When Two Boards Are Better Than One

Establishing a corporate advisory board can be an effective and inexpensive way to help executives build bridges to new technologies and ideas.

At larger companies, advisory boards can inspire innovation by offering a fresh perspective. They can push younger companies to new frontiers by helping to build relationships and by providing a cost-effective way to import critical skills outside a company’s traditional competencies.

Advisory boards are comprised of outside experts who bring a niche set of skills or expertise and take some of the burden off the public board of directors. They can help organizations manage change; advise companies that are repositioning or reinventing themselves; make informed decisions on technology, innovation, design, and sustainability; and develop new strategic positions and alliances to expand globally. Unlike traditional corporate boards, which may be consumed with governance issues, advisory boards give non-binding advice, possess no fiduciary or legal responsibilities, serve at the company’s discretion, and are more flexible in size, composition, and length of service. The practice, generally, is for each adviser to serve a one-year term, which provides the leverage to change advisers as needed without drawing media and analyst attention.

Among the primary benefits of serving on an advisory board is the development of intellectual and social capital. Advisory boards bring this capital together efficiently, inexpensively, and with focus. The counselors can concentrate on giving sound advice—both on strategy as well as execution. The right people, with the right background, knowledge, and diversity can give an enterprise real connectivity to its customers and constituents. And without the legal context of the board of directors, advisory boards can make their recommendations informally.

For many companies, an advisory board can provide a level of talent they might not otherwise be able to afford. Highly placed executives, who do not have the time or are unwilling to assume the liabilities of a traditional corporate board, find that advisory boards are an attractive option. Coming from different businesses and industries, the advisers are in a unique position to visualize possibilities synthesized from insights and technologies used in other industries. As Peter Drucker said, “The future has already happened in some other industry or part of the world. It’s the job of the executive to bring that future to their company.” (See “Drucker in the Boardroom”) Advisory boards can act as global ambassadors to the future.

For Envision, MicroNets, Stratco and other smaller companies that that have created such boards, advisers can open up their networks to provide access to investment bankers, venture capitalists, and individual investors. Advisers provide technical expertise in key areas such as operations, industry trends, financial performance, risk, strategic alliances and partnerships, global expansion, technology, and reinventing or repositioning the company in the world economy.

Targeted Help

The newest trend is to create an advisory board to address a single issue, such as design and innovation, sustainability and the environment, family owernship, global divisions, and specialized markets like those related to gender or age. Procter & Gamble is a pioneer in this practice, focusing on design and innovation. While there are many different strategies employed in CEO A.G. Lafley’s heralded turnaround of P&G, one of the largest companies in the world, the Design Advisory Board (DAB) and critical outside thinking from a multitude of sources have played a key role.

Selecting the right board members from diverse backgrounds is tremendously important. “We wanted to create a network of people who are thinking about P&G,” explains Claudia Kotchka, senior vice president of Design, Innovation, and Strategy, “and we treat them like family.” Members, described by Kotchka as leaders in the design field, hail from a variety of disciplines and include top designers, academics, and corporate executives.

P&G’s DAB has become a resource to teams within the company grappling with myriad design and consumer experience issues. Brand teams present problems to the advisory board, which then passes on ideas to the teams that address such areas as product design, strategy, markets and execution. The DAB also provides long-term thinking and big ideas relevant to a category or the organization as a whole. Not surprisingly, there is a waiting list for brands that want to solicit the group’s expertise.