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.

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The Life Cycle of a CEO— Claudius A. Hildebrand & Robert J. Stark

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Introduction

In fact, Dave hadn’t been the first choice for the CEO position, or even the second or third choice. Word was five others had been offered the job before him. What’s more, a couple of years earlier he’d been unceremoniously fired from his position as divisional president at a leading competitor. No one would have suggested from his educational background, either, that he was CEO material. Not only did he not have a degree from an elite school, but it also took him six years to graduate. He hated college and he’d dropped out for a time.

As Dave’s first year in the CEO seat progressed, the sneering assessments of that Florida night prevailed on the Street; the company’s stock slid 40 percent.

Building on our study findings that CEOs who lead through influence were the most effective, we followed up by conducting interviews to learn about the development advice and training these leaders had received. We asked leaders to describe how they made the journey to becoming the highly effective leaders they were. What emerged is that a leader’s evolution generally proceeds in iterative cycles, with steps forward often followed by backsliding into old habits and then a renewed effort at change. It’s a process of trial and error, and often of fits and starts, as the daily grind of immediate demands diverts attention from one’s inner work. Those who continue to progress in the journey typically go through a three-phase cycle.

First, they are confronted with a necessity for change either because they took on a new challenge that reveals the shortfalls in their leadership or through feedback from their higher-up, colleagues, or mentor.

Another factor at work here, though, is the status quo bias, a powerful and widespread psychological force in business. The concept was introduced by researchers William Samuelson and Richard Zeckhauser, who showed in studies with many kinds of decision-makers, including managers, that “when making an important choice, people are more likely to pick the option that maintains things as they are currently.” When you’re enjoying success, your status quo bias is reinforced, which might be just fine. But given that after five, six, or seven years, market conditions will surely have evolved, it usually won't be fine to stick with the status quo later. When responding to those changes would involve making a substantial alteration to or even reversal of a winning strategy or to operational engineering you have orchestrated, the status quo bias makes recognizing the need for change and making the case for it to your team and board a good deal more challenging.

Advice on combating the status quo bias by methodically rethinking business assessments and gaining perspective from outside the firm is not new. But the problem is that far too few leaders develop a rigorous and continuous discipline of doing so. And if CEOs don’t impose that discipline on themselves, nobody else will.

The imperative to challenge yourself becomes more difficult to achieve the longer you have been doing the job successfully. Nigel Travis said, “Being a CEO for longer is tougher because you have to find ways to keep improving.” Some CEOs recalled feeling less engaged in this stage, with boredom creeping in. “When you get into years six to ten, the intellectual stimulus is less,” one shared. “You come in with lots of ideas,” another commented, “and then run out of them.” Someone else said, “Years six to ten is a period of time when the luster is off the rose and what was new and exciting is no longer new and exciting.