The Hoops are reportedly keen on recruiting Finland coach Stuart Baxter to work in a director of football-style role with Lennon, who could be confirmed as manager following a successful spell as interim boss.
Smith, 70, works as assistant manager and first team coach to Steven Pressley at Falkirk and believes the combination of veteran and rookie works well.
But he says a similar partnership will only work at Celtic if Lennon - like Pressley - is allowed to fulfil his role as manager and make the key decisions.
"Whoever goes in has to realise that Neil is there in his own right as the manager," said Smith.
"If Celtic decide he is to be the manager, then he has to be seen to be the manager.
"Whoever goes in to work with him is there to lend his support, offer advice and anything else he has to offer - but it's got to be understood that Neil is the man where the buck stops."
The former St Mirren, Aberdeen and Dundee United manager added: "I don't know how the roles are going to be set out at Celtic.
"Knowing Neil Lennon, I think he will manage all first-team affairs and he will be in charge of the coaching, team selection and, certainly, recommending all the signings and players.
"I don't know what role Stuart Baxter will be asked to do there."
Smith was shown the ropes as a rookie boss at Stirling Albion by Bob Shankly - brother of Bill - and his own vast experience in management is now being utilised at Falkirk.
He was recruited as part of the backroom staff when Eddie May took over the hotseat last summer, before being replaced at the helm by Pressley.
"I think it works well but a lot of it depends on the individuals," said Smith.
"You've got to be prepared to give your advice and knowledge when you can and you still do the things you love doing in terms of coaching but you've got to understand that the manager is the manager and you work alongside that position.
"When I was at Stirling, Bob Shankly was the managing director and I was the manager so it was different.
"I give similar advice to Steven and if he wants to use it he can use it; if he doesn't, it's his prerogative to do what he thinks.
"I didn't want the role of director of football at Falkirk. I'm there as assistant manager and first-team coach.
"I wanted to continue working at the coalface of the game, rather than what I see as an undefined position.
"I don't know what the position director of football is because I always believe that the manager is the director of football."
Source: Team Talk
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