How CEOs can seek advice: Avoid internal advisors, surround themselves with diverse ideas

CEOs have their own village at work, with the company board, employees, financial analysts and others offering advice at every turn. Part of the hefty remuneration that the average CEO takes home is perhaps for the sole job of sifting through heaps of advice and making the right decisions. But the means define the end here. And, getting the right advice is where it all begins for the boss.

In a recent paper published in the Journal of Management co-authored by Professor Yasemin Kor of Cambridge Judge Business School, one of the conclusions that has been highlighted states: CEOs of companies facing poor financial performance are particularly prone to seek advice, but they show a preference for internal advisers who are less likely to offer fresh insight and more likely to confirm their previous views. And, when they do ask for external advice, they tend to confide in ‘trusted, friendly contacts’ or people with similar backgrounds.

The paper, which is based on a review of 65 studies in high-impact academic journals or which have been heavily cited, further states, “If CEOs have not already surrounded themselves with advisers who have a diverse set of perspectives and ideas, it may be too late to seek these in desperate times.”


The review also found that CEOs rely more on external contacts when their companies pursue innovation-based strategies or attempt to differentiate from rivals, because such contacts are more apt to provide a diverse set of experiences and more novel information. However, CEOs prefer internal contacts for efficiency-based strategies and in stable environments, as success for such a strategy is based more on internally driven control systems.

“When CEOs seek advice more from sources cognitively distant from themselves, enabling them to bring in novel perspectives and knowledge, their firms pursue strategic change at a higher rate, while insular sources of advice (internal or external) promote strategic inertia,” the paper says.

The review also finds that although CEO advice seeking from the executive team and directors has positive effects, such effects are stronger when there is a fit between the firm’s strategic needs and the adviser expertise.

“There is a large body of literature on how CEOs seek advice, but the research has been disconnected and dispersed among different management streams, so this paper synthesizes these research findings to provide useful analysis,” says co-author Yasemin Kor, Beckwith Professor of Management Studies at Cambridge Judge Business School, commenting on the paper. “We think this synthesis can be useful to CEOs, boards of directors and others in thinking about the sort of advice CEOs seek out – or don’t seek out – and how that can affect firm performance.”

The paper – titled “CEO advice seeking: an integrative framework and future research agenda” – is co-authored by Dr Shenghui Ma of the School of Management at Fudan University in China, Professor Yasemin Kor of Cambridge Judge Business School, University of Cambridge, and Professor David Seidl of the Department of Business Administration at the University of Zurich.