The Role of Advisory Councils

What is an Advisory Council?

Advisory councils support the main board and executive by offering expertise, insights and contacts but have no governance authority. They are flexible in remit and composition, meeting less frequently and focusing on specific issues.

Professor Dame Diane Coyle, an accomplished advisory council member, noted: "You are not constrained by the same narrow interpretation of responsibilities similar to those found in a non-executive role".

Sir John Scarlett, a senior advisor to Morgan Stanley and former Head of the Secret Intelligence Service, said: "There must be a readiness to accept the limitations as well as the advantages of the advisory role. If advisors sit as frustrated executives, the advisory council is unlikely to function effectively”.

The effectiveness of an advisory council and the topics it addresses depend significantly on the composition and the chair of the advisory council. Bob Zoellick chairs Standard Chartered’s International Advisory Council. He said: “Advisory councils are an art, not a science, and must be customised for the people, topics and conversations. The more advanced skillset is not chairing the meeting but planning how you are going to use the meeting both in advance and afterwards”.

Mark Hoban, a member of PwC’s advisory council shared a similar view: “The [advisory councils] cannot just be an adornment, they must be relevant and evolve as the business does. It’s not there just as the great and good, it has to be practical and bring value to the firm”.

Why Create an Advisory Council?

Businesses create advisory councils to augment knowledge and strategic thinking. Advisory council members provide technical or specialist advice, extending the skills and understanding of management and the board. 

Bill Emmott, former editor of The Economist and a seasoned advisory council member pointed out: "[Advisory councils] are there to give focus to, or sometimes challenge, research and intelligence work being done in the company, thus avoiding groupthink and giving direction on big picture issues".

Companies should seek advisory council members whose qualities complement the existing board. Equally, an advisory council and its members should not be used to mask gaps in knowledge or skills needed on the main board.

Who Should Serve?

The composition of each advisory council will depend on the organisation's goals. Sir John Scarlett said: "You are looking at experienced people who understand the challenges that come with running an organisation as well as working in a particular industry. After that, it is a question of the particular skills they have and where their specialty lies”.

The composition of an advisory council should align with its role and contribution, whether for business development or enhancing the main board's knowledge on specialist issues. The council's objectives will guide its composition.

A diverse mix of experience and knowledge enhances an advisory council's performance. Bill Emmott argued: "Advisors who understand different geographies and come from different intellectual disciplines can provide insight into key economic and geopolitical challenges. They can help the board think outside the box".

Bill Emmott said: "Advisory council members can open doors and provide connections. But to make it successful, there has to be some genuine association with the company".
To make the advisory council function effectively, the chair must foster strong working relationships within the advisory council and with the main board or management team.

Making Advisory Councils Work

Successful advisory councils are clear about their purpose. Setting and communicating distinct roles and expectations for individual advisors and articulating the council's mandate is essential. Sir John Scarlett highlighted: "The advisory council must have an unambiguous mission and definition. The structure and financial arrangements must be well defined".
An important first step is ensuring internal stakeholders support the advisory council's remit. To ensure the advisory council’s success, establish explicit working protocols, with the guidance of the executive team, to support the company's objectives. 

It's crucial to maintain two-way communication so advisors can provide updates and share valuable contacts. Bob Zoellick added: “What I have found most useful is to have at least one member of the advisory council who can translate the insights, facts or experience into what executives should be watching or asking about. Wrap ups are important.”

Odgers Berndtson's Board Practice, with global reach and extensive experience, has long been responsible for some of the most important chair and non-executive director appointments as well as the creation of advisory councils. We advise a range of companies from FTSE-listed to small and medium sized enterprises.

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