Today’s world is characterised as being VUCA – volatile, uncertain, complex, and ambiguous. Because of this new and unpredictable environment, it is almost impossible to predict threats or opportunities – at the same time, the potential for disruption is very high.
In such a situation, a business leader must be even more outgoing in terms of getting diverse yet relevant perspectives. The Advisory Boards provide an ongoing structured approach that companies can adopt for achieving the above.
An Advisory Board is a group of independent people who advise the leadership team of a company on specific topics and who meet on a regular basis. Unlike a statutory board of directors, the members of an advisory board do not have the authority to vote on business matters, nor do they have any legal responsibility towards the company. The company has no obligation to implement the advisory board’s recommendations.
Some of the top reasons for companies to set up advisory boards have been as follows:
1. desire for complementary expertise
2. need for advice and validation in decision making
3. support in growing the business
Besides, advisory boards can be good ‘testing ground’ for companies before they induct members into the statutory board of directors.
Both private and public companies can benefit from adopting an advisory board structure either in a specific business area like digitalisation or broader strategy validation. While statutory boards are well regulated in most countries, there is a lot of merit and benefit in adopting a structured approach to advisory boards as well.
It starts with critical need assessment, followed by member selection, defining advisory board charter, integrating feedback loop along with regular meeting cadence. The amount of effort and rigor put upfront in curating the right advisory board, and related processes can be a real strategic advantage for companies.