Culture Change Through Infusion of Outsiders

Shared assumptions can be changed by changing the composition of the dom­inant groups or coalitions in an organization—what Kleiner in his research has identified as “the group who really matters” (2003). The most potent version of this change mechanism occurs when a board of directors brings in a new CEO from outside the organization, or when a new CEO is brought in as a result of an acquisition, merger, or leveraged buyout. The new CEO usually brings in some of his or her own people and gets rid of people who are perceived to represent the old and increasingly ineffective way of doing things. In effect, this destroys the group or hierarchical subculture that was the originator of the corporate culture and starts a process of new culture for­mation. If there are strong functional, geographic, or divisional subcultures, the new leaders usually have to replace the leaders of those units as well.

Dyer (1986, 1989) has examined this change mechanism in several organizations and found that it follows certain patterns:

1. The organization develops a sense of crisis because of declining per­formance or some kind of failure in the marketplace, and concludes it needs new leadership.
2. Simultaneously, there is a weakening of “ pattern maintenance ” in the sense that procedures, beliefs, and symbols that support the old culture break down.
3. A new leader with new assumptions is brought in from the outside to deal with the crisis.
4. Conflict develops between the proponents of the old assumptions and the new leadership.
5. If the crisis is eased and the new leader is given the credit, he or she wins out in the conflict, and the new assumptions begin to be embed­ded and reinforced by a new set of pattern maintenance activities.

Employees may feel “We don’t like the new approach, but we can’t argue with the fact that it made us profitable once again, so maybe we have to try the new ways.” Members who continue to cling to the old ways are either forced out or leave voluntarily because they no longer feel comfort­able with where the organization is headed and how it does things. The new leader can fail in three ways—improvement does not occur, the new leader is not given credit for the improvement that does occur, or the new leader’s assumptions threaten too much of the core of the culture that is still embodied in the founder’s traditions. If any of these three conditions apply, the new leader will be discredited and forced out as happened with Scully at Apple (it is said that he never got the respect of the technical community within Apple, yet that was Apple’s core, no pun intended).

This situation occurs frequently when an outsider is brought into young companies in which the founders or owning families are still powerful. In those situations, the probability is high that the new leader will violate the owners’ assumptions and be forced out by them.

Culture change is sometimes stimulated by systematically bringing outsid­ers into jobs below the top management level and allowing them gradually to educate and reshape top management’s thinking. This is most likely to hap­pen when those outsiders take over subgroups, reshape the cultures of those subgroups, become highly successful, and thereby create a new model of how the organization can work. Probably the most common version of this process is to bring in a strong outsider or an innovative insider to manage one of the more autonomous divisions of a multidivisional organization. If that division becomes successful, it not only generates a new model for others to identify with, but it also creates a cadre of managers who can be promoted into more senior positions and thereby influence the main part of the organization.

For example, the Saturn division of General Motors and the NUMMI (New United Motor Manufacturing Inc.) plant—a joint venture of GM and Toyota—were deliberately given freedom to develop new assumptions about how to involve employees in the design and productions of cars and thus learn some new assumptions about how to handle human relationships in a manu­facturing plant context. GM also acquired EDS (Electronic Data Systems) as a technological stimulus to organizational change. Each of these units was successful with different cultures and thus could become a model for the par­ent organization to change, but as things have turned out, an innovative subculture within the larger culture does not guarantee that the larger culture will reexamine or change its culture. The innovative subculture helps in disconfirming some of the core assumptions, but again, unless there is sufficient anxiety or sense of crisis, the top management culture may remain impervious to the very innovations they have created. As of this writing, GM is closing down Saturn and NUMMI in spite of its need to make major changes.

Source: Schein Edgar H. (2010), Organizational Culture and Leadership, Jossey-Bass; 4^th edition.