Why you need an advisory board charter

So often, we recruit new staff without role descriptions. This usually doesn’t cause too many issues to start with. But then you start thinking, “Why are they doing what they’re doing? Why aren’t they doing what I want them to be doing?”

Often, the answer is because they don’t have clarity on their responsibilities. We haven’t defined their role. We haven’t given them a role description, and they haven’t signed off on it.

Let’s learn from that mistake and ensure we set our advisory board up for success with an advisory board charter.

What is an advisory board charter?

An advisory board charter is a role description for your advisory board. It’s an agreement that provides advisory board members with clarity on mutual expectations and obligations, which, in turn, protects the interest of all parties.

The purpose of an advisory board is to:

  • Provide feedback to refine the vision of the business
  • Oversee the business structure and strategy
  • Protect the interest of the business owner
  • Provide guidance and support to the operations manager
  • Consider risks to the business
  • Oversee and contribute to ideas, initiatives, business strategies and a succession plan
  • Evaluate the planning and performance perspective

An advisory board charter also defines membership. Typically, an advisory board consists of five people: the chair, business owner, up to two independent advisory board advisors, and one or two people from the business.

Advisory board members are paid for their participation, which is agreed upon separately with the business owner.

The chairperson or business owner appoints an advisory board chair. The chair’s role is to construct the agenda for meetings in consultation with the business owner, and to facilitate meetings.

The advisory board charter clarifies the nature of members’ relationship and liability to the business. Members are not directors of the business, nor do they have liability. Their relationship to the business is not one of employee, partner, joint venture, agent or officer of the business. The advice they provide is purely within their capacity as an advisory board member.

The advisory board charter includes sections on confidentiality, intellectual property, meetings, guidelines and codes of conduct. For example, the codes of conduct should stipulate that members make an effort to understand the business, be frank and honest in their opinions, give constructive feedback, listen to the views of others, read relevant documents before meetings, be guided by the best interests of the business, and raise any concerns with the advisory board chair.

The specific responsibilities of the advisory board may include financial and risk management, strategy and business planning, and providing whatever advice the business owner needs at that time. Meetings should focus on strategic issues rather than operational issues.

The advisory board charter is signed off by the advisory board members and business owner or CEO prior to the commencement of the first meeting.

A charter will ensure the growth of your business

Having clarity around the role of an advisor means the advisory board will meet the needs of the business. A charter also ensures advisors are terminated as appropriate, as it identifies that they are engaged month by month for the specific advice required by the business owner.

For example, we recently worked with a client who needed an advisor. We went to market and found the advisor she required. After one meeting, the advisor’s contract of engagement was ended, as they were able to provide our client with advice on what she needed at that time.

An advisor’s engagement is very different to other engagements. It’s meeting-by-meeting, advice by advice, to meet the business’s key performance indicators. This is why it’s so important that the charter is understood and signed off by all prior to the commencement of the advisory board.

If you need help creating your advisory board charter, email me at [email protected].

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