There are many different types of Boards an organisation can have, and there can be some overlap in their focus and purpose.
Almost every organisation will have a Board of directors, but not every organisation will feature an advisory Board. While there are commonalities between these two Boards, there are also some clear differences in their function within a company.
In this article, we’ll explore exactly what each Board does, and what they have in common, and what they do differently.
What Is A Board Of Directors?
A Board of directors is a supervisory Board, formed to oversee the management of the organisation.
They convene on a regular basis to discuss and make decisions about the organisation, often focusing on the bigger picture and less on the day to day aspects of a company.
This group safeguards the interests of all stakeholders and ensures the company is operated in an efficient manner, overseeing its budgets, resources, policies and objectives.
What Is An Advisory Board?
An advisory Board is a group of expert individuals who offer advice to the management of an organisation; they provide a platform to discuss ideas and concepts.
An advisory Board helps to fill a knowledge gap in the organisation. It supports the goals and objectives of the organisation, provides expertise and oversight, and serves as a mentoring body using its skills as guidance.
What Are Their Similarities?
Both a Board of directors and an advisory Board serve a general purpose to steer the organisation towards its goals and potential success. Both Boards provide perspectives, insights and ideas to the organisation, and represent the organisation in public matters.
Both Boards also have a role in monitoring, overseeing and reporting on the organisation’s performance, and making sure the organisation is developing good corporate governance and achieving its objectives. They tend to operate with the interests of the company in mind.
However, outside of the similar goal both Boards have, there are several key differences in what their role is within an organisation.
What Are Their Differences?
An advisory Board’s main responsibility is offering advice and expertise so that companies can make informed, strategic choices. Whereas a Board of directors is responsible for ensuring that the company is functioning optimally, turning a profit and achieving its objectives.
A key difference between a Board of directors and an advisory Board is established in the legal responsibilities each Board has.
An advisory Board has no governance responsibilities, meaning the advisory Board members have no actual voting rights within the organisation and they cannot make financial decisions.
In comparison, a Board of directors has voting rights and the power to make changes within a company. Members of a Board of directors vote upon and make the major decisions, and while an advisory Board does provide important guidance, the CEO or executive team has no obligation to take that advice.
The primary role of a Board of directors is in governance. A Board of directors focuses on making financial decisions and actively creating strategies for the organisation; they are far more action-based than an advisory Board.
The advice from the members of the advisory Board tends to be more specific to the company on an operational level, while the advice from a Board of directors can be more strategic and focused on the future and the bigger picture.
Additionally, a Board of directors can create an advisory board and elect the advisers that help guide them. An advisory Board cannot create a Board of directors, although they can help prepare for a Board of directors, as organisations may choose to have an advisory Board first.
In this way, Boards of directors and advisory Boards interconnect with each other, and while they share a similar purpose in helping an organisation achieve its goals, they differ in their legal responsibilities and their status within a company.
Despite this, they are both still important aspects of running a successful organisation, and it is vital to have at least one helping to manage a business.
Why Are They Important For Your Organisation?
The benefits of a Board of directors include:
- Establishes a body to plan strategy and objectives
- Helps monitor goals and progress
- Helps mitigate risk for an organisation
- Ensures compliance with industry regulations
- Gives business and management expertise
- Establishes a larger professional network and connections
- Enables more accountability for executives
The benefits of having an advisory Board include:
- Gives an outside, unbiased perspective on crucial decisions
- Ensures all decisions are thought through and all outcomes considered, minimising the possibility of mistakes
- Establishes credibility for an organisation
- Aids in planning and achieving objectives
- Ensures a better awareness of industry trends
Advisory Boards also provide a degree of consistency, longevity and background knowledge as their members supply reliable advice on specific issues. It can mean less pressure on executives and on the organisation in the long run.
An advisory Board can aid if an organisation’s Board of directors grows to an unmanageable size, as a smaller advisory Board may work more effectively and efficiently than a larger Board of directors.
Boards of directors ensure an organisation is run efficiently and represent a responsibility towards the stakeholders and shareholders, while also holding the chief executive accountable in the actions of the organisation.
They are a body that the organisation can turn to in times of crisis, as well as rely on in times of growth and success.
While a Board of directors is a must have for your organisation to run effectively, an advisory Board can also be crucial in guiding a company to success. Both have their value within an organisation and, despite their differences, both of their purposes focus on helping your organisation achieve its goals.
How Convene Can Help Your Boards
In order for both your Board of directors and advisory Board to be able to aid your organisation, your Board meetings need to run as smoothly and seamlessly as possible.
From creating an agenda to establishing a strong admin trail, every step of the process should be as easy as possible. With the right software that has the right features, the task of management can be much more effortless.