1195
n
Liaisons and intrigues
it is not really genuine advice-
seeking, but it serves more in a
self-conrmatory fashion; people
seek conrmation that what they
are doing is right, and what better
way to get that than by asking
the opinion of your friends?
To examine which CEOs engage in this pseudo advice-seeking
and which ones truly turn to people who might actually disagree
with them, McDonald and his colleagues surveyed 225 large
American industrial and service rms. They managed to obtain
information on how often their CEOs sought the input of other
top managers outside their own rm, and how well acquainted
they were to them. Subsequently, they statistically correlated that
to the extent to which these top managers received performance-
contingent compensation packages, and found a very clear result.
Those CEOs who had a very small performance-related pay
component in their compensation package sought very little true
external advice. They relied on asking their friends – and perhaps
their wife, uncles, and mother – whether they too thought that
what they were doing was great, splendid, and spot on.
In contrast, CEOs with a relatively large performance-contingent
component in their remuneration package sought advice much
more often from other executives who were not their friends
and who had different backgrounds than themselves. These
people may be slightly scary (they might actually tell you
that what you’re saying is nonsense!) but perhaps also more
useful. Moreover, McDonald and colleagues showed that this true
advice-seeking signicantly helped the nancial performance
of the CEOs’ companies, in the form of an increase in the
company’s market-to-book and return on assets. Thus, the scary
stuff actually led to hard cash!
The pay-for-performance construction paid off; it stimulated
executives to repress their “it’s-only-human” inclination to avoid
asking the opinion of people who might actually disagree with
you. It is much safer and less threatening to solicit advice from
‘‘
People seek confirmation
that what they are doing is
right, and what better way to
get that than by asking the
opinion of your friends?
’’