How are management boards, governance boards and an advisory boards different?
Often board members accept positions on boards without asking about the type of board. The type of board dramatically affects the member’s role. Therefore, it is essential to determine the type of board on which you are interested in serving prior to committing your valuable time and resources.
A governing board is an oversight board. It takes time to distinguish between management and governance, ensures it is clear about its mandate and plans to achieve specific outcomes. It designs systems to hold the CEO/Executive Director accountable for the day-to-day operations and simultaneously ensures it fulfills its own accountability responsibilities.
A management board is set up to assist the CEO/Executive Director to manage an entity. The board shares management responsibilities with the CEO/Executive Director and is directly involved with effectiveness and efficiency of operations.
An advisory board is designed to provide input needed by a business owner or entity. The members do not manage or govern. The board provides advice on matters which may be outside the CEO’s/Executive Director’s or owner’s expertise or the members provides second opinions or review of risks based on their expertise.
What does an advisory board do?
An advisory board meets regularly to support the owner or senior employee in many areas. Some of those include:
- Any area outside that person’s expertise.
- Assisting the owner or CEO/Executive Director to look at an issue to ensure all risks are identified and understood
- Business process reviews
- Designing strategies (marketing, financing, networking, etc.)
- Problem solving/conflict resolution
- Providing feedback
- Reviewing plans
How often should an advisory board meet?
Sometimes advisory boards meet at regular intervals and other times they meet on an as needed basis. The frequency of meetings may depend on the requirements of the entity.
For example, it is not be a requirement for a privately owned company to have an advisory board. It may be a requirement for a public body to have one if it is required by its legislation.
If an entity is only involving the board at the last minute when issues are out of hand, the board may want to consider meeting on a more regular basis.
Are the account abilities different for dissimilar types of boards?
There is a difference. Advisory boards usually do not have the same legal or financial responsibilities as a management or governing board. This is because advisory boards exist to provide advice only. The owner or CEO/Executive Director does not have to take that advice. He may compare that advice with intelligence he obtained from other sources prior to making his final decision or choosing his final course of action.
Normally, relevant legislation or the articles of incorporation outline board responsibilities. If board members sit on an advisory board and the articles establishing it are not clear, it is easy to encroach in management.
Should I be paid for my services
If an advisory board is set up by a not-for-profit entity or a government, the board members may not be paid. If it is set up by a business, there may be remuneration, especially if the advisers are invited because of their specific expertise.
For example, if a small business owner sets up an advisory board of individuals with financial backgrounds because business expansion is a key issue, then individuals who have expertise in raising capital, joint ventures, importing and exporting, tax structures, business planning and financial planning may only agree to sit on the advisory board if they are paid.
Are advisory boards beneficial?
Owning a business or being a CEO/Executive Director can be stressful. Experts can assist that person to
- Ensure the issue is the real issue
- Focus on the big picture
- Look externally as well as internally
- Ensure the information he is working with is accurate
- Identify the best partners, agencies or methods
- Network and meet persons who can assist the business/ entity achieve its desired outcomes
- Identify and monitor risks
- Ensure the owner is working on the business rather than working in it 100% of the time
- Set the strategic directions for the entity/company.
The key message
If you are on an advisory board, do not attempt to manage or govern. Determine the areas where advice is needed, assess what you can contribute, and confine the role to that set out by the entity/business.
