Summary

• Boards can offer valuable insights to help shape your organization, acting as a sounding board for your C-suite and broader management team.
• Whether you need advisors for certain business goals, or directors to establish governance and representation of stakeholders, keep in mind these considerations and criteria when establishing either type of board.

Directors and advisors bring a unique perspective to your organization with external insight on business performance, trends in the market and various industries among other areas. The criteria for developing an advisory board or a board of directors are similar so it’s important to understand which structure will work best for your business.
 

Creating An Advisory Board

Building a successful advisory board can involve several approaches.

• First, clearly identify what your organization wishes to achieve with the support of an advisory board. It’s helpful to align on a specific purpose, outcome and goal as well as the long-term trajectory of your business to help guide your search for compatible advisors.
• With this baseline information in mind, you can identify individuals to fill skills gaps within your organization and surround your leadership team with a variety of viewpoints as you navigate the future course of the company.
  • For example, you may want to strengthen your understanding of a specific industry ahead of a new product launch, or perhaps you’re looking to understand your business sector from a different perspective.
  • Individuals with experience at a competitor, expertise in a different market where you’re looking to expand, or deep knowledge of a certain customer segment can provide constructive points of view that might go unnoticed among your internal team.
  • When considering the financial wellness of your organization, bankers and accountants are commonly sought after advisors for compliance and financial reporting best practices.
• Include diverse perspectives too.
  • Seek out individuals with management expertise, varied industry expertise and genuine interest in supporting your organization.
  • For example, a board with IT, marketing, HR and legal viewpoints across sectors from technology to manufacturing ensures that you’ll have diverse points of view to tap.
  • Finance experts can help guide important business decisions and act as a sounding board around the review of your financials and overall health of your business. Bankers tend to look to minimize risk and as a result, may ask questions others may not be considering. They’re often seen as a balance to a CFO, CEO and business leader who can ask does everything look right?
  • Gender, racial and ethnic representation are other important ways to diversify.

To formalize your advisory board:

• Define roles and expectations for members,
• Align on whether members will be compensated,
• Create an established structure (i.e., number of members, term length, leadership roles, etc.) and,
• Schedule a regular cadence of meetings¹.
• Additionally, establish expectations and rules of engagement with your leadership team and CEO to ensure the board maintains transparency across your business.

Once you agree on the individuals who should be on the board:

• Extend invites to potential members and initiate an onboarding process. Include an overview of your organization, its challenges and expectations for the board.
• Align on a feedback mechanism. Consider the most effective way for the advisory board to communicate with your leadership team to ensure their insights are heard and valued². Bring them together regularly and communicate a calendar of meetings in advance for a particular year.

As your organization evolves, continuously review the effectiveness of the advisory board to ensure its counsel is meeting your goals. You can always pivot the structure and roles to meet new and changing needs.

Creating A Board Of Directors

Creating a board of directors can be more stringent than for a board of advisors, especially for public companies that may require shareholder involvement, legal stipulations and strategic alignment, and occasionally amendments, to your business’ existing bylaws.

First, identify internal and external individuals with diverse expertise and skills. Private companies, such as family-owned businesses, will often prioritize involving external board members who bring objective expertise and support in areas unique to the nuances of their family structure, such as family business governance and succession planning.

Creating bylaws that outline responsibilities, roles and terms by which board members abide involves several steps and considerations, including:

• Purpose and structure of the board,
• Membership criteria,
• Meeting procedures and frequency,
• Roles and responsibilities, and
• A decision-making process.

Additionally, consider if your board will have sub-committees and include provisions for succession planning³. As you draft bylaws, involve key internal and external stakeholders and legal counsel to ensure compliance with your business goals and industry regulations.

The Advantage Of Dynamic Boards

Whether developing a board of directors or an advisory board, having a group of members with varied expertise and experience will ultimately enhance your decision-making and innovation and help your organization more easily navigate a wider range of challenges, circumstances and stakeholders. There are many ways to approach designing your organization’s board structure. By keeping a few considerations in mind, you’ll be on your way to surrounding yourself and your team with additional, value-add perspectives whenever you need them.

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Eastern Bank's Commercial Banking Team is available as a sounding board with the tools and resources to help ensure your company is prepared for different business situations. Contact us to learn more.

The opinions expressed herein are those of the authors and do not necessarily reflect those of Eastern Bankshares, Inc., Eastern Bank, or any affiliated entities. Views and opinions expressed are current as of the date appearing on this material; all views and opinions herein are subject to change without notice. These views and opinions should not be construed as any specific recommendation. This material is for your private information and we are not soliciting any action based on it. The information in this content has been obtained from sources believed to be reliable but its accuracy is not guaranteed. There is neither representation nor warranty as to the accuracy of, nor liability for any decisions made based on such information.

¹Contributor. (2021, March 28.) How to Set-up an Advisory Board? Advisory Board Centre. https://www.advisoryboardcentre.com/insight/how-to-set-up-an-advisory-board/

²Staff. (2015, March 11.) Governance: How Do You Get The Right Kind of Feedback From Your Advisory Committee? Carnegie Higher Ed. https://www.mstoner.com/blog/strategy/web-governance-get-right-kind-feedback-advisory-committee/

³Hampton, C. (2014, February 19.) Developing a Strategic Plan and Organizational Structure, Section 7. Writing Bylaws. The University of Kansas. https://ctb.ku.edu/en/developing-strategic-plan-and-organizational-structure

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