Board Advisory Tasks: The Importance to Differentiate between Functional and Firm‐Specific Advice

Abstract

In small and medium‐sized organizations, boards of directors often spend most of their time providing advice to the management. As the content of advice provided has seldom been the focus of previous studies, we differentiate between functional and firm‐specific advisory tasks. We examine antecedents of the two types to explain why this differentiation is important. Applying group effectiveness arguments, we study the effects board members' different knowledge bases and diversity have on the two advisory tasks, considering the mediating effects of board processes. Our results suggest that it is important to distinguish between different types of board members' knowledge and different board advisory tasks. Our findings have direct implications for research and practice. First, there is a need to go beyond the surface level understanding of what boards are doing. Second, our results emphasize the importance of organizational knowledge, and hence question the call for independent board members for advice provision.

The advisory role of non-family board members: a case-based study of a family firm

“…This approach has yielded limited results and has been repeatedly criticised for being largely based on archive data of large US companies with dispersed ownership, as well as dismissing factors such as board processes and behavioural aspects (e.g. Bammens et al 2011;Bankewitz 2018;Gabrielsson and Huse 2005;Huse 1998Huse , 2000Huse et al 2011;Zattoni et al 2015). Consequently, the second stream has responded by applying multi-theoretical, processual and/or behavioural, social and cognitive approaches so as to understand the missing links between the governance of a firm, board efficiency and firm performance (e.g.…”

“…Consequently, the second stream has responded by applying multi-theoretical, processual and/or behavioural, social and cognitive approaches so as to understand the missing links between the governance of a firm, board efficiency and firm performance (e.g. Bankewitz 2018;Finkelstein and Mooney 2003;Forbes and Milliken 1999;Huse et al 2011). For example, Huse (2007), Huse et al (2011) andvan Ees et al (2009) have suggested the adoption of the behavioural theory of boards.…”

“…More recently, scholars focused on actual board behaviour have offered new insights to further conceptual clarity. Bankewitz (2016Bankewitz ( , 2018 calls for a higher granularity of tasks. He suggests differentiating between functional advice that refers to advice on general management as well as financial and legal questions and firm-specific advice that includes board members' advice on matters that relate to functional production, information management and marketing.…”

“…Despite of this both research and public debate has long focused on the board's control and monitoring role. However, recent years have witnessed a growing interest in the topic of the board's advisory role (see for example Åberg et al 2019;Adams et al 2010;Bankewitz 2016Bankewitz , 2018Krause et al 2013;Machold and Farquhar 2013) as well as board processes in general (see for example in this journal Derdowski et al 2018;Huse et al 2011;McNulty et al 2011). Yet we still have a limited understanding of what board members actually do when they enact this role.…”

“…Yet we still have a limited understanding of what board members actually do when they enact this role. As Bankewitz (2018) observes, it is necessary to gain insight into what takes place in reality inside and outside the boardroom (Finkelstein and Mooney 2003) This can be done by applying an approach that recognises both the contextual setting and the importance of processes (Pettigrew 1992). Half a century after Mace (1971) challenged the mythical concept of board members' roles vis-à-vis their real activities, we still have work to do in clarifying what the board members actually do when they fulfil their duties.…”