Every organization, from baseball teams like the Yankees to nonprofits to entrepreneurial organizations to Fortune 500 companies, struggle with deciding when to replace the leader.
Sometimes it appears to be obvious because the organization is struggling. It is losing money, market share or games. Other times it isn't so obvious, because the company appears to be doing well.
To the casual observer with little experience at running an organization, everything seems cut and dried. If the leader produces, he or she keeps the job. For those who don't produce, the guard at the gate is holding a box with their possessions and demanding their security pass.
But it isn't as simple as all that. As I write this column, the Yankees, with 13 straight playoff appearances -- with six pennants and four World Series titles over that span -- are seriously considering showing their future Hall of Fame manager Joe Torre the door. Should Joe go?
When reviewing a leader's performance, you have to look at the following seven reasons for making a switch:
: There are leaders who maintain the top job because they are creative thinkers. They are the visionaries. On the other hand, sometimes leaders see the world as it used to be and not as it is.
I once worked with the CEO of a computer distribution company.He built the company from zero to $300 million.
for the hearts and minds of those choosing computer operating systems. It was obvious from speaking with CIOs that Microsoft was winning, but this CEO refused to believe Big Blue could lose because he liked its product.
Troops not listening
: The employees no longer believe or listen to the leader. They don't trust his judgment. I once took over for a CEO whose employees put his items in a box and set them in his parking space.
It was outrageous, but they felt he wasn't listening to them and didn't have their best interests in mind. In Joe Torre's case, he just can't seem to get the team to the top level, no matter how much the owner spends.
Frozen leader syndrome
: The leader is frozen and not reacting to the change in market conditions. Look at Tower Records, Montgomery Ward and Howard Johnson.
Why didn't Tower Records jump into the online music business with both feet? Why didn't Montgomery Ward convert its paper catalog to online? Why didn't Howard Johnson see the fast-food revolution coming? The leaders became indecisive, too conservative or just didn't understand the changes that were hitting their industries.
: The leader isn't able to attract smart, hardworking people. Prospects need to believe that the leader is smart, hardworking, gives managers wide latitude or all of the above. There has to be a reason to join the team.
: When you start to see good people leaving without even having another job to go to, you have to wonder what's wrong with this picture. It could be employee burnout, the employees not seeing growth opportunities or loss of faith in the leader.
: There is a difference between cheap and frugal. Frugal is making sure that the company spends smartly. Cheap is being stupid. The leader won't make investments in new technology, training or other areas that would move the business forward. This usually happens when the leader comes strictly from a finance background and doesn't believe in spending any money on anything that doesn't say "sales" on it.
: I once ran an organization for five years, and I just didn't want to go to work anymore. I was bored with the business. I couldn't come with anything new. It was time to move on.
There are times when boards don't recognize that changing the leaders can be wrong for the organization. The organization may not have the resources or talent to compete because the ownership hasn't provided the funding or has meddled in hiring.
Again, a good example comes from sports. My hometown baseball team, the Philadelphia Phillies, was ready to get rid of their manager after they got off to a poor start in the beginning of the season. The manager, Charlie Manuel, was in his third season.
In the entire time he has managed the team, no player has ever gone to the media to complain about the manager. This has been a stark contrast with the previous manager, former Phillies great Larry Bowa, whose style of managing was harsh and negative and so grated on players that there were stories all of the time about players wanting to leave. The players worked so hard for old Charlie that they stole the division from the Mets.
A change in managers would have been a disaster. It would have made a statement to the team that the season was lost. The best way to determine whether a leader should stay is to watch the type of effort and loyalty he or she gets from the employees.
If a leader is getting maximum effort, the organization then needs to re-evaluate the business model and determine whether to change strategies, invest more or possibly sell or close the business.
At the time of publication, Marc Kramer had no positions in the stocks mentioned.
Marc Kramer, a serial entrepreneur, is the author of five books and is an instructor at the University of Pennsylvania's Wharton's Global Consulting Practicum, where he serves as Country Manager for Chile.