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On Advice and Advisers

One thing CEOs have plenty of is advice. It seems everyone wants to tell the CEO about how to manage …

One thing CEOs have plenty of is advice. It seems everyone wants to tell the CEO about how to manage the company better.

Your managers tell you in reports and meetings, although they frequently disagree with one another as to the right course of action. In this world of empowerment, employees chip in gleefully; if you are an Email aficionado, your free-advice in-basket runneth over.

Your suppliers tell you how you can become more cost- and quality-efficient. Your distributors and dealers provide logistics counsel (as long as you don’t disturb their margins).

Your service agencies are persistent and impassioned advisers. Your advertising agency, public relations firm, commercial and investment bankers, accountants, and lawyers all know one or more facets of your business better than you do, and they are always anxious to expand their spheres of influence.

Customers, bless their hearts, are a veritable cornucopia of advice. We beseech them to tell us what they want and don’t want via focus groups, market surveys, and field tests. Often, so much advice pours in from this quarter that it becomes conflicting and confusing. The difference between what customers say they want and what they actually end up buying can be huge.

Noted authorities have written books that tell you how to re-engineer your company, reorganize your divisions, and re-do your strategy. You and your executives can attend courses and seminars led by stimulating professors with great ideas. And every magazine has a bunch of articles that tell you how to operate better, faster, cheaper.

A separate breed of advisers is your shareholders. They not only want to guide you in dividend policy, but are ready to discuss or argue about your policies on diversity, the environment, advertising media, global politics, cumulative voting, and your salary. You must listen carefully to large shareholders’ suggestions. These days, institutional investors give forceful advice on issues such as executive compensation, corporate governance, and (gasp!) CEO performance and tenure.

Some chief executives engage a management consultant to sift through all this information and misinformation. You can find expensive advice on hundreds of subjects-including strategic planning, organizational structuring, computer networking, incentive compensation, executive recruiting, consumer attitude, process mapping, and travel-you name it, and there is a consultant for it.

Whose advice should you take? When should you reject or temper the advice you receive? Whom can you trust?

The best teacher on these subjects is experience. By monitoring an adviser’s track record over an extended period, you can improve your odds of selecting a cogent counselor. And you can check with other CEOs and companies to compare experiences. You should never act on advice without double-checking the adviser.

Beware of simply going with the majority vote. Occasionally, a single voice can outweigh a multitude of advisers. A reasoned “don’t do it” from your legal or accounting adviser may be the decisive factor. On the other hand, a daring or highly creative idea from almost any place can, with the proper look-see, lead the way to a breakthrough.

One of the first things all business executives learn is that the advice you get from a consulting firm is only as good as the consultant assigned to the account. That applies to the various agencies that serve you, as well.

All this seems to leave the CEO standing in the loneliness of leadership, wondering where to go and what to do to make those master policy decisions that can make or break a corporation.

But don’t despair. One of the best sources of competent advice for CEOs is the experienced outside directors on their boards. Strong, talented directors tend to learn enough about your company and its business that they can objectively appraise the advice you receive from the “experts.” Your independent directors have no axes to grind. Their goals are much the same as yours-to do what is best for the company over the long term.

If you do not have strong, talented, experienced, independent directors on your board now, you had better start finding them. That’s the best advice I can give a CEO today.

Formerly the CEO of F. Schaefer (19721977), Robert W Lear is chairman of CE’s advisory board. He also teaches at Columbia Business School, where he is an executive-in-residence. He is an independent general partner of Equitable Capital Partners and holds directorships with Cambrex Corp.; Scudder Institutional Funds; Korea Fund; and Welsh, Carson, Anderson, Stowe Venture Capital Co.

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