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Power Sheet – January 19, 2015

January 19, 2016, 3:28 PM UTC

You’ve probably never heard of Kasper Rorsted – I hadn’t until yesterday – but he turns out to be a highly valuable man. Adidas announced that he would be leaving his job as CEO of Henkel, a German consumer packaged goods maker, and would become CEO of Adidas in October, replacing CEO Herbert Hainer. Henkel immediately lost $2 billion of market value on the news, and Adidas, a smaller company, immediately gained $1 billion – on a day when German stocks overall lost ground. All because of one man planning to change jobs nine months from now.

Everybody nods their head when you say human capital is really important, but it’s easy to forget just how important one human being can be. Every board of directors’ most important job is picking the right CEO, and every business leader’s most important job is picking the people who report to him or her. Nobody’s batting average is perfect. So here are seven lessons I’ve learned from CEOs about this supremely important responsibility:

-Don’t hesitate to make a change. If you get CEOs – even the greatest CEOs – talking candidly about their biggest regret, it’s always the same thing: I waited too long to move a person who was in the wrong job. Only later do they realize the cost of their delay.

-Don’t tell yourself that you can coach the person you’ve chosen, even though he or she isn’t quite ready for the job or, once in the job, isn’t performing well. That’s one of the most common rationalizations. It almost never proves true.

-Pay attention to the person’s lifestyle. You say it isn’t strictly relevant? Yes it is. It bespeaks character. Former HealthSouth CEO Richard Scrushy partied hard, surrounded himself with sycophants, flew one of the company jets to gigs for the country band of which he was lead singer, formed and managed a girl band, raced around in his 10 boats…you didn’t need a lot of life experience to see that trouble was likely. Scrushy served five years in federal prison for bribery and still owes HealthSouth almost $3 billion.

-Check for grounding and humility. I once asked former Honeywell CEO and former General Electric vice chairman Larry Bossidy how he could tell when rising leaders weren’t going to make it. He answered, “They don’t grow. They swell.”

-Don’t hesitate to raise the topic of succession with a CEO, if you’re a director, or with anyone who reports to you. People often feel uncomfortable initiating this conversation, fearing they’ll be seen as trying to push the person out. But the best leaders are happy to talk about the process of developing their successor, knowing that the process takes years and that they’ll be judged in part by their successor’s performance.

-Analyze your calendar to see how much time you’re spending on leadership development and succession planning for yourself and those who report to you. It probably isn’t enough. The numbers I’ve heard from successful CEOs range from 20% to 60%. After all, this is your most important job.

-Don’t ever, ever settle. If you aren’t confident you’ve made a great choice, then don’t make it. Even if you are confident, you may still be wrong. But if the inner voice is telling you something isn’t right, listen to it.

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Today's Quote

"As many of you know, we have implemented changes to diversify our membership in the last four years. But the change is not coming as fast as we would like. We need to do more, and better and more quickly." —Academy of Motion Pictures Arts and Sciences president Cheryl Boone Isaacs' response to growing concerns over the lack of diversity among Oscar nominees.  USA Today

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Produced by Ryan Derousseau