We’re just an SME—do we really need a board?

By Prof. Enrique N. Soriano

It is a question I am often ask by founders and family business owners. The honest answer is this: you may not need a board yet—but you do need discipline. This is where an advisory board becomes valuable.

For many small and medium enterprises, the advisory board is the first step toward structured decision-making. It allows founders to move beyond isolation—to test ideas, challenge assumptions, and benefit from the experience of others. But let us be clear:

An advisory board is not a board of directors.

It advises, but it does not govern. It carries no fiduciary duty, no formal authority, and no binding accountability. And that distinction is critical.

A well-structured advisory board delivers three essential benefits.

First, it broadens perspective. Founders often operate within the limits of their own experience. Advisers bring external insight—alternative strategies, industry context, and lessons learned from other organizations. They help the founder see what is otherwise invisible.

Second, it reduces emotional decision-making. Family and founder-led businesses are often shaped by instinct, relationships, and history. Decisions can be influenced by loyalty, pride, or unresolved tensions. Advisory boards introduce structure—encouraging discussions that are more objective, more data-driven, and less personal. Over time, conversations shift from reaction to reason.

Third, it nurtures successors. When next-generation family members are exposed to advisory board discussions, they begin to understand how decisions are made—not by authority, but through reasoning and accountability. They observe how experienced advisers challenge ideas, weigh risks, and arrive at decisions. In many ways, the advisory board becomes a classroom for future leaders.

This is why an advisory board is more than helpful. It is a training ground.

It prepares both the founder and the organization for a more demanding future. It introduces the discipline of structured meetings, encourages preparation, and normalizes the expectation that decisions must withstand scrutiny.

It quietly shifts the mindset from “I decide” to “I must explain.”

And that shift is transformative. But its limitation is equally clear. Because it has no authority, its effectiveness depends entirely on one factor:

the founder’s willingness to listen. If the founder is open, the advisory board becomes a powerful asset. If not, it becomes ceremonial.

Many SMEs fall into this trap. They assemble advisers—often trusted friends or long-time associates—and begin meeting regularly. There are discussions. There is agreement. There is comfort.

But little changes.

Decisions remain centralized.
Assumptions go unchallenged.
Accountability is absent.

The business appears more structured, but it remains founder-dependent. This creates a dangerous illusion: the belief that governance is already in place. It is not.

An advisory board is a safe environment—but not a governing body. To make it effective, founders must be intentional. Select individuals with independent thinking. Encourage honest—even uncomfortable—dialogue. Use meetings to test strategy, not validate assumptions. Because advice, without discipline, changes nothing.

More importantly, founders must begin to see the advisory board not as a support group—but as a rehearsal for governance. The discipline developed here—the habit of preparation, the openness to challenge, the shift toward objectivity—will determine whether the organization is ready for a real board.

Ultimately, the advisory board is not the destination. It is preparation—for a real board.

Professor Enrique M. Soriano serves as a Mentor at the Singapore Institute of Directors Board Readiness Program, where he contributes to the development of current and aspiring directors in corporate governance, board effectiveness, and strategic oversight. He advises multi-generational family enterprises and boards across Asia, advocating for merit-based board composition and principled stewardship to ensure long-term sustainability.