When to Have an Advisory Board vs. a Traditional Governance-Style Board

As organisations scale, leaders often reach a crossroads: do we need a governance board or an advisory board? The distinction matters. As does the board you ultimately construct.

While both structures bring external expertise, their purpose, authority, and value to the organisation are fundamentally different. Choosing the right one at the right stage can accelerate growth, attract investors, and strengthen decision-making, but choosing poorly can slow progress and add unnecessary complexity. Timing is a key factor.

My blog post this month explores the differences between advisory and governance boards, when each is most effective, and how hybrid structures are reshaping modern corporate leadership in Australia and beyond.

Understanding the Core Difference: Advisory vs Governance

At a glance, the distinction comes down to authority and accountability.

• Governance boards (often referred to as Boards of Directors) hold fiduciary responsibility. They make binding decisions and are legally accountable to shareholders or members under the Corporations Act 2001 (Cth).

• Advisory boards provide non-binding strategic guidance. They have no legal or decision-making authority, but they offer deep expertise, market insight, and mentorship to management or founders.

Put simply:

A governance board is accountable for the business; an advisory board is accountable to it.

The key is aligning the right model to your business stage, structure and strategy.

When to Have an Advisory Board

Advisory boards thrive in environments where agility, innovation, and speed of execution matter more than regulation or compliance. Its really about bringing expertise from the outside, to the inside of your organisation.

1. Early-Stage or High-Growth Companies

For founders scaling rapidly, particularly in tech, SaaS, or growth-stage enterprises ($1M–$20M revenue), advisory boards are an invaluable extension of the leadership team.

They help bridge the gap between entrepreneurial energy and strategic structure by providing:

• External commercial and financial expertise without formal governance overhead.

• Access to networks, partnerships, and capital opportunities.

• Accountability frameworks that prepare businesses for future governance readiness.

Example:
A Sydney-based SaaS company approaching $3M ARR may use an advisory board to prepare for Series A investment; focusing on product-market fit, pricing, and investor readiness, before transitioning to a governance board post-raise.

2. Private and Family-Owned Businesses

In private or family enterprises, an advisory board offers impartial perspective while respecting ownership control. It helps separate emotional decision-making from strategic direction — without the legal or structural obligations of a corporate board.

3. Emerging Sectors and Startups

Industries like clean tech, AI, and medtech benefit from specialist advisors who can provide domain insight faster than formal governance models allow. Advisory boards often act as a sounding board for market validation, partnerships, and regulatory planning.

Benefits of Advisory Boards

• Flexibility in membership and structure.

• Access to strategic expertise without liability.

• Rapid decision support for founders or CEOs.

• Easier setup and dissolution than a formal board.

When to Establish a Governance Board

A governance-style board becomes essential once accountability, compliance and fiduciary oversight outweigh agility.

1. Companies with Investors or Legal Obligations

Once a company accepts external investment, operates as a public or large private entity, or manages significant capital and staff, directors are legally required to govern under the Corporations Act.

Governance boards ensure:

• Compliance with financial and legal regulations.

• Protection of shareholder interests.

• Oversight of risk, audit, and executive performance.

2. Established or Regulated Industries

Sectors like finance, property, energy, and healthcare operate under strict regulatory frameworks. Here, governance boards must enforce controls, approve budgets, and oversee management decisions to protect reputation and ensure continuity.

3. Organisations Seeking Institutional Credibility

For mine, mature businesses seeking acquisition, major partnerships, or listing, having a governance board signals stability and professionalism to investors, regulators and the market.

Benefits of Governance Boards

• Legal protection and fiduciary accountability.

• Strategic alignment with long-term corporate goals.

• Transparency and investor confidence.

• Formalised oversight of risk, remuneration, and audit.

Comparing Advisory and Governance Boards

Both models can coexist, but clarity in scope and expectation is critical.

Hybrid and Transitional Board Models

As organisations evolve, many adopt hybrid board structures that combine the strategic agility of an advisory board with the discipline of governance oversight.

1. Transition to Governance

For example, a high-growth fintech in Perth might:

• Start with an advisory board to refine product, pricing, and partnerships.

• Transition to a formal governance board once external capital or licensing obligations arise.

• Retain a parallel advisory group to provide sectoral or technical insight outside formal board constraints.

2. The “Advisory-to-Governance” Framework

According to the Advisory Board Centre, of which I am a Certified Chair, a clear transition plan prevents confusion or role overlap. Boards should define:

• Mandate: What authority each body holds.

• Membership: How advisors interact with directors and executives.

• Metrics: What success looks like for each board type.

This staged approach allows companies to scale governance maturity without losing entrepreneurial agility.

Governance and Advisory Boards in Australia: Regulatory Context

Australia’s corporate governance landscape is tightening.
Directors face increasing scrutiny around risk management, ESG accountability, and digital oversight, areas where advisory boards can provide early expertise before formal governance structures are required.

The AICD and Advisory Board Centre both recommend that founders view advisory boards as a stepping stone, not a substitute, for governance readiness.

A disciplined advisory board helps businesses test strategy, improve accountability, and prepare for due diligence, ultimately de-risking the transition to a formal board of directors.

Key Questions to Determine the Right Structure

1. What stage is your business in?

   • Early growth → Advisory board

   • Mature or investor-backed → Governance board

2. Who are your stakeholders?

   • Private owners → Advisory

   • Shareholders/regulators → Governance

3. What is your strategic focus?

   • Innovation or scaling → Advisory

   • Risk and compliance → Governance

4. What outcomes do you want?

   • Speed, flexibility, mentorship → Advisory

   • Control, accountability, credibility → Governance

Conclusion: Matching the Model to the Mission

The choice between an advisory and a governance board isn’t about hierarchy, it’s about fitness for purpose.

An advisory board accelerates growth, innovation, and learning when agility is essential. A governance board safeguards assets, reputation, and compliance when structure is critical.

The smartest organisations recognise when to use each, and how to evolve seamlessly between the two as they mature.

Next Step: Build the Right Board for Your Growth Stage

If your business is ready to clarify its board strategy, contact me for a consultation.
We’ll help you design an advisory or governance framework tailored to your goals — blending flexibility, accountability, and performance for sustainable growth.

Tony Simmons