The best advice can come from anywhere; The trick is to decide which counsel is worth heeding and which is not

October 8, 2013 3:52 pm

The best advice can come from anywhere

By Luke Johnson

The trick is to decide which counsel is worth heeding and which is not

Ican never decide if the business advice industry is actually useful or packed with purveyors of overpriced claptrap. Part of my dilemma is that through articles such as this and my books and speeches, I am a very small part of the circus. Moreover, I am constantly paying for guidance from all sorts of experts – lawyers, accountants, IT specialists, insurance, property and suchlike. So surely I must believe in its value . . .

Of course its worth depends greatly on who is dishing out the words of wisdom. Decisive counsel from a brilliant mind is to be prized. But all too often, one would do better to follow JRR Tolkien’s words from The Hobbit: “Go not to the elves for advice, for they will say both yes and no.”Top of the advice industry heap are the grand management consultants, working with powerful strategy firms such as McKinsey, Bain and the Boston Consulting Group. Many big corporations pay such organisations large fees to make recommendations about what to do. For years they were untouchable – well-networked and immensely powerful. But the façade has started to crack. A number of books have been written in recent years criticising the practices of the profession, such as Walter Kiechel’s The Lords of Strategy and, more recently, The Firm: The Story of McKinsey and Its Secret Influence on American Business by Duff McDonald.

I do not buy the conspiracy theories about the damage the big strategy houses have caused their clients. But it seems that trust in their insights has faded since the credit crunch and scandals such as the insider trading case involving Rajat Gupta, the former global managing partner of McKinsey, have to a degree impaired reputations.

Next in the pecking order come the large accounting and legal firms. Between them, the giants of the professions make billions of dollars in fees, which seem to increase remorselessly. The various companies with which I am involved must spend more than £1m every year on anything from conveyancing to auditing to compliance. I suppose it is the price capitalists pay for the rule of law, good title to assets, relatively free markets and a supply of accurate financial information. But it often feels an expensive burden on entrepreneurship.

Then there are endless conferences, forums, symposiums and seminars promising any amount of coaching and knowledge. These get-togethers must be multiplying with the recovery given the proliferation of invitations I have received this year. High-quality events can be instructive – even inspirational – and an opportunity to connect with customers, suppliers and possible recruits. But they can also be a great drain on time, and plain boring. I have learnt to be selective about which meetings I attend. Occasionally I learn things; more often the benefit lies in serendipitous encounters.

Books are an underrated source of advice. They are incredibly cheap really: for example, you can buy a dozen legal texts for the price of an hour with a top lawyer. Meanwhile the review system on Amazon and the mass media means you can in effect inspect a title before you buy. But books require personal effort, and of course they tend to be general and not bespoke to your particular challenge. Hence many like the comfort blanket of paid hands scrutinising the issue, and giving it their stamp of approval.

Well-chosen non-executive directors and retained industry veterans should be an excellent source of sound judgment and sagacity. They will have more of a stake in the outcome, unlike advisers simply working for a fee on a discrete task. Of course, persuading assertive founders to take notice is never easy – so many follow GK Chesterton’s dictum: “I owe my success to having carefully listened to the very best advice, and then going away and doing the exact opposite.”

And then there is the internet – and the rise of user-compiled sites such as Wikipedia and Quora. The web has the advantage of being free, always accessible and instant. It is not personal and is frequently unreliable, but for straightforward factual enquiries, rather than thoughtful opinion, it is probably the best place to start. Unfortunately contradictory views online are common. That is when you need advice about which advice to take!

lukej@riskcapitalpartners.co.uk
Twitter: @lukejohnsonrcp

The writer runs Risk Capital Partners, a private equity firm, and is chairman of StartUp Britain