Transition to Midlife: Problems of Succession for Organizational Culture

Organizational midlife can be defined structurally as the stage at which founder owners have relinquished the control of the organization to pro­moted or appointed general managers. They may still be owners and remain on the board, but operational control is in the hands of a second generation of general managers. This stage can occur slowly or rapidly and can hap­pen when the organization is very small or very large, so it is best to think of it structurally rather than temporally. Many start-up companies such as Smithfield Enterprises (see Chapter Thirteen) reach midlife very quickly while an organization such as IBM only reached it when Tom Watson, Jr. relinquished the reins. The Ford Motor Co. is perhaps still in the transition phase in that a family member is still the chair of the board.

The succession from founders and owning families to midlife under general managers often involves many stages and processes. The first and often most critical of these processes is the relinquishing of the CEO role by the founder. Even if the new CEO is the founder’s son or daughter or another trusted family member, it is in the nature of founders and entre­preneurs to have difficulty giving up what they have created (Dyer, 1986, 1989; Schein, 1978; Watson, 1990). During the transition phase, conflicts over which elements of the culture employees like or do not like become surrogates for what they do or do not like about the founder because most of the culture is likely to be a reflection of the founder’s personality. Battles develop between “conservatives” who like the founding culture and “lib­erals” or “radicals” who want to change the culture, partly because they want to enhance their own power position. The danger in this situation is that feelings about the founder are projected onto the culture, and, in the effort to displace the founder, much of the culture comes under challenge. If members of the organization forget that the culture is a set of learned solutions that have produced success, comfort, and identity, they may try to change the very things they value and need.

Often missing in this stage is an understanding of what the organiza­tional culture is and what it is doing for the organization, regardless of how it came to be. Succession processes must therefore be designed to enhance those parts of the culture that provide identity, distinctive competence, and protection from anxiety. Such a process can probably be managed only from within, because an outsider could not possibly understand the subtle­ties of the cultural issues and the emotional relationships between founders and employees. But it may require an outsider to stimulate this inner pro­cess, usually a board member or a consultant hired by the board.

The preparation for succession is psychologically difficult, both for the founder and for potential successors because entrepreneurs typically like to maintain high levels of control. They may officially be grooming succes­sors, but unconsciously they may be preventing powerful and competent people from functioning in those roles. Or they may designate successors but prevent them from having enough responsibility to learn how to do the job—the “Prince Albert” syndrome, remembering that Queen Victoria did not permit her son many opportunities to practice being king. This pattern is particularly likely to operate with a father-to-son transition as was the case in IBM (Watson and Petre, 1990).

When senior management or the founder confronts the criteria for a successor, some cultural issues are forced into the open. It is now clear that much of the culture has become an attribute and property of the organiza­tion, even though it may have started out as the property of the founder. It is said that in Kodak “the ghost of George Eastman still walks the halls.” If the founder or the founder ’s family remains dominant in the organi­zation, we may expect little culture change but a great deal of effort to clarify, integrate, maintain, and evolve the culture, primarily because it is identified with the founder. For example, David Packard turned over the management of HP to a promoted general manager, but at one stage in its evolution when Packard saw decisions being made that violated some of his own values, he stepped back into the picture and brought in a different CEO who reinforced those values.

When the founder or founding family finally relinquishes control, an opportunity arises to change the direction of the cultural evolution if the successor is the right kind of hybrid: representing what is needed for the organization to survive, yet seen as acceptable “because he is one of us” and therefore also a conserver of the valued parts of the old culture. At Steinbergs, after several outsiders had failed as CEOs, someone was found who had been with the company earlier and was therefore perceived by the family to “understand the company” even though he brought in many new assumptions about how to run the business. After several outside CEOs, Apple brought back Steve Jobs who had run another company and pre­sumably learned some valuable things to bring back to the organization he founded.

During the growth period, culture is an essential glue; at midlife, the most important elements of the culture have become embedded in the structure and major processes of the organization. Hence, consciousness of the culture and the deliberate attempt to build, integrate, or conserve the culture have become less important. The culture that the organiza­tion has acquired during its early years now comes to be taken for granted. The only elements that are likely to be conscious are the credos, dominant espoused values, company slogans, written charters, and other public pro­nouncements of what the company wants to be and claims to stand for—its philosophy and ideology.

At this stage, it is more difficult to decipher the culture and make people aware of it because it is so embedded in routines. It may even be counter­productive to make people aware of the culture, unless there is some crisis or problem to be solved. Managers view culture discussions as boring and irrelevant, especially if the company is large and well established. On the other hand, geographical expansions, mergers and acquisitions, and intro­ductions of new technologies require a careful self-assessment to determine whether the new cultural elements that will have to be dealt with are, in fact, compatible.

If this succession transition occurs when the company has grown and aged, strong forces toward cultural diffusion will operate because powerful subcultures will have developed and because a highly integrated culture is difficult to maintain in a large, differentiated, geographically dispersed organization. Furthermore, it is not clear whether or not all the cultural units of an organization should be uniform and integrated. Several con­glomerates I have worked with have spent a good deal of time wrestling with the question of whether to attempt to preserve or, in some cases, build a common culture, as the Swedish government example showed in the pre­vious chapter.

A number of change mechanisms come into play in connection with these transition processes. They may be launched by the outgoing founder/ owner or by the new CEO or occur spontaneously. In midlife organizations, these mechanisms will operate in addition to the ones previously mentioned.

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

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