There’s no algorithm to apply, no flow chart to follow, no equation to run to get a perfect hit rate on the decision to develop or replace. The best executives care deeply about their people, and that’s why they often wait too long. But they also improve their judgment over time.

Which brings us to a crucial question: How do you know when you’ve crossed the demarcation line, when it’s time to make the shift from “develop” to “replace” for a key seat? I’ve come to believe the best approach is to ask considered questions and let those questions guide you to an answer. I’ve distilled years of reflection down to seven questions that I offer here to stimulate your thinking when you face the “develop or replace” conundrum. To be clear, these aren’t a prescription; you might come up with only one concern and decide to replace, or you might come up with six concerns and decide to develop.

• Are you beginning to lose other people by keeping this person in the seat?

The best people want to work with the best people, and if they sense chronic tolerance for mediocre performance in key seats, they might begin to vote with their feet. Worse, if you tolerate high-performing people who behave contrary to your stated core values, the true believers will begin to lose heart and become cynical, and some will leave. There’s no better way to destroy a great culture than to retain people in key seats who fail to perform or run roughshod over the company’s core values. roughshod over the company’s core values.

• Do you have a values problem, a will problem, or a skills problem?

If someone in a key seat behaves consistently or flagrantly contrary to the core values of the enterprise, the best leaders replace them. If someone passionately embraces the core values of the enterprise and also has the indomitable will to do whatever it takes to master his or her seat, you can be more patient before reaching a decision to replace them in that seat. The hardest call comes with the question of will. Does the person lack (or has the person lost) the will to develop to meet the demands of the seat? If not, can you ignite their will?...

• What’s the person’s relationship to the window and the mirror?

The right people in key seats display window-and-mirror maturity. When things go well, the right people point out the window, giving credit to factors other than themselves; they shine a light on other people who contributed to the success and take little credit themselves. And when things go awry, they don’t blame circumstances or other people for setbacks and failures; they point in the mirror and say, “I am responsible.” People who look in the mirror—who always ask, “What could I have done better? What did I miss?”—will grow. People who always point out the window to explain away problems or affix blame elsewhere will be stunted in their growth.

• Does the person see work as a job or a responsibility?

The right people in key seats understand that they don’t have “jobs”; they have responsibilities. They grasp the difference between their task list and their true responsibilities. A great doctor doesn’t merely have the “job” of performing procedures but embraces responsibility for the health of the patient… Every person in a key seat has a broader responsibility than a task list, and the right people never hide behind “I got the tasks done” as an excuse for failing to deliver on the broader responsibility.

• Has your confidence in the person gone up or down in the past year?

Just as a company’s stock price rises or falls as investors gain or lose confidence in the company’s growth and performance, confidence in a person also rises or falls based on his or her growth and performance. The critical variable is the trajectory of that confidence over time. When someone says, “Got it!” do you increasingly set your worries aside or do you increasingly feel the need to follow up?”

• Do you have a bus problem or a seat problem?

Sometimes you might have a right person on the bus but in the wrong seat. You might have put the person in a seat misaligned with his or her capabilities or temperament. Or perhaps—and this happens frequently in high-growth companies—the demands of a seat might have grown to outstrip the capabilities of the person in that seat.

• How would you feel if the person quit?

If secretly relieved, then you might have already concluded that he or she is a wrong person on the bus. If genuinely distraught, then you might well believe that he or she is still a right person on the bus.

Level 5 leaders who build the greatest and most durable companies think first about “who” and then about “what.” They first get the right people on the bus (and the wrong people off the bus) and then figure out where to drive the bus.

When you’re facing chaos, turbulence, disruption, and uncertainty, and you cannot possibly predict what’s coming around the corner, your best “strategy” is to have a busload of disciplined people who can adapt and perform brilliantly no matter what comes next. Our research supported what we came to call “Packard’s Law” (named in admiration after HP’s co-founder): No company can consistently grow faster than its ability to get enough of the right people and still become a great company. If a company consistently grows faster than its ability to get enough of the right people, it will not simply stagnate, it will fall. The number one metric to track isn’t revenue or profit or return on capital or cash flow; the number one metric is the percentage of key seats on the bus that are filled with right people for those seats. Everything depends on having the right people. (Directed reading: Good to Great, Chapter 3; BE 2.0, Chapter 2.)

The lesson, and perhaps the irony, of Tsedal and Sebastian’s study is that executives who deferred to subordinates moved up the pecking order faster than those who refused to bend to their underlings’ will and wisdom: Leaders were granted more power because they gave it away. Yet deference and “flattening” the hierarchy aren’t always the right moves. The University of Michigan’s Lindy Greer shows that the best leaders are adept at “flexing” the hierarchy.

Lessons for Leaders to Live By:

1. Focus on the Journey, Not the Destination

“The journey is the reward” is ancient Chinese wisdom that, thanks perhaps to Steve Jobs’s affection for it, you’ve probably heard before...

2. Link Little Things to Big Things...

3. Put “Grease People” and “Gunk People” in the Right Places ...

Even if your organization is well designed in other ways, friction problems will fester and flare up if the right people aren’t in the right roles. To avert such troubles, skilled leaders work to put “grease people” in places where friction ought to be low and “gunk people” in places where friction ought to be high. Research on personality and culture reveal differences in responses to rules, risk, and monitoring that can help you figure out where people (including you) fall on our grease-gunk continuum:

Grease People

Gunk People

Rules: “Unbureaucratic personalities” or “Chaos Muppets” who ignore, bend, defy, and remove rules, norms, and traditions.

Rules: “Bureaucratic personalities” or “Order Muppets” who follow, create, and enforce rules, norms, and traditions.

Risk: Comfortable with taking chances, focus on the upside of trying new things. Encourage others to take risky actions.

Risk: Uncomfortable with taking chances, focus on what can go wrong, hesitate to try new things. Discourage others from taking risky actions.

Monitoring: Scrutinize others lightly. Quick to trust others and assume good intent. Downplay and encourage errors, setbacks, and rule breaking.

Monitoring: Scrutinize others closely. Wary about trusting others and assume bad intent. Call out and punish errors, setbacks, and rule breaking.

So, if your organization is plagued by vigilantes who make you jump through hoops akin to “Say, ‘I am filthy,’ five times” consider how they are treated. Are they ignored or underappreciated? If so, firing them isn’t the answer; their replacements will probably act the same way. Try what Larry’s boss did and show them some respect...

4. The Best Friction Fixers Are Friction Shifters...

Leading friction shifting in your team or organization also requires sending clear signals that it’s time for more or less friction, making sure your intentions are understood and shape behavior. You may believe that others hear your message, but as chapter 4 shows, people, especially those with a lot of power, often have a dim understanding of how others interpret and respond to their decisions, orders, and suggestions. Organizations muddy the waters further by pummeling people with confusing, conflicting, and excessive information—making it tough to distinguish “signal” from “noise.” That means, to trigger friction shifting, a leader’s job is to craft simple and crisp signals that it’s time to work in grease or gunk mode...

Paul told us, when you take charge of a troubled company, “you have to assess the situation rather than act quickly. Everyone wants you to do something, so the first thing you say, very calmly, is, ‘We’re not going to do anything today.’” During his first months on the job, Paul hit the brakes and asked “each of the top eighty people in the company to write a two-page document that answered, first, ‘Who are you? What are you responsible for?’ And then: ‘What issues do you believe are most pressing? What would you do if you were me?’” After speaking to all eighty and figuring out what was broken, who the best (and worst) people were, and what was required to fix BHP, Paul let his charges know that it was time to shift gears and start those changes, which, in just a few years, turned the company around...

5. Friction Fixing Is Fueled by Civility, Caring, and Love

A related leadership lesson we’ve implied is that friction fixing is accelerated by shared civility, caring, and love. When such emotions pervade an organization, people form stronger bonds, develop trust, focus on the best qualities of colleagues and customers, and devote more energy to helping others and less to satisfying their selfish needs. Civility, caring, and love reflect a rough hierarchy of collective compassion. As Christine Porath documents in Mastering Civility, when organizations are plagued with rudeness, it causes employee commitment, cooperation, and coordination to plummet...

As Peter Drucker said, “It is a law of nature that two moving bodies in contact with each other create friction.” But civility can help bring out the best in people because, as Drucker put it, “manners are the lubricating oil of an organization.” When employees—and the customers and citizens they serve—treat one another with outward respect, it helps everyone avoid open warfare and backstabbing, resolve (or at least tolerate) tensions, and be more amenable to collaboration. Christine’s research confirms that when civility is pervasive, employees get more done; they go the extra mile to help others and enjoy better physical and mental health. Christine dissects how leaders build civil cultures by modeling desired behaviors, hiring, rewarding, and promoting people for civility, and developing programs that spread respectful actions. She shows how seemingly small interventions pack a wallop. Like the upswing in civility at Ochsner Health in Louisiana. It was sparked partly by the “Ochsner 10/5 way,” which means if an employee is within ten feet of a colleague or patient, the employee is expected to make eye contact and smile. And to say hello if the employee is within five feet. Every organization (and family) would be more civil if we all followed Christine’s advice when we encounter a difficult person: “Before shutting down, saying no, or displaying frustration, try to appreciate where the other person is. You might even go one step further and ask yourself, How can I help them?” Caring is a more powerful form of collective compassion than civility. It entails deeper empathy and concern than surface civil behavior. In caring cultures, people feel obligated to help others avoid and overcome obstacles —they expect one another to take that extra step Christine suggested.

I’m comforted by something I’ve come to believe more and more in recent years—that it’s not always good for one person to have too much power for too long. Even when a CEO is working productively and effectively, it’s important for a company to have change at the top. I don’t know if other CEOs agree with this, but I’ve noticed that you can accumulate so much power in a job that it becomes harder to keep a check on how you wield it. Little things can start to shift. Your confidence can easily tip over into overconfidence and become a liability. You can start to feel that you’ve heard every idea, and so you become impatient and dismissive of others’ opinions. It’s not intentional, it just comes with the territory. You have to make a conscious effort to listen, to pay attention to the multitude of opinions. I’ve raised the issue with the executives I work most closely with as a kind of safeguard. “If you notice me being too dismissive or impatient, you need to tell me.” They’ve had to on occasion, but I hope not too often.