Why a CEO Needs a Candid Advisor from OUTSIDE the Organization

I was reading through notes I took about six months ago during a talk given by a CEO of a large company, who was fired by his board because his firm had serious performance problems -- and was taking great risks -- that he never learned about until it was too late, and the firm was in deep trouble.  I can't identify him, but as I have warned here, at HBR,and in Good Boss, Bad Boss, every boss risks living in a fool's paradise -- and the more power the boss wields over others, the greater the risk.

Here is his comment:

"You desperately need a candid adviser.  When you become CEO, you get a lot of bullshit.  You don't information so much as you get sales pitches.  You're alone in the ring."

This guy learned the hard way; I offer it so others can avoid the pain and obvious embarrassment he felt.  He looked like wounded animal during this talk, but I had to give him credit for being honest. 

P.S. If you read Andrew Sorkin's well-crafted Too Big To Fail, you can see how out of touch the leaders of big financial services firms were in the run-up to the meltdown.

Comments

[Joe Marchese]

Spot on, Bob. Let me add my thoughts from a recebt blog:
http://mckeeverandsullivan.wordpress.com/2009/12/11/xenophilia/

[Bob Sutton]

I accidentally published the above post twice. I deleted the repeat but wanted to preserve this comment from Christian Fey:

It is intriguing how people can be so blind to the idea that you may not be right. This is generally caused by two different factors: interest in gaining favor, or being pushed out by the asshole for being dissenting. The latter is clearly a leader enabled fault, but additionally, the former is as well. By not encouraging challenges to your views, you end up telling your subordinates that the way to gain your favor is to agree with what you say. This can be good when you know you're right, but obviously, you won't know when you're wrong until the s*** hits the fan and you ask, "Why did no one tell me this was a stupid idea?!"

Thanks Christian and sorry to delete your comment!

[mark allen roberts]

What you need to seek out as the new CEO is a “Heretic” as I share in my blog http://nosmokeandmirrors.wordpress.com/2009/04/10/want-to-add-value-to-your-bottom-line-quicklyhire-a-heretic/

I am often brought in to play this role as nothing will improve overall results faster than the Heretic focused on serving the market and challenging "how we do things around here"

Mark Allen Roberts

[Fernando J. Grijalva]

In this regards, Dr W. Edwards Deming stated that, "As a good rule, profound knowledge comes from the outside, and by invitation.  A system can not understand itself."

[davidburkus]

I really like that quote "You don't get information so much as sales pitches." It's kind of what the MUM Effect processes reports into: sales pitches.

[Michael Dearing]

I think this is right on. I also think that for very early stage ventures, the CEO needs to have an outside advisor who is also *not* an investor. At least one.

[Derak Berreyesa]

Just as all managers and employees should be looking to their network of peers for support so should CEOs. If a CEO has too much hubris, I can see them getting into situations that they can't handle on their own.

[William Cunningham]

It sounds like he may have (involuntarily?) surrounded himself with yes-men, who only worked to appeal to him in a classic attempt at cohesiveness. Nobody wants to be the bringer of bad news as there's a tendency to shoot the messenger, so of course employees will only talk about good things in order to win favor if the conditions are conducive to rewarding positive news and punishing negative news. He should have been a little suspicious when he was getting nothing but good news. This is where management fails, missing any sort of checks for group behaviors and intentional masking of company problems in order to maintain an attractive outward exterior. As far as he knew, the outside looked great, but the company was rotting from the inside without proper managerial support.