It’s a widely accepted heuristic that when it comes to hiring a new CEO, internal hires are best for maintaining the status quo, whilst external hires are better for signalling a break from the past.

It’s a heuristic that’s based upon the belief that the level of similarity to the culture of the organization is key to the success, and approach taken by the executive.  Alas, a recent study from researchers at Georgia State University, Arizona State University, the University of South Australia and Auckland University of Technology suggests we may need to rethink things.

The importance of culture

The researchers examined 119 American companies, with a particular focus on the culture of both the CEO, their senior management team and the rest of their organizations.

Whilst you might imagine that when the culture of those three elements are aligned it would lead to better performance, the reverse was actually the case.

“Consistencies between CEO leadership and culture create redundancies,” the authors say. “Leaders who are culture conformists are thus ineffective. CEOs who lead in a manner different from the culture benefit companies because they provide resources to the organization that the culture does not.”

Vive la difference

Culture in this instance was looking at the shared values and norms of the company, and was referred to as either relationship-orientated or task-orientated.  A task-orientated culture, for instance, might typically see an employee focusing on problems such as customer needs or competitor actions.

Relationship-orientated cultures, by contrast, tend to see employees focusing more on internal factors such as good communication and collaboration with their peers.

So why does a similar outlook between the boss and the wider organization result in worse performance?  The rationale is very similar to that outlined in the intro to this post.

“Similarities between leadership and culture can produce a myopic focus on things that have worked in the past while precluding employees from acquiring other resources or processes that could enhance success,” the researchers say. “CEOs should be mindful about focusing employees on important outcomes and processes that cultural signals may overlook.”

Perpetual innovation

It hints at the increasingly perpetual need to innovate to adapt to a rapidly changing environment.  Such an environment requires a constant reassessment of what good looks like to ensure organizations keep pace with the changes around them.

The authors do provide a slight caveat however and remind us that not all differences in culture are positive.  For instance, if a leader is excessively confrontational it is unlikely to yield a positive outcome, especially if they tend to discard everything that has been shown to work in the past.

To frame things in the context of Vijay Govindarajan’s 3 box thinking, such an approach would discard too much from Box 1, thus making it hard to provide the stability and resources to innovate in Box 3.

“Leaders must search diligently for what isn’t currently being handled by the culture and fill in the gap,” the researchers conclude. “They should adopt a leadership style that builds upon the positive aspects of the existing culture, contributing to the culture without undermining it.”