Advisory Boards: Competence Centres For Difficult Markets
Article by Christian Tegethoff, Managing Director CT Executive Search
What is an advisory board and what does it do? As the name suggests, an advisory board is a committee with a purely advisory function.
Unlike the management, an advisory board has no decision-making powers. In contrast to supervisory boards, advisory boards also have no formal control function. Advisory boards have no governance tasks or legal responsibilities. This means that companies are free to compose their advisory boards as they please. There are no rules as to who can join an advisory board, how often the board meets and what issues it deals with. Formal elections, term limits and disclosure of advisory board remuneration are not required.
The objectives of advisory boards vary from company to company. Some companies are interested in information about new technical developments, others hope to strengthen their networks in politics or foster their reputation. An advisory board can also help to develop knowledge of foreign markets and to understand the business culture of a specific target country.
Most companies choose to set up advisory boards when experienced individuals “from outside” can enrich the knowledge and strategic planning capabilities of the management team.
Advisory boards can act as "sparring partners" by questioning management's assumptions, for example on technical issues. In short: Advisory boards are an opportunity to use expert advice without hiring an external consultancy agency. The company and the advisory board are in the same boat - they work together in the long term and are united in their interest in the success of the company.
Unlike the management, an advisory board has no decision-making powers. In contrast to supervisory boards, advisory boards also have no formal control function. Advisory boards have no governance tasks or legal responsibilities. This means that companies are free to compose their advisory boards as they please. There are no rules as to who can join an advisory board, how often the board meets and what issues it deals with. Formal elections, term limits and disclosure of advisory board remuneration are not required.
Advisory boards: in-house consultants and networkers
The objectives of advisory boards vary from company to company. Some companies are interested in information about new technical developments, others hope to strengthen their networks in politics or foster their reputation. An advisory board can also help to develop knowledge of foreign markets and to understand the business culture of a specific target country.
Most companies choose to set up advisory boards when experienced individuals “from outside” can enrich the knowledge and strategic planning capabilities of the management team.
Advisory boards can act as "sparring partners" by questioning management's assumptions, for example on technical issues. In short: Advisory boards are an opportunity to use expert advice without hiring an external consultancy agency. The company and the advisory board are in the same boat - they work together in the long term and are united in their interest in the success of the company.
Advisory boards in the emerging markets
Countries like India, China, Iran or Russia can be difficult environments, especially for small and medium-sized companies. It is not easy to keep up with the constant changes in the regulatory area and the ever-changing economy.
The local subsidiary companies are sometimes small, local management is often too absorbed in day-to-day business to be able to focus on strategic issues. In such a constellation, it makes sense to install a local or regional advisory board.
The advisory boards - experienced local managers from the respective company environment or the relevant target industries - support the local management with their experience by providing a "bird's eye view" and acting as coaches of the management.
With their market understanding based on experience, the advisory boards help to avoid costly mistakes and to identify the direct route to the goal.
A skilled advisory board can also provide their contact network to build and maintain relationships with customers and other stakeholders. Renowned names help to increase the company's visibility and improve its image. These strengths are beneficial for working with (potential) customers, government bodies and a strategical approach to business development.
As trustworthy and valued lawyers for their respective markets, the advisory councils can help to promote understanding of the local specifics at the company's headquarters. In doing so, they support country management in fulfilling its intercultural bridging function.
When does an advisory board make sense in Eastern Europe and the emerging markets?
The typical tasks of a regional or country-specific advisory board include:
- imparting market understanding and support in strategy development;
- maintaining contacts with key customers, especially at the owner level;
- facilitating contacts in politics and administration;
- assistance in interacting with joint venture partners;
- establishing contacts to potential customers and partners.
- maintaining contacts with key customers, especially at the owner level;
- facilitating contacts in politics and administration;
- assistance in interacting with joint venture partners;
- establishing contacts to potential customers and partners.
The decisive factor for the usefulness of the advisory board is the consistent appointment of personalities who bring the required skills and networks with them.
CT Executive Search supports companies in identifying and approaching candidates for advisory board positions.
As a rule, these are personalities from the local economy and/or politics who, based on their experience, can bring added value to international companies. We leverage our local networks in countries such as Russia, Ukraine, China and India in order to identify candidates for advisory boards who measurably increase companies’ success.
CT Executive Search composes entire advisory boards or places individual advisors with specific competencies, tailored to the requirements of local or international management.
How can advisory boards be composed effectively?
CT Executive Search supports companies in identifying and approaching candidates for advisory board positions.
As a rule, these are personalities from the local economy and/or politics who, based on their experience, can bring added value to international companies. We leverage our local networks in countries such as Russia, Ukraine, China and India in order to identify candidates for advisory boards who measurably increase companies’ success.
CT Executive Search composes entire advisory boards or places individual advisors with specific competencies, tailored to the requirements of local or international management.