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Advisory Boards in the Financial Sector

Part 3: What is the best structure for an Advisory Board?

As we’ve seen in parts 1 & 2, an Advisory Board (AB) is very different to a traditional Board of Directors and can help enhance a company’s offering in a number of ways. But a good Advisory Board should follow certain core principles, so we also have to consider what the best structure is to get maximum value from the AB. Of course, since Advisory Boards are set up for many reasons (including whole-of-company ABs, Project ABs, Customer ABs etc), there is no one structure which is optimal for all contexts.

The Five-Member Advisory Board

For a traditional Advisory Board set-up, a commonly used structure is as follows:

• The Advisory Board consists of about five members

• There is an independent Chair of the Advisory Board

• An additional two independent advisors may sit on the board

• And two executives from the company (often the CEO and another for a small to medium company, or two senior managers or division heads for larger companies)

The Roles of the AB Members

The Chair should be competent at leading an Advisory Board, understanding the principles of independence, clarity of scope, measurable objectives, with a team that is fit for purpose. The executive members of the AB are chosen because of their commitment to and expertise in the outcomes to which the AB is working towards. Any additional independent AB members might be included specifically because of their subject-matter expertise, or indeed because they come from outside this specialist area and thus bring diversifying knowledge and experience to the table.

Do What Needs to be Done

The concept of “fit for purpose” is a phrase you will see often with well-run Advisory Boards. Sometimes it’s useful to know what AB structures are “common”, but ultimately the AB should be structured in a way that lets it best achieve the stated goals. We recommend strongly that a suitably qualified and experienced independent Chair is first identified and appointed. Then, in discussion with the executive putting the Advisory Board together, they can agree on the right structure; appoint the appropriate executives; and finally interview and appoint the ideal additional independent members.

What Advisory Board should your company be setting up now? See contact below for more information.

Written by Jonathan Watkin & Greg Solomon


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