Advisory boards as active players in company development

Specialist articles by Alexander Eichner,, 27.02.2014

Company advisory boards have developed into an established institution not only in the context of large companies, but also for medium-sized businesses. In their capacity as counterpart in dialogue and discussion to the executive management as well as the shareholders, advisory boards in many cases provide a valuable stimulus. Thus the advisory board is increasingly assuming a role in both strategic and operational restructuring.

Whatever the task, be it the acquisition of new customers, the establishment of new distribution channels, the takeover of competitors, the selection of new management personnel, the arrangement of succession for the company owner, the company sale or the addressing of a major crisis, in any case the advice of experienced advisory board managers can be beneficial and also profitable.

The company advisory board has no ultimate authority in decision-making; their comments serve merely to support the company decision-makers. This has always been the case, and will remain so in the future. However the role of advisory board is in a state of transition. Parallel to the development within the supervisory boards of the DAX-30 and the M-DAX companies, a change in paradigm is apparent among the advisory boards of the Republic. Prompted by public criticism of the passive attitude of many supervisory boards threatened by or indeed facing acute problems, things are beginning to happen.

The advisory board is becoming pro-active in the structuring process

Just as the supervisory board is recently being defined less in terms of a controlling committee but rather as a structuring coach in the framework of company development, this applies equally to the advisory board. Business is faster, more complex and more risky. The tendency is towards fewer mandates and more depth in tasks. In future, members of an advisory board will be required to have skills in the strategy-based exchanging of ideas, in developing a vision and in practical operation proposals. Gone are the days of the passive Old Boys Club meeting four times a year for coffee followed by dinner. The advisory board is becoming pro-active in the structuring process.

Whereas previously, advisory boards largely relied on the activities of the management and on their own experience, they are now increasingly urged to obtain information from external sources, in order to be able to comprehend and hence scrutinize critically the statements of the management. The advisory board has to work less internally focussed and must become more active. At the same time the advisory board – or in individual cases, the relevant member of the board – is the corporate sparring partner or company coach. The reflection on business decisions and thinking processes creates a sense of security or indeed forces reconsideration, when crucial new arguments are presented.

In brief: advisory boards need movers and shakers

Faced with this new diversity and depth of tasks, every medium-sized business should be warned against appointing board members for their notability as individuals. It is to be expected that a prominent ,meet and greet man' is less likely to advance the business, than an experienced manager for whom the issues are more important than the person. Naturally each non-prominent member of the advisory board should contribute his own network of contacts and connections, if beneficial to the company.

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