Wise Counsel: The Role and Value of Advisory Councils

Advisory Councils – informal, independent, non-statutory committees of external experts who advise and guide the Board – are growing in popularity and scope. Positioned somewhere between an official Board committee and a brainstorming group, a well-conceived Advisory Council blends tightly-focused expertise with independent, sometimes unconventional, thinking. Unlike official Audit, Remuneration or Risk committees, an Advisory Council (also referred to confusingly as an Advisory Board) is not constrained by statutory status. Notwithstanding some rare cases, such as the Australian Age Care sector, they remain largely unregulated.

When establishing a Council, Boards should focus on three areas: purpose, process and people (probably in that order). Their purpose can be as varied as the world of business itself – from advising on emerging technologies to the impact of demographic change. Odgers experts have helped create a wide range of Advisory Councils: a global pharmaceutical CEO exploring the commercial potential of scientific developments; a time-pressed banking chief needing time for ‘blue sky’ thinking; and a Japanese manufacturer looking to give senior leaders an international perspective, to name a few.  And their scope is widening. “Advisory boards (councils) involving consumers have been a real development recently,” says Sandra Gamble, Chair of the Best Practice and Ethics Board.

Councils can add huge value by challenging a company’s assumptions, testing a hypothesis, providing feedback, or opening doors to important connections. The Board does not always have the expertise or resources to discuss major strategic themes thoroughly. “You need people who understand where the world is going, in politics, finance, trade and more; people who can join the dots, but also know what the key dots to be joined are” says Dr José Viñals, who set up an International Advisory Council as Chair of Standard Chartered PLC.

Some 90% of the discussion might provide confirmation of existing views, Dr Viñals says, but the 10% that provides new insights or reframes an issue can be the most valuable contribution. For example, realising “that the world might be moving from being ‘multilateralist’ to ‘multi-aligned’ can help the CEO identify new opportunities.”

Advisory Councils may be at their best when grappling with multifaceted, complex and nuanced challenges. When a part-state owned French energy company wanted to expand in the post-Brexit UK market, it had to weigh up a tricky interplay of politics, energy policy, culture, media, numerous public sensitivities, and new regulations. The Board needed “big, broad, strategy testing, and an understanding of what is politically acceptable at the local level,” says Sir Mike Rake, a CEO, Chair and NED at numerous leading international companies over several decades, who chaired its Advisory Council.

One contentious issue relates to who precisely an Advisory Council is meant to serve. Often viewed as an aid to the Chair or CEO, they now increasingly require buy-in from the wider executive team and beyond. Councils can be “a best practice way to be able to harness the stakeholder voice and to bring it into decision-making cycles,” says Louise Broekman, founder of the Advisory Board Centre.

Once a Council’s purpose is established, then clear processes and protocols should be agreed at the outset. “There is always a risk that an Advisory Council becomes a mere talking shop,” says Odgers’ Baroness Virginia Bottomley, who has served on numerous advisory councils, and helps find suitable candidates for other Advisory Councils. To avoid this, members might be required to submit regular written reports outlining a thesis or proposal. "It's about creating a culture where there is a real expectation that the papers have been read and that the people who come along bring ideas to the table, shape what's happening and really get stuck in", says Denise Collis, a former member of the advisory council at Leeds University’s business school.

Mixing and matching

However, formal outputs cannot replace the need to generate good rapport. A mix of online and all-day in person meetings and dinner creates trust, and effective working relationships. “It generates real, meaningful conversations, not a succession of monologues,” says Dr Viñals. Indeed, some seven years on, his Council “has worked even better than we expected - we are better informed, more confident in our thinking. 

Success also comes down to getting the right mix of people. “You choose the people for the thing you need,” says Sir Mike Rake. At the same time, you need to draw in a wide enough range of experience without losing that collegial atmosphere. Typically, Advisory Councils settle on five to eight members with business, consulting, academic or entrepreneurial experience who, crucially, also understand the difficulties in running a company. Some include technologists, scientists, journalists or well-connected ex-politicians, depending on the goals. Dr Viñals wanted a mix of geographic, public and private, emerging and developed markets expertise, and gender diversity. Sometimes giving voice to an external, disinterested and unconventional perspective can yield real, unexpected value.

There is another balance to strike. On the one hand, appointees must be independent from the CEO or Board that has appointed them. On the other, they must be sufficiently connected to the company to genuinely desire a positive outcome. A big worry is that Advisory Councils are prone to ‘capture.’ Professors Nada and (the late) Andrew Kakabadse of Henley Business School, point to critics who suggest that councils may “subtly promote the perspective of the CEO’s views…under the guise of collegiality and freely offered advice; the CEO or Chair’s perspective gradually becomes the mindset of the Corporate Board and C-Suite.”

Transparency is essential. At some level, members should declare any interest in the process or how they may be connected to the company. That shouldn’t necessarily disqualify them, but it can be important to maintain broad, longer-term buy-in.

These tensions are manageable if the right leader, whether the CEO, the Board Chair or an external expert, is in place. For starters, the chairing style may differ from, say, running a Board meeting. Discussion should be exploratory but also practical and intentional. The leader must sense when a line of conversation is worth pursuing, even if it is unclear where it is heading. Ultimately, the leader must be able to convert extensive, roving discussions over several meetings per year into actionable conclusions, insights or advice.

Finally, if the Advisory Council appears to be losing steam, it is important to know when and if to terminate it or at least redefine its terms. If there is no time limit set, Advisory Councils can roll on for years giving up to date advice until a new CEO or Chair changes priorities or seeks new advisors and fresh perspectives.

Advice for the advisors

1. Is an Advisory Council really needed? Does the level of advice sought justify the time and resources invested in a Council? Might a ‘task force’ or single expert be brought in on an ‘if and when’ basis, instead? Is there broad support for a proposed Council, or does it mainly serve the interests of a particular person, faction or viewpoint?
2. Set clear terms of reference. The job spec should set expectations around goals and outputs, time commitment, how, where and when work takes place, written submissions, and remuneration. Ambiguity can lead to ‘mission creep’, unhealthy arguments and disillusion.
3. Agree a reporting system. Councils shouldn’t be constrained by excessive disclosure requirements, performance monitoring or tight deadlines. Progress reports are a necessary discipline, and these should be explicit and properly communicated to the Board and stakeholders. The Board may also want to know how Council members came to their decisions and whether there were dissenting views.
4. Define the Chair’s qualities. The leader should be able to distil the assorted wisdom of Advisory Council members into actionable outcomes, or at least provide well-informed scenarios, possibly with percentage likelihoods. The Chair must sense when to let conversation flow without losing direction. One profound insight may more valuable than numerous commonplace conclusions.
5. Make bold appointments. Think broadly about who and how many members should sit on the Advisory Council. If the purpose is to elicit fresh thinking, then this may be the moment to make unconventional appointments.
6. Consider what skills/experience members need. Council members should be able to articulate clearly what precisely is the challenge to be solved. That requires an understanding of both the subject matter and the company’s strategic goals.
7. Avoid drift. Advisory Councils can easily lose direction. When the remit is met or if meetings show little sign of doing so, be ready to terminate it. But have a formal review process afterwards to learn from its successes or failures.