If you are confused whether forming a board of advisors will be an advantage or not for your company then this article will give you pointers so you can make a more informed and intelligent decision.
What are the advantages and disadvantages of forming board of advisors? What makes it different from a board of directors? This business guideline will help you differentiate the one from the other and help you decide if forming a board of advisors for your company is the right choice for you.
Advantages
Cheaper than a board of directors
Members of the board of advisory usually are paid less than directors of boards. This is primarily because they play different roles. An advisory board’s purpose is to answer questions while a board of director is to enact a policy. It’s more affordable to the pocket.
Can help you establish credibility
Putting together an advisory board can enhance your company’s image. However this would depend on the quality of members within your board so no need to be in a hurry when developing the core of your board. Look for advisors in different fields and in unusual places. Get a good choice business lawyer, banker, accountant, even a pastor, and a financial consultant and maybe even a doctor. Start by thinking about your company. What does your company need? Once you have identified these, put together a board for this purpose.
Analyze your plan
No need to solve problems in isolation. With an advisory board, you can have a constant feedback mechanism, a kind of check and balance thing. Because of its diversity and collected experience, members of the advisory board can bounce back different ideas you never have thought of. Flaws and future dilemmas brought by your plan can be addressed quickly and handled smoothly.
Option to recruit short term
An advisory board can exist on a short term or long term basis depending upon the agreed contract of terms and purpose of formation. The timing of assembly would also depend on the business situation. On the other hand members of the board of directors are usually elected by shareholders and owners who in turn elect officers who hire employees. Therefore they are elected for the long run most of the time.
Recommend new markets
Because of diversity of field, interest and experience, a board of advisors can easily recommend new markets a company can invest on. They have the capacity to introduce new business contacts and key people in different circles of influence from other industries.
Disadvantages
Part time treatment mentality
Members of an advisor board usually work in other occupations as well. They may also be doing some side consulting with other companies too. The possibility of treating your company as a part time job is likely, opposite to a director who may have more vested interests in the company’s overall situation.
No legal responsibility
Unlike a board of directors, a board of advisors has no legal responsibility over the company. As far as they are concerned, all they do is give you sound advice and suggestions. They don’t hold the reins to run your company as a board of directors does. At the end, it’s still up to you if you want to act on that advice or not.
