A New Era for Culture, Change, and Leadership https://sloanreview.mit.edu/article/a-new-era-for-culture-change-and-l...

With the world in flux, organizations and the people within them
need close relationships to thrive.

When social psychologist Edgar Schein joined MIT’s

Sloan School of Management in the 1950s, the school
had just launched its great experiment of teaching
management through formal disciplines like
mathematics, social psychology, economics, and
history. That was a radical departure from
expounding “the practice of management” through
cases taught by professors who had been managers
for most of their careers. The new approach sparked
close, unlikely collaborations and deep, innovative
thinking about leadership, group cultures, and
Image courtesy of Edgar and Peter Schein
organizational change — all nascent fields of study at
the time. It was in this environment that Ed and his
colleagues embarked on what he calls “an exciting
quarter century of model building,” which helped
define how people thought about and engaged with
organizations.

Decades later, in a digital era, Ed says it is time for a new model, one that is built on close professional
relationships, openness, and trust. He and Peter Schein, his son and collaborator, have been working on
this model for the past few years. After earning a degree in anthropology and an MBA, Peter spent most
of his career as a strategy executive at a number of Silicon Valley companies. In 2015, he decided to join
Ed in analyzing and describing the changes afoot as the tasks of management become more complex,
interdependent, and volatile. In this conversation, they share their perspectives on organizational life, a
brief history of ideas leading up to this moment, and their thoughts about the future.

Ed Schein: Peter, in our recent work together, you have advocated for combining culture, change, and
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leadership into an integrated process, rather than viewing them as three separate topics of importance.

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Why this approach?

Peter Schein: Most of us at work these days, in organizations large and small, implicitly accept that
culture matters. Whether or not it eats strategy for breakfast, culture is a deep substrate: coercive,
empowering, good, or toxic. It does not change when our business has a bad quarter or when we proclaim,
“We have a culture problem.” Organizations’ cultural concerns certainly vary from environment to
environment: Startups may worry about building the right culture; midlife organizations may worry about
how to integrate the various occupational, social, and other subcultures that often conflict or are at cross-
purposes; and older organizations may focus on how to create a culture of innovation, for instance, or a
culture of employee engagement as stability regresses toward stasis and apathy. Nevertheless, culture is the
great stabilizing force as organizations mature and cannot be manipulated with quick fixes, such as revising
a mission statement. Culture survives through phases of growth. Change initiatives that metaphorically
alter the color of the walls take a long time to alter the deeply held beliefs that positioned those walls in the
first place.

And yet organizations must operate in a world that is continually in flux around them. Our work processes
are evolving in response to rapidly changing micro- and macroeconomic conditions. Much of our data
gathering and decision-making now happens at network speed, generally the speed of light, whereas it used
to happen at the speed of sound, of conversation and reflection.

In this context, if we think about change as a linear progression or a step function — if we believe we have
time to pause-change-resume as events unfold — we may be left behind. Although linear, top-down change
models still can work for simple production flows, they often amount to amending, appending, or fine-
tuning existing processes, and it’s not clear how long humans can bet on adding this kind of value before AI
ends up doing a far better job.

We might be better served to think of change as a waveform with no wait states, just variable ebbs and flows
that we can try our best to manage. I sure hope humans will outperform AI when it comes to continuously
adapting to shifting contexts, in four dimensions, while automation excels at fine-tuning, in three
dimensions.

I am both curious and optimistic about new models of work and of organization design, in which hierarchy,
job descriptions, and work streams have morphed into fluid processes of perpetual adaptation as
circumstances change, just as an organism shifts blood flow to the subsystems with the greatest need.
Organizations will have evolved a number of subcultures as they mature. Rapid environmental change will
affect these subcultures very differently, and the change processes, in turn, will shape both formal and
informal leadership. So you really can’t think about these things separately.

Ed Schein: Leadership, too, has morphed into a fluid process rather than something to be characterized
by the title, talent, or tenacity of individuals in formal positions of authority.

Peter Schein: Yes, it reflects what we are seeing throughout organizations. For some today, and many of
us soon, work is done in groups and projects with shifting membership and constantly evolving new roles as
the tasks become more complex and interdependent. We can now think of leadership as the creation and
implementation of a new and better way of doing something, whether that be a new strategy, a new product
or service, or a new way for a group to run its meetings and make decisions.

Leadership in this sense results from seeing a need, building the kinds of relationships that will make
something new
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anywhere in an organization or a work group. The relationships we see thriving, not just among peers in
formal organizations but also in coalitions and ecosystems, foster openness and trust to maximize
information flow and optimize decision-making.

We talk about the importance of relationships all the time. Ed, you have repeatedly argued that improving
relationships involves developing a richer understanding of the different levels and types and how they
work. How do we do that?

Ed Schein: The depths of work relationships basically reflect broad categories that have arisen in all
societies. What we have called a level minus 1 relationship is, in a word, domination. It exists when
someone in control exercises absolute power and subjugates the other person, as in sweatshops or prisons.

Most of our relationships, both at work and in civil society, are not quite that asymmetrical, but they tend to
be distant and transactional. In these level 1 relationships, we learn to play various roles in order to get
along with others and manage our daily affairs. At work, this level is reinforced through organizational
design. Employees are hired for their skills to fulfill certain clearly defined roles and are expected to
maintain proper social and professional distance from their peers and from people higher or lower in the
hierarchy.

We are very familiar with the managerial culture that typically goes with this design. If the work lends itself
to such precise role definition, we accept it because it is efficient even though its impersonality makes us
call it a bureaucracy (and perhaps even grouse about it). But the fundamental weakness of level 1
relationships is that the distance between and even within roles makes it very easy for employees at all
levels to avoid open communication and harbor distrust. Not speaking up becomes easier and safer when
career competition is culturally taken for granted in a rigidly designed hierarchical system. This leaves the
organization vulnerable to deficits in quality, safety, customer satisfaction, and innovation. We can think of
level minus 1 as power relationships and level 1 as role relationships, and assert that neither will work in the
future.

Instead, we will need level 2, which can be described as personal relationships. We see these now in the
evolution of what the sociologists have labeled the informal organization, where employees and managers
form closer connections to create better communication and more trust. In level 2 relationships, people
choose to treat each other as whole human beings, not just role occupants, which collapses the
psychological distance even across hierarchical boundaries, as when a C-level executive forms a personal
relationship with a line-level engineer and thereby finds out what is really going on in the organization.

With work becoming more complex and interdependent, and organizations becoming organic and flexible
spheres of groups and teams, the managers of tomorrow will have to get to know their people in order to
create valid and reliable communication and to build trust in both directions. All members of the
organization will have to feel psychologically safe to speak up when things are not working and to exercise
leadership when they see a new and better way of getting something done. Great leaders and managers have
always done this, but it has never become a necessary part of traditional managerial culture. It should be. 1

Peter Schein: You have had a long career in the field of organization studies. Can you describe how you
arrived at your emphasis on relationships in your work on leadership and culture?

Ed Schein: Let’s start with my first postgraduate job. As a social psychologist and an officer at the Walter
Reed Army Institute of Research, I was assigned to be part of a team that brought back repatriated
prisoners of war
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psychological maladjustments and to be helpful during the 16-day voyage home from Korea to San
Francisco. What I had handed to me was a huge data pool showing how the Chinese communists in the
early 1950s indoctrinated some of their civilian prisoners on the mainland and got a small number of POWs
to collaborate with the enemy and provide the Chinese with some useful propaganda. This experience
dovetailed with my research interests in interpersonal influence and made it very clear what a level minus 1
relationship involved.

That led me to my first years at the MIT School of Industrial Management — what Sloan was called back
when Douglas McGregor, a prominent leadership theorist, recruited me in 1956 to bring social psychology
to graduate management training. He brought me into the first of several “hot groups” that were forming
there. I was thrown together with Warren Bennis and Richard Beckhard, who became major mentors in
introducing me to experiential learning. The human relations training labs that grew out of Kurt Lewin’s
group dynamics research at MIT had evolved experiential learning methods to help managers develop the
skills of observing and managing group and interpersonal processes. After some initial resistance, because I
thought I already knew all of this stuff, I discovered that experiential learning was much more powerful
than learning through lectures, readings, and cases, and that I could be an effective coach for these groups.
In these training groups, I saw how a number of strangers could move quite quickly from level 1 to level 2
relationships.

I then posited that the essence of good management and good leadership was the ability and desire of
people in those positions to observe, understand, and manage the relationships they had with their
superiors, subordinates, and peers. I took it for granted that level 2 was the appropriate manager-employee
relationship long before it had been labeled as such. It was only recently that I saw the need for an explicit
model of relationship depths that reflects how society trains us all as adults to differentiate exploitative,
bureaucratic, personal, and intimate relationships.

While all this was going on at MIT, I learned that organizations valued much of what we were teaching.
They would hire us to give lectures and get into consulting engagements to help sort out their career,
management, and leadership issues. It was not a huge leap from there to transfer my interest in
indoctrination to the question of how corporations were able to influence their new hires to adopt a
corporate value system.

Peter Schein: How does all this connect with your contributions in the fields of career development and
talent management and with your ideas about culture?

Ed Schein: I found many examples of strong corporate influence in my research, but I also found that
people could easily resist this influence by leaving a company or leaving an industry altogether to become
teachers or consultants. That led to a major panel study in which I followed 44 MIT alumni and discovered
that in the first 10 to 20 years of their careers, people use their experiences to build an image of who they
are, what motivates them, what they are good at, and what their central values are, which came to be called
a career anchor. Once alumni panelists had developed such a self-image, it anchored their career decisions
and organized their work lives.

To further study these issues, I was joined by Lotte Bailyn and John Van Maanen, with whom I worked
intensely for more than two decades on career development, the role of women in the workplace, dual
careers, work-life balance, and various related topics that together virtually formed the field of career
development. Our different perspectives and ability to work closely together made for an exciting quarter
century
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Most of my consulting in the early years grew out of my interest in career development and, from the
organization’s point of view, socialization of new employees and talent management. I wrote a paper on
how the primary function of the personnel department, already called human relations at that time, was the
difficult task of matching the needs of the individual employee with the needs of the organization. The
concept of culture had been applied by anthropologists to preliterate and modern societies for a long time,
but it became clear to me that what companies taught to their new employees could also be described as the
company culture. I then observed how every startup organization had a strong value system that the new
employees had to fit into. If the organization became successful, what started out to be the founders’ values
soon became taken for granted as the basis for the organization’s success and not long after that became the
organizational culture. And I then observed as well that this process of building a core value system around
which rules and norms of behavior evolved applied not only to organizations but also to various occupations
and professions — engineering, medicine, law, various forms of ministries, and so on.

I had felt for a number of years that organization studies at Sloan and at most business schools was
dominated by psychology. With the arrival of John Van Maanen, we were able to broaden our focus and
build a PhD program around ethnographic methods. That spawned a series of PhDs who took this point of
view to many other major business schools and gradually brought much-needed sociological and
anthropological insights into this field.

Employee socialization, we realized, was basically the same process as a group teaching its new members
the culture of that group. In order to justify its survival and grow, the organization had to hire and train
employees with the right kinds of talents and career anchors.

Peter Schein: In that sense, culture and leadership have long been connected.

Ed Schein: Founders and entrepreneurs set the tone as they form their new organizations, so leaders
clearly create culture from the outset. But as those organizations mature, their cultures determine what
kind of leaders they choose. They develop a very clear idea of what leadership is supposed to be in that
environment, and they select people for senior jobs who match that profile. The same thing happens
throughout the ranks. A young organization draws on a variety of talents to achieve success, but as it ages, it
develops strong beliefs, expressed in job descriptions, about what kinds of talent are needed and then
recruits only those people. Talent management in the very mature organization then becomes a subtle
process of the culture just re-creating itself, of hiring only people who “fit” in both the technical culture
(how tasks get done) and the social culture (how relationships work in the organization). When the outside
environment, or macroculture, changes, organizations arrive at a moment of truth: We need innovation, yet
we can’t get our people to do it! If we understand how culture works, this should not be a surprise, and
indeed some large organizations have figured out how to innovate, in part by allowing their R&D functions
the freedom to evolve their own technical and social cultures.

But enough about how we got where we are…. Peter, you’ve been here in Silicon Valley since the very early
days of the internet. It’s one of those places that seems inevitably about defining more than accepting the
future. As we think about our integrative view of organizations, what do you see out here that gives you
hope or concern about organizational futures?

Peter Schein: Without giving new technology companies too much credit, I’d say it’s true that innovators
out here have revolutionized both tools and processes of work. There are so many examples. Terms like
loosely coupled, tightly aligned, fail fast, reality distortion field, and radical candor are all little points of
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Our friend and colleague at Palo Alto’s Institute for the Future, Bob Johansen, describes “shape-shifting”
organizations of the future, capturing the basic notion that static organizational charts are retrograde at
best in 2019. 2 This shape-shifting idea can be seen in holacracy, an interesting effort by online apparel
retailer Zappos and other organizations to unshackle innovation from traditional command-and-control
norms. 3 For many, this may be too extreme. Global, multifaceted corporations may even deem it irrelevant.
Yet categorically, there is little reason why the ideas behind holacracy — which is just one approach to
dynamic, ad hoc, self-managed teams — should not be an organizing principle for organizations of any size,
assuming the top brass and their key leaders have established level 2 trust and openness and are willing to
relinquish hierarchical control. Grappling with degrees of control versus degrees of freedom, I think, is a
central struggle for young innovative companies trying to mature as multiproduct, multidivision, long-run
winners.

Another interesting development is the popularity of OKRs, or objectives and key results, for helping
organizations make progress on their goals. A host of HR software vendors, from Atiim to Weekdone,
provide platforms for individuals and teams to share their objectives and key results with their colleagues,
on the theory that everyone benefits from knowing where everyone stands. This model is a newer iteration
of a familiar socio-technical construct that endeavors to connect the goals and aspirations of all individuals
in a work group, or an organization as a whole, to the key strategic imperatives of the organization. Built
into OKRs is the sharing of priorities, projects, and progress, up, down, and sideways. Andy Grove used
them as the CEO of Intel, and venture capitalist John Doerr introduced them to Google. 4 The
complementary acronym to OKRs is CFRs, which stands for conversations, feedback, and recognition. With
this corollary conversation imperative, this management and control framework is reframed in more
humanistic terms with what appear to be more humanistic values.

We may come to appreciate that the alchemy here is in connecting the technical benefits of visibility,
predictability, and accountability with the socio benefits of involvement and engagement. This could prove
to be a very positive step forward, though perhaps not solving for the transparency fallacy. Transparency
may feel like a humanistic benefit in the elimination of secrets and skunk works, and yet it may only be
valuable when it’s a requirement in a group or organization that lacks openness and trust. Again, we see the
struggle between freedom and control. It is similarly captured in the paradox of CFRs. If the primary goal is
to openly share what is going well and what needs to be changed, CFRs may be very effective in accelerating
results. However, if the emphasis is more on providing feedback, this may just be a veneer on the deeper
motive of top-down control.

Earlier I mentioned the premium that organizations are placing on speed. If we’ve learned anything in a
cradle of innovation, it is that pace really matters. Socio-technical innovations may be reenergizing
humanism in creative work, yet if any such process innovations slow down the pace, we can expect that the
next big thing will aim to speed us up again. A new leader may see a way to do something new and better,
built on trust, openness, and reflection. We think this is happening a lot (as Frederic Laloux notes,
“something is in the air” 5 ). Yet one of the headwinds that organizations will face as they seek to adapt their
social culture is the macrocultural preference for speed over reflection. These forces are in constant tension.
Senior leaders, especially those who oversee organizational development (OD), will need to keep thinking
like ethnographers and participant observers to get the mix right.

So, Ed, this raises one last observation and question: For a lot of good reasons, OD has evolved dramatically
since your first culture and leadership book, particularly in helping organizations to accept new realities
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and experiment with new approaches. Where do we go from here?

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Ed Schein: Trends in OD have for many decades had their own tribes of researchers and practitioners, and
we have seen positive developments along many vectors. It is a good thing that there is such a growing
interest in change management, reflecting the changing nature of work itself. And I am thrilled to see so
many people getting on the culture bandwagon, though I caution that some may lack adequate grounding in
culture dynamics.

The need for openness and trust pervades all of these areas. But many of today’s models for leadership,
change, and culture are still predicated on the assumption that level 1 — bureaucratic, professionally distant
— relationships can work. They can’t. Other models talk about the importance of mutual trust but neither
define it nor propose how to build it.

Trust happens through vital information exchange and open sharing, as we build relationships that allow us
to intuit and anticipate each other’s responses, so we can count on each other’s next moves to be supportive
and collaborative rather than competitive and self-seeking. Building that trust helps us work positively
toward mutually defined goals. It’s self-reinforcing, and to get there, we need level 2 relationships.

In short, a positive theory of level 2 openness and trust is the conceptual glue that ties together culture,
change, and leadership. We have come a long way, but I can’t help but reflect on the little irony that where
we hope this is all going is what Douglas McGregor had in mind all along with his wonderful Theory Y as
the foundation for the human side of enterprise. 6

Edgar H. Schein is a professor emeritus of the MIT School of Management. Peter A. Schein is a strategy consultant in Silicon Valley. They are the authors of
Humble Leadership: The Power of Relationships, Openness, and Trust (Berrett-Koehler, 2018). Their new book, the third edition of The Corporate Culture
Survival Guide: Culture Change Leadership (forthcoming), strongly articulates the need for new models of management and leadership.

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1. See E.H. Schein and P.A. Schein, Humble Leadership: The Power of Relationships, Openness, and Trust (Oakland, California: Berrett-Koehler, 2018).

2. B. Johansen, The New Leadership Literacies: Thriving in a Future of Extreme Disruption and Distributed Everything (Oakland, California: Berrett-Koehler,
2017).

3. See, for example, B.J. Robertson, Holacracy: The New Management System for a Rapidly Changing World (New York: Henry Holt, 2015).

4. J. Doerr, Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World With OKRs (New York: Portfolio/Penguin, 2018).

5. F. Laloux and E. Appert, Reinventing Organizations: An Illustrated invitation to Join the Conversation on Next-Stage Organizations (Brussels, Belgium:
Nelson Parker, 2016), 161.

6. D.A. McGregor, The Human Side of Enterprise (New York: McGraw Hill, 1960).

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