The value of expertise from outside of the company without diluting control
An advisory board is a body that provides non-binding strategic advice to the management/owner of a business. Many new or small businesses choose to establish advisory boards in order to benefit from the knowledge of others, without the expense or formality of the Board of Directors.
The main reason to create an advisory board is to seek expertise outside of the company. Small business owners often don’t want to dilute their control of their business by establishing a Board of Directors with formal responsibilities and authorities, so instead form an advisory board to access high-quality advice and network in the industry.
The roles and responsibilities of advisory board members include:
- Developing an understanding of the business, market and industry trends.
- Providing ‘wise counsel’ on issues raised by owners/directors or management.
- Providing unbiased insights and ideas from a third point-of-view (not involved in the operation of the business).
- Encourage and support the exploration of new business ideas.
- Provide a social networking platform for directors and the company.
- Assist in the development of a governance framework.
- Monitor business performance.
- Impose challenges to directors and management that could improve the business.
Companies should seek advisory board members whose qualities complement the existing board of directors and not duplicate their knowledge or skills. Advisory board members should include distinctive knowledge on different aspects of business such as marketing, product development, sales techniques, and strategies that are of use to the directors.