THE MODERN WAYS and strategies of conducting and transacting business are completely different from years before; modern businesses are facing growing competition every day, changing consumer tastes and perceptions, new laws regulating businesses, and well trained and experienced management with innovative business ideas in rival businesses. Today’s business management cannot be effectively handled and effectively entrusted to a single executive officer or a couple of the management personnel. Private businesses are creating an advisory board to assist business managers with the day-to-day running of the business. Private businesses which have created an advisory board have prospered more than the businesses which have entrusted their management to solely their organic managers.
An advisory board is an external group of professionals who assist the business’ management in laying out the proper strategies and principles for the business. An advisory board is a very different entity from a business board of directors; the latter has well defined powers and can make binding decisions on a business while the former has no clearly defined powers and is somewhat informal; its advice is not binding but must be taken seriously as it is very important to the business. A business doesn’t usually operate without a board of directors, but may operate without an advisory board. An advisory board is set up by the business’ executive officers or the owner; it is good to ensure that it is composed of well-educated and experienced professionals who will give advice which can bring a dramatic positive impact to the business.
The benefits of an advisory board include external and objective up-to-date business techniques and strategies to enable the business to deal with competition and to strategically prolong survival. Innovativeness, creativity and research are necessary for any business and an advisory board offers these; for your advisory board, consider business lecturers, financial consultants, and marketing professionals so that you are given the recent market status and the needs of consumers. An advisory board protects the business from the likelihood of costly business decision mistakes. It also complements and supports the business management skills of the managers and chief executive officers. An advisory board is also very important in advising the business on which other investments to undertake and to prevent the business’ exposure to excessive debt.
An advisory board also ensures that the business maintains good public relations, good corporate social responsibility, and is in touch and responsive to the needs of its customers and stake holders. It also analyzes the successes, challenges and the possible consequences of any business decision. It also helps in forecasting the future market trends and how to prepare for the same. In case of the sudden death or resignation of a business manager or chief executive officer, a business with an advisory board is unlikely to suffer this impact the way a business without this advisory may. The owner or management may pick one of the advisory members to perform the duties and functions of the vacant position in an acting capacity. Investors are interested in participating in the activities of businesses which are properly managed; having an advisory board boosts public confidence in the sound and frugal management of the business and more people will want to invest in it.
Since an advisory board is vital for business, you should hire qualified individuals to perform and discharge the functions of this board effectively. It is highly recommended that you combine professional individuals who are highly trained and experienced in the various business fields like law, economics, marketing, human resources, accounting, finance, etc. There is no standard on the minimum or maximum number of the members of the advisory board because some businesses have an advisory board of three members, while others have a board of thirty members; its size varies depending on the size, complexity and nature of the business.
Identify the main areas which need advice; most probably, it is the business’ finance and planning divisions. Hire individuals who will help you lay workable and valid strategies to prepare for the future. To get the best individuals, hire independent and focused individuals who will take your business to the next desired level. You may hire an independent human resource manager to conduct the interviews, selection and recruitment, or set up an interview panel yourself, provided you recruit highly qualified individuals. Do not hire individuals who hold positions or have interests in similar or rival businesses to yours as they will be privy to the confidential information and strategies of your business, which, of course, should not be known by your competitors. Also, avoid hiring executive officers’ kids if they’re incompetent and provide no real value to the company.
Since members of the advisory board must be remunerated, you must ensure that their duties and responsibilities of developing the business are clearly laid out before they take their offices. Most businesses recruit members of the advisory board on contract basis; you should be able to terminate the employment if the advisory board violates the terms of the contract or does not perform to the required standards. Ensure that you agree on fair and reasonable remuneration terms with the members of the advisory board; it should not be too costly for the business but should be adequate to pay them for their professional services.
Finally, ensure that the functions of the advisory board do not overlap or contradict those of the existing business management. You should allow the members of the advisory board to buy equity or stock, or invest in any other manner possible in the business so that they benefit from the annual share of the company’s growth and prosperity. If it’s a public company, the setting up of an advisory board must comply with the company and other business laws, enforce the articles and memoranda of associations of the company, and should generally be approved by a the business or company share holders as it increases liability to the business.