When Leaders Need to Step Up or Step Down

There are ways to determine when a business leader needs to move on, as can be seen in the examples of General Electric and Microsoft.
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Like a boxer who is getting his brains knocked around and doesn't realize it is time to throw in the towel or the quarterback who doesn't see his timing isn't what it once was, there are business leaders who either refuse to accept or don't recognize when it is time to move on.

How many leaders have we seen who have stayed past their prime and hurt their organizations? Tom Monaghan built


into a pizza powerhouse, but by the time David Brandon took over, Domino's was faltering badly. Stanley O'Neal, former CEO of

Merrill Lynch

, took the thundering herd over the cliff and now Merrill is part of

Bank of America

(BAC) - Get Report

. Even Mike Shanahan, who won two Super Bowls for the Denver Broncos, and Tom Landry, who led the Dallas Cowboys to five Super Bowls and two wins, didn't realize it was time to go until someone showed them the door.

There have been leaders like Bill Gates of


(MSFT) - Get Report

, Alfred Sloan of

General Motors

(GM) - Get Report

and Jack Welch at

General Electric

(GE) - Get Report

who understood their companies would benefit from a new vision and leadership, even though they were incredibly successful.

Many business leaders can't see when they are no longer the right person. There are five areas that leaders, board members and advisers should look at when determining if it is time for a change:

  • Sales growth: The first and most obvious indicator is if sales are no longer growing or falling. I once met an entrepreneur who grew his business from zero to $300 million, but refused to believe that Microsoft's operating system was the future, even though his younger employees were telling him that old IBM (IBM) - Get Report operating system was no longer acceptable to clients. Eventually, he had to sell the business for a fraction of what it once was worth.
  • Recruitment: The most talented people are no longer interested in joining the company. This is happening to Microsoft under current CEO Steve Ballmer, who hasn't taken the company to a new level. College students I speak with respect Microsoft, but they aren't excited about joining the Kingdom of Gates.
  • Staff development: A $100 million company I am working with in Latin America has never run any programs to develop its professional staff. The best employees, the new CEO told me, would leave for companies whose goal was to improve their workers' skills. Skill development not only serves as a great retaining tool, but an even better recruiting tool.
  • Innovation: When was the last time the company developed a new product or thought about cannibalizing its own products/services? When a leader stops reinventing the company, it is time to go.
  • Complacency: Leaders who are comfortable with the status quo need to go. This happens when leaders become bored or statesmen serving on for-profit and non-profit boards with greater interest in the outside world than the day-to-day operations of their own company.

If you are a leader who no longer thrives on the chaos and challenge of building your business or if you work for such a leader, it is time to look in the mirror or be told the truth that you either have to step down or step up. In uncertain times, leaders must be engaged, forward thinking and energized.

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.