Chapter 6, Problem 1OTJVC

Summary Introduction

To determine:

What role does an advisory board play in the owner's approach to decision making, and would an individual owner needs to develop an advisory board?

Concept Introduction:

In the modern economic context, decision making is seen as a vital factor that determines the effectiveness of the organization to drive and step forward. It is highly necessary to focus and organize the decision-making process to bring out effective strategic decisions, that would lead to overwhelming advantages. An advisory board is a specialized body that provides non-binding strategic advice to the management of an organization, corporation to make strategic decisions, organizational structures and systems. The informal nature of an advisory board gives greater flexibility in structure and management compared to the board of directors.

Answer to Problem 1OTJVC

Solution:

If I was a business owner, I would like to build an advisory board to aid in decision making and it will be helpful for other aspects of the organization as well.

Explanation of Solution

There are many roles played by the advisory board in the process of decision making. It will be described below;

• Advisory board can serve as a feeder group for a board of directors. This board has better knowledge of the operations and needs of the business.
• Most advisory boards formalize advice, that is, these boards provides the degree of consistency, longevity and background knowledge to the members to understand enough and have enough interest, therefore, better decisions will be generated.
• Advisory boards provide safe harbors for executives who may be able to test proposed options before they are forced to present it to more definite and assertive board of directors.
• Advisory board often provides focused input that enables to generate and encourage effective decision making. Focused input will reduce the level of errors and mistakes that will be committed.
• Advisory boards can address fiduciary duties and other liability concerns.

The above are the main duties and roles often carried out by the advisory board. However, as an owner, I would like to build an advisory board to derive as many as possible guidance and advice to make effective strategic decisions. There are many advantages to building an advisory board, It will be clearly explained below:

• An advisory board will aid to address the realities of operating in a different location, with different cultural and business norms, without any loss of control, especially when a firm is exposed to a different market or segment.
• An advisory board will aid and provide guidance to improve certain skills such as; software development, mathematics, and financial engineering.
• Advisory board will serve as a tremendous ally in the quest for superior corporate governance.