Once and for all, let’s clarify the difference between Advisory Boards and Boards of Directors. People often believe they are one-in-the-same and use the terms interchangeably. When, in reality, they are very different entities. And although they are both important, they wield very different levels of power.
The shareholders or members typically elect the people who will serve on the board of directors. In a small firm, the board of directors is usually comprised of the business’ owners and family members. In larger organizations, the boards are comprised of interested individuals from disparate backgrounds and industries that, theoretically, represent the organization’s customer or membership base. The board’s responsibility is to guide the overall direction of the organization and to be the ultimate decision-making authority on strategic matters facing the organization. The company president or CEO reports to the board. The board of directors has voting power and full authority to override the decisions of the President/CEO. The board can hire and fire key staff—including the President/CEO. A board of directors directs the actions of the staff and of the organization.
Unlike the more commonly known board of directors, advisory boards are typically comprised of persons who—individually—are providing counsel to the business owner. These individuals may be attorneys, accountants, business consultants, human resources specialists, marketing professionals, etc. Each provides expertise and guidance to the business owner separately. An advisory board simply provides a way to pull these various advisors together on a monthly, quarterly, or semi-annual basis. Then, as a group, they can discuss the issues facing the company and can oft times determine quick solutions to strategic company issues. These advisors are not elected and they have no voting power. They are asked by the business owner to serve as a member of the advisory team and are paid for their advisory board services (as the board is usually a continuation of their current services). Their job is simply to advise.
I often suggest to my smaller clients that they start an advisory board when they are not yet comfortable with the idea of expanding or creating a board of directors for their company. Determine what is right for your organization and then invite them, advisors or directors, help you lead your organization to success.
Remember: Advisors advise — Directors direct.
Copyright MMV – Liz Weber, CMC, CSP – Weber Business Services, LLC – www.WBSLLC.com +1.717.597.8890
Liz supports clients with strategic and succession planning, as well as leadership training and executive coaching. Learn more about Liz on LinkedIn!