Informed Listening: Trusting the Right Voices as CEO

As an advisor, I learned long ago that my voice is just one in a choir of singers a CEO listens to. The choir includes not just their top lieutenants and paid advisors but, importantly, personal connections in their networks. These networks include friends, former colleagues, mentors, and any variety of people where there’s a perceived trust relationship. And then there’s the business side of it. There is a myriad of other people in the CEO’s orbit who would love to be leading the choir, so they’ll offer advice whether it’s sought after or not, sometimes regardless of their qualifications.

I’ll share one example from my world. Not long ago, we had spent months preparing a client for an investor day following a large and somewhat misunderstood acquisition. In addition to re-crafting the investment story post-deal and introducing a new financial reporting structure, we needed to provide the Street with a five-year projected financial model. This model was complicated by the fact that the early years would be impacted by an industry downcycle, rising interest rates, and a potential recession. A strong CFO and FP&A team road-tested this model, and we worked closely with the client to message its many nuances.

A few weeks before the event, the CEO had dinner with a partner of a noted global management consulting firm who had a business relationship with our client. The CEO confidentially shared some of the investor day positioning to solicit feedback. The consultant listened and then suggested to the CEO that our model needed to be more aggressive if we “wanted the stock price to go up.” Never mind the critical importance of credibility and proper expectations management!

Thankfully our client knew better, and we dispensed with the “advice” quickly. But anecdotes like this fascinate me because they show how easily the opportunity to indulge a CEO can draw people out of their swim lanes. The higher the financial stakes, the more likely it is that a banker or consultant will step beyond their expertise to gain favor, attention and trust. Following misplaced or compromised advice can create significant business and reputational risk.

That’s why it’s important to consider the source when listening to multiple voices. CEOs should be careful to filter advice through the foundation of the underlying relationship and the potential that the one giving advice is compromised by their own business objectives. Foremost is this question: Is the advisor genuinely working toward the success of both the individual and their business? Examples:

• If the CEO is listening to a personal friend, the advice will be genuine and well-delivered in tone, but quite likely lacks a full understanding of the business situation;
• If it’s a mentor, knowledge of the CEO’s strengths and weaknesses will be top of mind, but perhaps not the reputational and financial impacts to the business of making the wrong decision;
• If the advice is coming from a knowing insider who clearly stands to gain financially from a given outcome - often this can be a strategic investor like a VC – the advice will be persuasive and well-informed but might not fully consider the interests of other stakeholders;
• If it’s an expert in an adjacent but different field, like a banker asserting oneself on a nuanced IR issue or the management consultant opining on a sensitive valuation issue in my example above, the CEO has to be careful not to assume the “brand” behind the “advice” confers broader expertise than actually exists;
• And finally, the trickiest – someone who is already a trusted advisor to the CEO being asked for a view in an area where the advisor lacks experience - this one is just as risky to the advisor’s survival as the CEO’s.

To be clear, seeking advice from outside parties is smart. CEOs shouldn’t just drink the Kool-Aid served by colleagues and insiders who may have personal goals at stake or are merely effective at managing up. Gut checks are useful. However, while everyone has a good sense of whom they trust personally, it’s important to apply the filters of competence and motivation that lie behind the advice.

From my side of the table, I’ve learned to apply those filters myself, to understand the context behind others’ opinions and use it to shape my advice to the CEO more thoughtfully. In other words, if you want to lead a choir you have to be able to harmonize, not just solo.