Advisory Boards: Structure and Roles for Your Organisation (2024)
Company advisory boards are important to its operations. As much as they are not part of the company’s management structure, they contribute their expertise by addressing key issues and provide insights into projects. They work hand-in-hand and regularly meet to discuss strategic plans to achieve the company’s goal.
We’ll show you what an advisory board is, how it differs from the board of directors, types, roles, and structure of the board in this article.
Discover effective management tool for your board
Rely on our choice – iDeals Board
What is an advisory board?
The advisory board is a group of individuals in a company who offer strategic opinions on specific aspects of a company’s processes. They have no legal responsibility for the organization’s operations, but their advisory services are important to help an organization handle its legal, financial, or managerial responsibilities.
More often than not, an organization, either a nonprofit or for-profit with a nonprofit side, needs the community it’s reaching out to, to perceive it in a positive light. The advisory board definition often mirrors the image of the organization, allowing the organization an opportunity to connect more strongly with its audience and network with members of the outer community.
Advisory boards meet with the leadership of the organization, report their findings, and draft actionable steps that will help to connect with the audience that they represent. They act as a voice on behalf of the community to the organization. The role of the advisory board is to be unbiased in presenting views and opinions that will advance the organization’s cause.
Struggle to simplify the board governance?
Find out what kind of software would be the most convenient
Check The Selection Guide
The difference between an advisory board and a board of directors
Have you ever thought about the difference between an advisory board and the board of directors in a nonprofit? Both boards are key aspects of a nonprofit; however, their roles diverge.
Advisory board vs board of directors
In the simplest form, the advisory board is a board of persons who advise the organization on its operations, while the board of directors acts are in charge of the organization’s day-to-day operations.
The board of directors bears all legal and financial obligations of the nonprofit, while the advisory board is exempt from these obligations, except working to raise funds for the organization.
The board of directors defines the goal of the nonprofit, hires, or works directly with management in representing stakeholder interests. Advisory board members advise the organization on steps to take towards achieving set goals, offering expert advice where necessary.
The board of directors makes strategic short and long-term plans in line with the organization’s vision of the organization while discovering improved ways to achieve them. They also use key metrics to determine the organization’s success at achieving its goals. Meanwhile, advisory boards help to provide key insights into how the goals can be achieved.
Both boards may act as the face of the organization on separate grounds. While the board of directors acts as the professional public relations officers of the organization, the advisory board members may act as ambassadorial public relations officers — passively or actively.
The board of directors is vested with the power to appoint the organization’s key officers, such as the CEO and the chief financial officer (CFO). Also, they can dismiss these persons of their duties if performance is not up to par. Advisory board members cannot function in these capacities, they have no power to elect nor terminate.
Types of advisory boards
A nonprofit advisory board may be formed for different purposes depending on the goals and structure of the organization.
This type of advisory board is formed from low-income social workers’ clients, who have vast experience on the issues that a nonprofit is poised to solve. They help to provide valuable feedback to the nonprofit on the impacts of its programs.
An advisory board of young professionals consists of young people who represent the younger population that an organization is looking to serve. They provide insights into activities and advise the management on creative ways to serve the population they represent. Also, they act as ambassadors of the organization to the younger community.
These advisory board members play no physical roles in the nonprofit other than providing the goodwill of their names to a nonprofit’s operation. You find these names on the nonprofit’s correspondence, but beyond that, these advisors have no other input to the nonprofit.
A fundraising advisory board could be created to advise the organization on prospective fundraising activities and how to reach new donors. Also, the advisory board could be made of an existing donor to the organization’s nonprofit cause.
An advisory board may be set up to train members for their future role as members of the board of directors and to test their decision-making skills. They may also lend their expertise to advise on how the leadership is chosen, and their decision may largely influence the outcome, even though they have no direct role to dictate who is or is not appointed.
The primary responsibilities of an advisory board
So what does an advisory board do? In fact, there are no specific rules to how members of an advisory board should act and the responsibilities expected of them. However, there are expectations and unwritten advisory board responsibilities.
First of all, to determine what your advisory board will do, you need to determine the following:
Why do you need them
How often do you need them
When they should meet
What your expectations are
Potential candidates for your roles
Now you’ve determined all of these, the possible responsibilities for your advisory board members may include some of the following.
Your advisory board will consist mostly of people who have the potential to provide expert insight into your goal and activities. You also need them to provide financial support, the goodwill of their names, volunteer, and engage with your community. Depending on your needs, all of these roles are important to the duties of advisory members.
Meetings are crucial for the board to function effectively; however, a letterhead advisory member may not be obligated to attend board meetings. The meetings could be held virtually or physically, depending on how convenient it may be for the advisors. Once they understand their roles, they’d be able to determine how often they should meet. Since these are experts themselves playing advisory roles, it might not be ethical to place excessive meeting demands on them.
The board has, with its expertise, helped the organization set goals and make strategic plans. Since they play ambassadorial roles on behalf of the organization, they can see the needs of the community they represent more closely. Then help the organization make strategic plans towards achieving them. To do this, they report to management, who, in turn, makes decisions accordingly.
The board will assess the performance of management’s key players and determine if they’re making decisions in line with company goals and objectives.
What an advisory board structure looks like
The structure of the board is up to you, as are their roles. Although, there are simple tips to keep in mind.
It’s best to have an odd number of board members to avoid a tie when voting. The number of members need not be too large — nine or eleven is sufficient and helps to make the decision-making simpler.
Your advisors should be experienced, especially if you’re searching for investors for your company or donors for your nonprofit. You should have a number that represents the equity of your company, or the audience you’re reaching out to. Also, your advisors should be made up of industry experts, or at least be able to connect with your organization’s audience.
Your advisory board structure should be about your needs, so your meetings should be structured as frequently as the need demands. If not, quarterly or annual meetings with the CEO should suffice.
Don’t forget to determine how you’re going to compensate board members for their expertise and commitment to your organization. However, you choose, remember that it could help to motivate them all the more.
Advisory board members
The advisory board member job description is simple. In the simplest forms, your advisory board should have a chairperson, vice-chair, board secretary, nominating committee chairperson, treasurer, and the board floor members.
The board chairperson
The chairperson is in charge of the advisory board — all members answer to them. They oversee the activities of the board and report to management as scheduled. They draft and share responsibilities with all board members and work with them to meet expectations.
The vice-chair works with the chairperson to achieve all the set goals and objectives. They also act as the chairperson in his/her absence. They report to the chairperson on all delegated duties.
The board secretary
The board secretary is an advisory board member responsible for handling the meeting minutes and maintaining proper records of the advisory’s activities. The person is also in charge of keeping members aware of meeting schedules, drafting reports, and monitoring the overall participation of board members.
Nominating committee chairperson
This person is in charge of maintaining the current state of the advisory board. They are charged with the responsibility of recommending new advisory members and analyzing the performance of current members in line with the organization’s needs. They report to the board chairperson regularly.
This advisor works directly with a staff member in charge of income reports. They review the report in light of the board’s objective and the efforts that have been invested to achieve them.
The board floor members
These members should actively participate in meetings, offer expert advice and volunteer services where necessary. They should also commit to assigned responsibilities and collaborate where necessary.
Time to use the modern board management software!
iDeals Board serves board of directors, committee members with a comprehensive suite for governance tools
Jesus RivasMarketing strategist
Jesus Rivas is an accomplished marketing strategist with a strong focus on the niche of board portals. With over 8 years of experience in the industry, he has honed his skills in creating effective marketing strategies that help organizations achieve their goals.
Jesus develops and executes marketing strategies, approves content plans, conducts marketing research, and coordinates content creators. His extensive knowledge of board portals and their objectives has been pivotal to the platform's success, enabling her to attract and retain a loyal user base.
Advisory boards provide wise counsel regarding myriad issues that your organization may be facing. An advisory board's essential operation is to support the organization's goals. The advisory board provides insight, but it's up to the organization and board of directors to decide whether or not to act upon it.
What Is an Advisory Board Member? Advisory board members are generally volunteers who are invited by the board of directors to assist them in fulfilling their duties and responsibilities by sharing their knowledge and resources with the board.
In structuring your board of directors, here are a few obvious recommendations: (i) it should be an odd number (so never a voting tie); (ii) it should largely be comprised of parties friendly to you and supportive of your vision (so no battles in the board room or being forced into a non-desired direction); (iii) it ...
Most advisory boards have three to five members. They are typically made up of equal members; unlike a board of directors, there are no chairs, presidents, vice chairs or vice presidents. The members all have equal rank and voice.
The leader of such a committee is the advisory chairman, whose role is to act as liaison between the board of directors and the advisory committee. The chairman is often also a member of the board of directors.
Definition of an Advisory Board and Board of Directors
The main responsibility of an advisory board is to help companies make strategic decisions by providing expert knowledge and guidance. In contrast, a board of directors is responsible for making sure that a company's operations are running smoothly and profitably.
“The one quality we always look for when thinking through an advisory board is the ability for the person to translate his advice to action. When choosing between a big name and someone who actually greases the wheels and participates, I would always pick the latter. ”
Best Practices of advisory board management include setting an agenda, communicating with members and soliciting recommendations. Once you set up your advisory board, all of these goals can be relatively easy to achieve.
Boards of directors most often include inside directors, who work day-to-day at the company, and outside directors, who can make impartial judgments. The top of most management teams has at least a Chief Executive Officer (CEO), a Chief Financial Officer (CFO), and a Chief Operations Officer (COO).
A one-tier board is a single group that's typically smaller and handles everything from management to supervision of the company. A two-tier board comprises a small management panel and a larger supervisory panel combined to handle company tasks separately.
Example. A typical Board of Advisors comprises a finance expert, a legal expert, a marketing advisor, a human resource manager, and an accountant. Each helps manage a specific aspect of the business and provides insights on upcoming business trends on their domain expertise.
The difference between an advisory board and a working group is simple: an advisory board is put together to get opinions, while a working group is put together to get something done. They're two very different tasks that require two very different skill sets.
A nonprofit advisory board is responsible for performing tasks outside of the usual purview of the nonprofit board itself. Advisory boards are formed to give the nonprofit organization specialized information, experience, and skills, so that the organization is able to achieve things that it otherwise could not.
So, what is advisory work? Advisors work hand-in-hand with companies to proactively identify the organization's opportunities or problems before they occur and then strategize with the CEO or other C-suite executives to develop the right roadmap for achieving success.
Steering groups will meet at regular intervals so members make a commitment to attend scheduled meetings whenever possible. Advisory Panels consist of senior staff and patient/public members and they work together to provide strategic advice.
An advisor may receive between 0.25% and 1% of shares, depending on the stage of the startup and the nature of the advice provided. There are ways to structure such compensation that ensures founders get value for those shares and still retain the flexibility to replace advisors, all without losing equity.
The average Advisory Board Member salary is $64,757 as of May 25, 2023, but the salary range typically falls between $58,111 and $72,945. Salary ranges can vary widely depending on many important factors, including education, certifications, additional skills, the number of years you have spent in your profession.
Advisory shares are a type of stock option given to company advisors rather than employees. They may be issued to startup company advisors in lieu of cash compensation. Advisors are usually granted options to buy shares rather than given the actual shares.
Reporting to the CEO, this position will provide high level advice and support to the CEO. This includes governance and administrative activities related to the CEO's role as Company Secretary, and ensuring the efficient management of the office of the CEO.
Advisory shares differ in some key ways from other types of equity a company may issue. The main difference is a pretty obvious one: advisory shares are only granted to advisors. Another key difference is that advisory shares issued as common stock options are always non-qualified stock options (NSOs).
How many members usually sit on a board? A typical board of directors has nine members, but some have three, and others have 31. Typically, private companies have between three and seven directors on their boards. To avoid voting ties, boards are usually an odd number.
First, what exactly is the board governance framework? It is a set of policies, procedures, and processes by which a company is governed. A governance operating model includes these four major components: structure, oversight responsibilities, talent and culture, and infrastructure.
What is a one-tier board? If you have a one-tier or unitary board (monistic governance model), there is only one board that consists of both the management and the supervisors. The supervisors are part of the board. Within the one-tier board a distinction is made between executive directors and non-executive directors.
Essentially, it is the role of the board of directors to hire the CEO or general manager of the business and assess the overall direction and strategy of the business. The CEO or general manager is responsible for hiring all of the other employees and overseeing the day-to-day operation of the business.
Whereas a board of directors focuses on governance, an advisory board contributes—you guessed it—advice and insight. An advisory board has no governing power or fiduciary responsibility. They simply offer opinions. That thought leadership, however, can have a powerful impact on a nonprofit's perception.
Regardless of whether a FAC is Presidential, statutory, or discretionary, it will require a formal federal advisory committee charter before it can conduct business. The charter marks the formal establishment of the FAC.
Evaluation management often involves a steering group, which makes the decisions about the evaluation. It is important to distinguish between a steering group (which makes decisions) and an advisory group (which provides advice).