Advisors Advise / Directors Direct
By Liz Weber
I thought I’d take a moment to simply clarify the difference between Advisory Boards and Boards of Directors. People often believe they’re one-in-the-same and use the terms interchangeably. In reality, they’re very different entities. Both are valuable, but they wield different levels of power.
Boards of directors are typically elected by the shareholders or members. In small firms, boards of directors are 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. A board of director’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 has full authority to override the decisions of the President or CEO. The board can hire and fire key staff – including the President/CEO. A board of directors directs the actions of staff and of the organization.
Unlike their more commonly-known cousins, the boards of directors, advisory boards are typically comprised of individuals 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 often 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. They are paid for their services on the advisory board 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’re not yet comfortable with the idea of expanding or creating a board of directors for their company. Remember: Advisors advise – Directors direct. Determine what’s right for your organization. Then let them help you lead your organization to success.
Copyright – Liz Weber, CMC – Weber Business Services, LLC.
WBS is a team of Strategic Planning and Leadership Development Consultants, Trainers, and Speakers. Liz can be reached at email@example.com or (717)597-8890.
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