By Dani Zelezniak, an experienced CEO (kVisi), angel investor and entrepreneur with expertise in technology, marketplace platforms and mobile apps.
If there’s one thing I’ve learned during my time building my company and investing in the future of tech, it’s that there is no shortage of opinions of what I should do. The question is who to look to when it matters and how to evaluate the counsel provided. For a CEO, learning who to consult with and take advice from is a critical skill and can be the difference between success and failure.
Here’s an example: In 2011, Ron Johnson was hired as J.C. Penney’s CEO. As the former head of retail at Apple, Johnson was held to high standards. However, shortly after taking charge at J.C. Penney, Johnson made a number of bad business decisions, including laying off 10% of the staff, firing J.C. Penney’s longtime advertising agency, and getting rid of discounts and sales. His Q4 2012 could be considered the worst quarterly performance in the history of major retail. By late February, the stock saw a 46% drop in price; shortly after this, Johnson was let go.
In all likelihood, the series of poor decision-making could have been avoided, or at least minimized, had Johnson received proper counsel from his team. Unfortunately, Johnson isn’t the only CEO in history to make poor decisions that affected a company long-term. Think Blockbuster turning down the opportunity to buy Netflix.
So what do you need to do, then, to avoid making such mistakes? Here are four critical steps:
1. Understand the different types of advisors and when to seek out their advice.
There are three levels of advisors, and each offers varying types of thoughts and opinions:
• Official outsourced advisors, such as a lawyers, business consultants or accountants: These people are paid to help you succeed; however, that does not mean that their advice is an be-all and end-all.
• Colleagues you work closely with who aren’t necessarily viewed as advisors: This group includes employees, co-workers, investors, clients and suppliers. Your colleagues likely have the company in mind while providing advice, but they might have personal motivations as well.
• Individuals in your life who you do not have business relationships with, such as your spouse, friends and family members: These people typically have your well-being in mind when they advise you. They are less involved in the day-to-day of your company and more involved in you as an individual.
One of the greatest mistakes CEOs make in their decision-making process is not understanding who their advisors are and the effect they can have on the decision-making process. Leveraging counsel from all the sources and thinking through the matter and the contributions each one can make reduce the likelihood of making a bad decision.
2. Know who your advisors are personally, and write them down.
Once you understand the varying levels of advisors at your disposal, it’s equally important to look internally to understand why one may sway you more than the other and what biases you might have toward accepting one solution over another. You should also question whether you are gravitating toward an emotional or pragmatic solution. These reflections help weed out suboptimal decision-making. In a spreadsheet, make a note of people you consider to be advisors. Include the following information next to each person’s name:
• What is your relationship to them?
• How did you meet them?
• What is their motive or interest when giving you advice? What do they have to gain if this deal works or fails?
• What is their knowledge in this particular field?
• Why are you asking for their advice? (Be honest with yourself on this one — avoid seeking advice from people just because you think they will agree with your thoughts. Choose to seek advice from people who will be honest with you.)
• What is their track record?
• What does it mean to you if this person disagrees with your actions?
Also ask yourself how making this decision could reflect on you as an individual and whether this is driving you to unintentionally make the wrong decision. If you choose to take the advice provided by a specific individual, write down their suggestions, and review your responses to the questions above. Then sleep on the advice before making a decision.
3. Remember that as the CEO, you have the final say on most decisions.
So your advisor might know a lot about the subject at hand. That’s great and will most likely be beneficial as you seek their advice on certain issues and subjects. However, at the end of the day, you get the final say on how to proceed in the decision-making process. Maybe your advisor has a lot more expertise or experience than you do on this issue; that does not necessarily mean that they are right and you are wrong. Part of the decision-making process will also involve trusting your gut and making the overall best decision based on how you feel.
4. Always take time to review the decision you’ve made.
After consulting with your advisors on a decision, make sure to review that you are doing the best thing possible. Write your thoughts down in a decision journal or map out your options on a probability tree. Whatever method you choose, take time to review and make sure that what you’ve been advised to do is the best decision moving forward. If you feel confident about it, then it’s time to execute your plan.
Understanding the different types of advisors, knowing who yours are, remembering that you have the final say on most decisions and taking time to review your decisions should reduce the likelihood that you will make Blockbuster-sized blunders. As a CEO, you often juggle multiple projects at a time; learning to rely on trusted advisors will help reduce the chances of something going wrong in your company and ease some of the burden of decision-making off your shoulders.