Building Your ”Kitchen Cabinet”

Here's how to develop your own circle of trusted advisors while avoiding conflicts of interest.

Avoiding Conflicts of Interest

Sometimes, no matter how much trust finance managers may place in their co-workers, they need the advice of someone unaffiliated with their company. This, says Joni, is when you should rely on structural trust, which “provides leaders with a channel for pure insight and information.”

To avoid conflicts of interest, executives usually place structural trust in people outside their company. “Strong outside advisers,” she writes in HBR, “provide leaders with a resource their organizations cannot. They supply a kind of ‘outside insight’ that inoculates leaders against myopia.” HighJump’s Mayleben agrees: “It’s important to have a sounding board where you can have an open conversation and get someone’s opinion outside the company.”

Rely solely on advisors within your own company, maintains Joni, and you may find that the structural trust is eroded by professional changes. One-time comrades may find themselves competing for a job, or for funds for their departments, or even for market share. Joni also notes that the Sarbanes-Oxley Act has created changes in structural trust between audit partners, senior finance executives, senior operations executives, and the audit committee. Senior audit partners who once reported to the CFO, for example, now often report to the audit committee. “Even if [a board member] has the best intentions for you,” adds Mayleben, “they’re a little conflicted because they have a fiduciary responsibility to the company.”

Because advisory relationships may be very sensitive, Joni generally recommends that her clients not discuss them publicly. However, finance chiefs interviewed for this article acknowledged that other CFOs were key members of their kitchen cabinets. Dodds of First Financial often turns for frank talk to another CFO “in the same industry but out of our market area a little bit — we don’t compete against each other,” a high school friend who is now an assistant controller in another market area, and a partner at an outside auditor. At Oak Hill, Copher turns for advice to former clients from his public-accounting days. Mayleben picks the brains of a retired Big Four partner, two HighJump board members who are also public-company CFOs, and his investment advisor — who helps Mayleben see his company from The Street’s point of view.

As you might have gathered, one key to stocking your own kitchen cabinet is to start building it early. (If you need an ostensible reason to join the alumni association you slighted before, find out when the next class reunion is coming up.) Mayleben also encourages his staff to develop their own kitchen cabinets: “I say to them, ‘You know me, and I know you. But people change jobs four or five times in their lives today — you need someone outside the company with an interest in you.’ ”

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