How to know if your board needs a NED or an Advisory Board Member

What is the role of an Advisory Board Member?

The clue is in the title. ABMs draw on their own particular skillsets to provide the C-suite and executive directors with advice on specific opportunities or challenges concerning their organisation. It is vital that a clear direction for the Advisory Board is established before it is set up.

Nurole has helped recruit Advisory Boards to advise on:

• Internationalisation
• Go-to-market strategy
• Fundraising
• Digital marketing
• Company merger

A few ABMs are generally chosen to work together on an Advisory Board and an organisation can have more than one Advisory Board. There could be several small teams of ABMs advising the main board on different areas of the business according to their specialisms.

What is the role of a NED?

Unlike an ABM, a NED or independent director – as they are often called in the U.S.– sits on the main board of directors. Their much wider role is to provide third-party guidance and oversight to ensure that the organisation is well run by the executive management team.

Whilst a NED is often recruited because of his or her specific experience, say in finance or marketing, and they will be expected to be authoritative in those areas, their remit covers the workings of the organisation in its entirety. They will have to read all the documents the board produces, attend regular board meetings and are seen as long-term members of the board.

Why take on ABMs instead of NEDs?

Larger established organisations often enjoy the benefit of NEDs and ABMs, but for those companies in start-up or scale-up stage, who don't have a full main board, an Advisory Board can be an incredibly valuable asset. It can, for example, help to direct the entrepreneurial spirit that drives an organisation, make great introductions through their contacts and unearth new funding streams and resources.

Unlike NEDs who are, on average retained for three-year rolling terms, ABMs can be appointed for a much shorter time frame and so can be used on a much more flexible basis. And, unlike NEDs, ABMs have no role in governance, they are non-fiduciary and have no say in any organisational decision making, they only advise.

ABM Compensation

ABMs tend to be slightly more expensive than NEDs on a day-rate basis, but as their contracts are for much shorter terms they often end up cheaper overall. ABMs are often compensated in cash and/or options. Average day rates vary from £1,000 to £2,000. Options range from 0.1% to 0.5% over a specified period of time.

Advisory Board case study

Renewable energy business Reactive Technologies was looking for some specialist expertise to help advise on its planned global expansion programme. The board decided to create a separate Advisory Board for this.

Using the Nurole platform, Reactive Technologies quickly recruited four fantastic ABMs, each of whom brought with them unique expertise in both the energy sector and globalisation. Britt Ide is an experienced Independent Board Director and Ambassador for the US Department of Energy; Peter Bird is a UK and Singapore-based Senior Advisor to Globeleq; Peter Molengraaf is an experienced Chairman, Investor and Board Advisor from the Netherlands; and Australia-based Guy Chalkley is the CEO of Western Power.

If you are looking for non-executive director roles, Nurole's innovative recruitment platform can help.