I'm going to answer this from the perspective of an engineer who has worked in similar environments and who has had leadership changes that went well, as well as ones that didn't Basically you're describing an environment in which people aren't doing as much as they are capable of, they were wor...
Backwards. I'd make sure that person didn't stay in the company. "One dirty fish muddies the whole pond" It's not personal or malicious - they're just not the right fit. A great skill set, while very important is always secondary to cultural fit if you really want your company to flourish.
Read Tribal Leadership, a great book on culture and Switch: How to Change When Change is Hard, a great book on implementing change when it's difficult.