Entrepreneurs: Advisory committee or board of directors?

Establishing an advisory committee is often considered the first step before setting up a formal board of directors. As an indispensable tool in governing a company, an advisory committee will prove its added value by immediately contributing to the growth of the company and its profitability and by providing sound risk management. Here’s a spotlight on a committee that brings a lot of advantages.

What is an advisory committee?

An advisory committee is a group of multidisciplinary experts that meet several times a year to support an entrepreneur in their work. These seasoned professionals provide the support needed to get your business plan off to a good start, resolve challenges and foster growth initiatives.

However, this committee has no decision-making power. To improve its effectiveness, it should include people with skills that are complementary to your own. By offering different points of view, this kind of committee can lend considerable support to your business. It will also play an indispensable role during key steps in your trajectory.

  • Improve the company’s strategic orientation

As you go about handling your company’s day-to-day affairs, do you find that strategic planning is falling through the cracks? Remember that you don’t want to be displaced by the competition or miss an important step in your business plan. In such a case, now’s the time to establish an advisory committee to improve your strategic thinking.

  • Raise the credibility of the company amongst outside partners

Whether you’re looking for a new supplier, an angel investor or a partner, having an advisory committee as part of your team will make the process easier. Having independent committee members contribute their expertise to the growth of the company will be perceived as a plus by those on the outside.  In this way, your SME can demonstrate that it’s being guided by people with experience!

  • Break the isolation

If you sometimes feel alone as the leader of your team, having seasoned experts on an advisory committee might do you a world of good. Not only will it enrich your social contacts, but the brainstorming that comes out of it might lead to you change your perspective on a few challenges that lie ahead.

  • Find that needle in the haystack

Are you having a hard time recruiting the right person? Are you constantly looking for an expert who holds highly advanced expertise? If so, members of your consulting committee might be able to put their own networks to work.

What about the board of directors?

The board of directors also occupies a major role in governance systems for companies. In general, it takes over from the advisory committee once the company is publicly traded or an external investor has access to the company’s capital. It is generally composed of between five and seven administrators who are elected by shareholders. Its mandate is much more formal than that of the advisory committee, since its decisions are binding for the company’s administrators and managers. Like the committee, the board of directors is composed of experienced professionals who contribute to improving your strategic thinking. It must also, however, undertake certain responsibilities, such as:

  • approving strategic orientations and associated budgets;
  • monitoring the financial health of the company;
  • validating the effectiveness of company management;
  • evaluating the CEO periodically;
  • determining the remuneration of executive directors.

Some financial partners may require the presence of a board of directors at an SME. They may sometimes suggest candidates, thereby facilitating accountability and the evaluation of progress already achieved. Sometimes very small SMEs who obtain limited financing can get away with establishing an advisory committee instead of a board of directors. At least until its expected growth becomes a reality…

Make an informed choice

No matter which governance tool you choose, the decision to set up one of these committees will have a positive effect on your future activities. Whether it’s an advisory committee or a board of directors, your team of partners will contribute to improving your productivity, raising your level of innovation and better managing the operational risks that arise along the way.

Advisory Committee

 

Board of Directors
Decision-Making Power None. Yes. Decisions made are binding for the company’s managers.

 

Members Selected by the entrepreneur. Elected by stockholders.

 

Responsibility None. Its members have no personal liability in the exercising of their functions. Its members have a fiduciary duty and legal responsibility towards the company and its shareholders.