At an event the other day, discussing the merits of Non-Executive Directors (NEDs), I was asked “So what is the difference between Advisory Councils, Advisory Boards and NEDs?” As the MD of a company that creates and manages Advisory Councils, they hoped I could clear up the confusion. And it is actually a really good question.
Before looking at the differences though, it’s perhaps worth touching on their similarities. In essence, they are all tools used by organisations to help make better decisions. They offer expertise, advice, guidance and opinion. Typically they are formed of experienced executives from private business, academia, the public sector, or not-for-profit organisations. All act in an ‘advisory capacity’. But that’s really where the similarities end…
Non-Executive Directors (NEDs)
Most people understand the role of the NED, to some extent at least. There’s no doubt they are valuable to a business, if chosen well. Their input is usually around 20 days per annum. As de jure Directors they sit on the Board and typically input into strategy, risk and compliance. But most people seem less aware of the corporate governance involved and the fiduciary liabilities that NEDs have responsibility for.
From a company’s perspective there is the process of selection, appointment, remuneration, defining a service contract, and notification of appointment to Companies House, all of which make it far from straightforward. NEDs are not always experts in the industry or the service that the company provides, but instead may be specialists in a particular field, role or function. Their focus is not normally operational process or day-to-day executive tasks, their input primarily relates to high level boardroom decision making. The resulting advice does not usually help general executives who run segments, departments, regions, products, services or functions.
Advisory Boards are in many ways similar to NEDs. They tend to be industry or academic experts providing support to the Board or the wider business. Typically they have ‘been there, done that’, or they are ‘guru’s’ in a particular field. They offer respectability to an organisation, and provide practical input and direction to the Board or Executives of the business. The big difference between an Advisory Board member and NEDs is that they are not de jure Directors. They don’t sit on the Board, and don’t have the same liabilities or responsibilities. They may input into strategy and process, but they don’t cast a vote on strategic or organisational decisions. It’s the role of de jure Directors to take responsibility for the actual decision making, and they carry the corporate ‘can’ if things go wrong!
Advisory Boards ‘do what it says on the tin’, they act as an advisory group (or as individuals), helping steer, promote or run the business.
So that leads us to Advisory Councils, which sound similar to Advisory Boards. Indeed, although they have a common end goal, their function and mode of operation is quite different. Their raison d’etre is to advise and influence the strategy and direction of the business. They do this by providing feedback, thought leadership, co-creation, and opinion to help develop new products, evaluate propositions or assess services. The Advisory Council will normally comprise key clients, stakeholders or thought leaders. An Advisory Council typically has many more members than Advisory Boards or NEDs. They can range in size from less than fifty to many thousands of customers, c-suite executives or stakeholders.
Advisory Council members should be selectively recruited to ensure they are representative of the customer base, prospect base or some other cohort. They normally interact with the business online, but also by phone or occasionally face-to-face. Sometimes people refer to them as B2B panels or communities, but their role is far more than just a research tool. Well set up and managed they become a fully engaged forum of VIPs, providing valuable advice and feedback on a range of subjects. Neither NEDs nor Advisory Boards can offer the range of advice or match the flexibility of Advisory Councils.
An Advisory Council is typically made up of the organisation’s key customers. If the company sells overseas, then the membership of the Advisory Council should reflect this and bring an international perspective to the organisation.
So in simplistic terms these are the main differences between Advisory Councils, Advisory Boards and NEDs. They each serve different purposes, and bring different perspectives. Businesses would be wise to consider them all, and potentially benefit from all three!
To help understand the Advisory Council more, we have produced a best practice guide to Designing and implementing an Advisory Council which you can download here.