<Knowledge is knowing that a tomato is a fruit.
Wisdom is knowing not to put it in a fruit salad.>
The advisory board is not a common practice, at least not in Romania. The board of advisors is a group of specialists that provides non-binding strategic advice to the management of a company, organization, or foundation. The advisory board has an informal nature and is usually gives greater flexibility compared to the formal board.
When is a board of advisors needed?
A board of advisors is needed for various reasons: the bigger a business gets, the more attention it needs. There are more issues that need to be handled to ensure its sustainability and usually the board of advisors is established when:
- there is a need to scale-up and the board of advisors gives feedback
- the creation of a board of advisors attracts the attention of investors and creates a feeling of confidence because such a known individual puts their trust in the company.
The composition of the board of advisors
Usually, a board of advisors is composed of a legal counsel specialized in governance, a financial, a human resource, a communication specialist, and an ESG advisor to help the business with their expertise and provide insights on various trends and potential issues.
The process needs to be elaborated:
- Identify the business needs: what specialists are needed to be part of the board? Members of the board of advisors shouldn’t just be those the owners of the business are familiar with. They need to have relevant experience in the industry where the business operates.
- The number of members: create a board of no more than five advisors. Two are too less, more than five is too much. The board of advisors is for brainstorming, no for creating additional distracting factors.
What to be avoided:
- It is better not to include people who will only be making a living out of being a member of the boards of directors and advisory boards. Ideally, the members of the board should be working a separate full-time job, but they should also be interested in growing a business
- Family members, close friends, or relatives whose emotional connection may interfere to the business
- The advisors that act as selling agents of the business or as executive directors
Are members of board of advisors remunerated?
Usually yes, and usually is a fee / meeting. Everything that is for free it is proved to be expensive in the end.