefore the Advisors the company needs. There is another reason the Advisory Board Chair and establishment process are critical. Companies simply can’t attract and get results from an All-Star team of advisors unless you have a seasoned coach helping select the Advisors and manage their performance.
Experienced Advisory Board Members are by definition at the top of their game and not short of advisory opportunities. While they expect to be well compensated for their contribution, they are professionally motivated by the results they can achieve for the company. Like a professional sports person, they want to work with the best coach and play for a winning team.
For these reasons, it is critical the Advisory Board’s objectives and the terms of each Advisor’s engagement are professionally managed. Mechanisms must be in place to engage Advisors, manage their performance, leverage their networks and disengage them when their expertise is no longer required. This is where historically, the informal structure and nature of Advisory Boards has failed to deliver on their full potential. Recognising there are in fact three roles on Advisory Boards is important:
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Advisory Board Chair – an experienced Advisory Board Chair person is fundamental to establishing the board, managing its members and meeting the company’s objectives. While role of an Advisory Board Chair has some similarities to governance board chair, there are many differences and it is certainly not a role they, or business owner or CEO should play. The Advisory Board Chair should be an enduring member of the Advisory Board and an experienced facilitator used to working closely with governance boards, leadership teams and Advisory Board Members
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Advisors – should be engaged for their relevant knowledge, skills and experience as well as their proven track record on Advisory Boards. In selecting Advisory Board Members, the company and Advisory Board Chair should not only assess their capability, but also the access they will provide to a network of Recognised Experts
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Experts – are not members of the Advisory Board, but rather subject matter experts in the Advisory Board Members network that the company may choose to engage to execute delivery on objectives if the company doesn’t have this capability. Conflicts of interest exist when Advisory Board Members at the same time involve themselves in operations as Recognised Experts. A well managed Advisory Board with a seasoned chair will manage these conflicts of interest.
Recognising the increasingly influential role they can play in the modern business apparatus, there is now a need to professionalise Advisory Boards, their membership and operations.
Companies must follow sound establishment processes led by a seasoned Advisory Board Chair. Advisory Board Members need to be identified and engaged based not only the relevance of their expertise, but also on their track record of success on Advisory Boards.
We expect to see a steady increase in the value governance boards and management teams place of Advisory Boards reflected in the compensation paid to proven Advisors. Along with that however, comes expectations of Advisory Board performance that delivers real results to the bottom line.