What is an advisory board: roles, responsibilities, and best practices

As businesses face increasing pressure to demonstrate strong governance practices, advisory boards are becoming an essential resource for providing informed, strategic counsel. They offer non-binding advice, helping organizations navigate key challenges while enhancing overall governance. While advisory boards don’t hold executive decision-making power, their insights are valuable in addressing specific business needs.

This article outlines the roles and structure of an advisory board, compares it with a board of directors, and presents best practices for building and managing an effective advisory board.

What is an advisory board?

The advisory board is a group of individuals who offer strategic opinions on specific aspects of a company’s processes. The role of the advisory board varies between organizations, as they have no fiduciary duties or legal responsibility for the organization’s operations. However, their advisory services are important to help an organization handle its legal, financial, or managerial responsibilities.

Do all businesses need an advisory board?

Companies wondering about forming an advisory board must address a critical question: “Why are we establishing an advisory board, and what do we want out of it?” The company may require support with everything from marketing to managing human resources to influence regulators’ decisions.

More often than not, an organization, either a nonprofit or for-profit with a nonprofit side, needs the community it’s reaching out to, to perceive it in a positive light. The advisory board definition often mirrors the image of the organization.

There is a short overview of the cases when companies might need an advisory board:

• Fast growth and expansion
• M&A 
• Assistance with staff development
• Difficulties in board communication
• Strategic partnerships
• Conflicts resolution
• Important decisions due to a shift in course

Benefits of an advisory board

An advisory board member brings to the company a lot of information, skills, and experience. In its report, BDC states that 86% of businesses with advisory boards experienced up to a 24% rise in revenue, while company productivity climbed by 18%. 

These people are frequently experts in their professions, capable of giving insights, and advice. Here are some specific ways an advisory board member might contribute value:

1. Leveraging expertise. Employ the useful and practical advice provided by experienced advisors who specialize in boosting company success.
2. Improving reputation. A positive reputation fosters increased trust among consumers, partners, and stakeholders, potentially leading to new possibilities and partnerships.
3. Building trust. A trustworthy company is more likely to attract and keep customers and partners and acquire the trust of investors.
4. Attracting top-tier talents. The presence of a reputable advisory board makes the firm more desirable to top-tier experts looking to join a vibrant and forward-thinking organization.
5. Cultivating culture. Advisory board members understand the company’s culture. This helps to maintain continuity and consistency with the organization’s values and goals

Purpose of advisory boards

The advisory board’s purpose is to fulfill corporate advisory board responsibilities or nonprofit advisory board responsibilities, depending on the context. Advisory board members provide strategic counsel and expert guidance to organizations, whether they are corporate entities or nonprofit organizations.

These responsibilities encompass a range of advisory board duties, such as: 

• Offering industry-specific insights 
• Sharing knowledge
• Advising on nonprofit governance best practices.

Advisory board meetings, when these board members or specialists convene to deliberate on critical issues, are often led by the advisory board leader or chairperson.

Importantly, compensation advisory board members and membership advisory board members often serve on a volunteer basis. In fact, they are motivated by a desire to see the organization succeed and adherence to board governance models that encourage effective and ethical governance practices.

The difference between an advisory board and a board of directors

Both boards are key aspects of a nonprofit; however, board of directors (BOD) and advisory board roles diverge. The role of the advisory board often extends to providing industry trends, facilitating contact network expansion, generating new business ideas, and offering invaluable expertise. The infographic depicts the main differences between the board of advisors’ responsibilities and the board of directors:

1. In essence, the advisory board advises the organization on its operations, while the board of directors acts in charge of the organization’s day-to-day operations. The board of directors bears all financial and legal responsibilities, while the advisory board’s mandate is exempt from these obligations, except working to raise funds for the organization.
2. Nonprofit leadership distinguishes between the board of directors and advisory boards. The directors’ board defines the organization’s objectives and monitors success through key metrics, while advisory board members offer expert guidance to achieve these goals effectively. This division of responsibilities optimizes strategic planning and goal execution. 
3. Both boards may act as the face of the organization on separate grounds. While the board of directors acts as the professional public relations officers of the organization, the advisory board members may act as ambassadorial public relations officers — passively or actively.
4. Finally, the board of directors is vested with the power to appoint the organization’s key officers, such as the CEO and the chief financial officer (CFO). Also, they can dismiss these persons from their duties if their performance is not up to par. However, advisory board members cannot function in these capacities, they have no power to elect or terminate.

The chart below summarizes the key distinctions between advisory boards, governing boards, advisory councils, steering committees, and change control boards. 

Types of advisory boards

Advisory board types vary widely, each with its distinct qualities. These boards, acting as a sounding board for senior executives, fulfill specific roles within an organization. Depending on the context, they may include multiple boards, from those focused on a local company to those specializing in a particular foreign jurisdiction. 

1. Programmatic. This type of advisory board is formed from low-income social workers’ clients, who have vast experience on the issues that a nonprofit is poised to solve. They help to provide valuable feedback to the nonprofit on the impacts of its programs. 
2. Young professionals. An advisory board of these ambassadors consists of young people who represent the younger population that an organization is looking to serve. They provide insights into activities and advise the management on creative ways to serve the population they represent.
3. Letterhead. These advisory board members play no physical roles in the nonprofit other than providing the goodwill of their names to a nonprofit’s operation. You find these names on the nonprofit’s correspondence, but beyond that, these advisors have no other input to the nonprofit.
4. Fundraising. A fundraising advisory board could be created to advise the organization on prospective fundraising activities and how to reach new donors. 
5. Governance. This board lends its expertise to advise on how the leadership is chosen, and their decision may largely influence the outcome, even though they have no direct role to dictate who is or is not appointed.
6. CAB. A CAB consists of selected customers or clients who provide valuable feedback, insights, and suggestions based on their experiences with the organization’s products or services

The advisory board member roles and responsibilities

So, what does an advisory board do? There are no specific rules to how members of an advisory board should act and the responsibilities expected of them. However, there are expectations and unwritten advisory board roles and responsibilities, such as the following:

1. Strategic guidance. Advisory board members don’t just provide suggestions; they actively shape the organization’s strategy and decision-making.
2. Networking and partnerships. Advisory board members leverage their extensive networks to open doors to potential collaborators, investors, and partners. They cultivate relationships that prove pivotal for the organization’s advancement.
3. Industry expertise. These members bring critical domain knowledge and industry-specific insights to the table. Their understanding of industry trends and best practices ensures the organization remains agile and competitive.
4. Accountability and risk management. Advisory board members share in the responsibility for the organization’s success. They collaboratively work to identify and mitigate potential risks. 

Key takeaways

• While lacking binding authority, the advisory board’s role provides priceless insights and expertise for robust corporate governance.
• A positive reputation, nurtured by advisory board contributions, fosters increased trust among consumers, partners, and stakeholders, opening doors to new opportunities and partnerships.
• Clear objectives are the cornerstone, guiding the advisory board roles towards defined purposes, be it strategic guidance, market expansion, or problem-solving.
• The advisory board structure varies in organizations. Generally, 9 to 11 advisory board members are sufficient, and it is better to set up an advisory board with an odd number of members.

How to structure an effective advisory board

The advisory board structure is up to you, as are the advisory board roles. Although there are simple tips to keep in mind.

It’s best to have an odd number of board members to avoid a tie when voting. The number of members need not be too large — nine or eleven is sufficient. Thus, a smaller advisory board helps simplify the decision-making. However, some companies have from three to five board members. 

Source: Chinook Capital Advisors

Your advisors should be experienced and experts in the industry, especially if you’re searching for investors for your company or donors for your nonprofit. When organizing board meetings, you should have a number that represents the equity of your company or the target audience. 

Don’t forget to determine how you’re going to compensate board members for their expertise and commitment to your organization. However, you choose, remember that it could help to motivate them all the more.

Best practices for effective advisory board membership

Advisory board members are critical to an organization’s success. Consider the following advisory board best practices to make the most of this position:

1. Clear and open communication
2. Regular participation
3. Staying informed
4. Confidentiality and discretion

Clear and open communication

Encourage open and honest contact with the organization’s leadership. Engage in discussions to ensure that your ideas and suggestions are properly appreciated and in line with the strategic direction.

Regular participation

Your active participation is the foundation of your effectiveness. Thus, attend meetings and discussions regularly. Your presence demonstrates your commitment to the organization’s mission and ensures informed decision-making. Thus, each contribution you make adds value to the discussions and the overall direction.

Staying informed

To be a forward-thinking and valuable advisory board member, you must stay informed about industry trends and developments. Continuous learning and staying updated with the latest advancements in your field will empower you to bring fresh and relevant insights to the table. 

Confidentiality and discretion

The trust you foster within the organization is one of the cornerstones of what you do. When dealing with sensitive information, maintain the utmost level of secrecy. Respecting the confidentiality of internal matters protects the organization’s integrity and strengthens your reputation as a valued counsel.

Consider using board portals to increase your effectiveness as an advisory board member. These secure digital systems simplify communication, allow simple access to meeting materials, and protect sensitive data. In turn, Ideals Board provides a set of features that bring transparency and security to your business. 

How to create and manage a successful advisory board

To achieve success in your organization, it is crucial to gather a strong advisory board that is capable of providing valuable insights. This requires taking assertive and pivotal steps:

1. Identifying the right members. The foundation of a successful advisory board lies in its members. Seek individuals with diverse expertise, a proven track record, and a passion for your organization’s mission. They should be well-connected, with the ability to open doors and offer valuable guidance.
2. Setting clear objectives. Define your advisory board’s purpose and expectations. What specific challenges or opportunities will they address? Having a clear mission ensures everyone is aligned and working towards common goals.
3. Structured meetings and agendas. Develop a structured agenda that focuses on key issues and ensures each member’s time is well-spent. Encourage open discussions and brainstorming while maintaining a disciplined approach.
4. Evaluation and feedback. Regularly assess your advisory board’s performance. Are they meeting the set objectives? Collect feedback from both board members and your organization’s leadership. Make necessary adjustments to improve the advisory board’s effectiveness.

4 challenges encountered by advisory boards

Creating advisory boards can be a cost-effective endeavor that demands little in the way of management. But, as with any facet of business, challenges invariably arise. These hurdles must be addressed to unlock the full potential of advisory boards:

1. Balancing diversity.
2. Limited interaction with peers and company leadership.
3. Transforming valuable insights into tangible actions
4. Keeping member engagement

Balancing diversity

Diverse perspectives and ideas add immense value to the decision-making process. However, there lies a challenge within this opportunity: how to strike the right balance.

Diverse boards, especially those in the top quartile for gender diversity, hold a 28% higher likelihood of outperforming peers. It’s a testament to inclusive leadership’s competitive edge.

Limited interaction with peers and company leadership

It is sometimes difficult to comprehend why members do not participate in the discussion. It’s much more upsetting when you don’t see them socializing with external stakeholders and fellow members.

To address the problem of communication, try promoting open communication and organizing team-building events.

Transforming valuable insights into tangible actions

When there’s no clear plan to capture insights and turn them into action, it’s easy for valuable ideas to slip through the cracks. It usually leaves other board members feeling disillusioned, and their engagement wanes as they wonder if their input truly matters.

Implement a structured approach with robust insights documentation, prioritization frameworks, clear action planning, regular updates, feedback loops, and recognition of member contributions.

Keeping member engagement

While companies may initially launch a robust program with successful meetings, there is often a significant lull between these meetings. During this downtime, both members and internal stakeholders may lose sight of shared goals and outcomes

Successful advisory board meeting organizers recognize the importance of maintaining member engagement in between meetings. They do this by establishing ongoing communication channels, such as regular conference calls and webinars.

A day in the life of an advisory board member

What is it like to be an advisory board member? How does the day begin and move forward?

Time commitment & responsibilities

Advisory board members spend most of their day helping the organization. Major advisory board member duties include attending online or physical meetings and offering expertise to the organization’s leadership, which usually consume the major part of the time. These meetings address organizational challenges.

Apart from these meetings, other advisory board member activities include:

• Reviewing reports
• Attending events for networking
• Staying updated on industry trends
• Connecting with other professionals

Typical meeting preparation & engagement

Preparing for board meetings is another key segment of an advisory board member’s work day. They carefully review related documents and recent news. Advisory board meeting expectations include:

• Actively participating in the meetings
• Sharing personal ideas and suggestions
• Asking important questions
• Guiding the leadership
• Discussing key points with others after the meeting

Key contributions to the organization’s success

Advisory board members play a vital role in ensuring organizational success. They share their hard-earned experience and knowledge, which helps organizations stay on track and make better and more informed decisions.

Advisory board members also strengthen networking, which helps create new growth opportunities. They stay updated with industry trends, which ensures that the organization is adaptable and ready for new challenges.

The future of advisory boards in corporate governance

The future of advisory boards in corporate governance is bright. There has been a 52% global increase in employing advisory boards as a part of the governance structure.

Trends in advisory board adoption

More and more businesses are realizing the importance of advisory boards. Reports state that 95% of the organizations used the services of advisory boards for the first time since 2019. What’s more, the number of active advisory members reached 2.6 million in 2023, which highlights the growing demand for advisory boards.

Advisory boards provide flexible and neutral sources of non-binding advice. They primarily provide

• Market insights
• Industry knowledge, and
• Networking opportunities

That is why small businesses, tech startups, and large companies are turning to advisory boards. 

Increased focus on diversity & ESG

Diversity and environmental, social, and governance (ESG) considerations are becoming central to corporate governance advisory boards. Studies have revealed that 88% of public companies and 67% of private companies consider ESG factors important for their business operations.

Companies are making sure that their advisory boards include a mix of different perspectives and skills. Advisory boards are getting more involved in the following:

• Sustainability efforts
• Ethical practices
• Corporate social responsibility

Technology’s role: Virtual boards & AI-powered governance

Technology is changing how advisory boards work, and virtual advisory boards are a common example. Virtual advisory boards allow companies to access global expertise without geographic limits. This makes advisory boards more affordable and accessible.

Artificial intelligence (AI) is also playing an important role in advisory boards’ decision-making. Artificial intelligence tools analyze risks, track trends, and offer data-driven advice. Machine learning helps advisory boards to get more accurate and timely insights, which makes their guidance even more valuable.

Key takeaways

• Maintaining regular communication and feedback keeps advisory board members engaged and ensures their advisory board roles remain relevant.
• Advisory boards provide non-binding yet strategic advice that boosts adaptability, innovation, and access to new networks.
• The demand for advisory boards is rising, especially among small businesses and startups seeking expert input without formal governance constraints.
• ESG and diversity considerations are shaping modern advisory boards, making them more aligned with current stakeholder expectations and social responsibility.
• Technology, including virtual boards and AI-powered analytics, is transforming how advisory boards operate by increasing efficiency, accessibility, and insight quality.

FAQs 

Are advisory board members paid?

Advisory board members typically are not paid for their participation. Unlike directors on a board of directors, they usually serve in a voluntary or honorary capacity, although in some cases, they may receive stipends or reimbursements.

What does an advisory board do?

An advisory board provides strategic advice and fresh perspectives to a company’s management team. Its members share industry insights, challenge assumptions, and help guide long-term decision-making without having formal authority.

What are the roles and responsibilities of advisory board members?

Advisory board members are responsible for offering independent guidance on key business matters, participating in board meetings, and using their experience and networks to support the company’s strategic direction and credibility.

What is the difference between an advisory board and a board of directors?

The board of directors has legal and fiduciary responsibilities, while the advisory board has no formal authority or decision-making power. Instead, it serves as a non-binding consultative body, offering recommendations and insights.

Who should be on an advisory board?

Ideal members are industry experts, former executives, investors, or thought leaders who bring unique perspectives and can add strategic value. Diversity in background and experience is a key factor in building an effective advisory board.

How often should advisory boards meet?

Most advisory boards meet quarterly or bi-annually, depending on the company’s needs. The meeting schedule should allow time to discuss high-level strategic issues and provide actionable recommendations.

Can a startup benefit from an advisory board?

Absolutely. For startups, an advisory board can offer credibility, access to networks, and critical thinking that helps founders avoid mistakes and scale faster. It’s a cost-effective way to gain senior-level insights early on.