Search results

This paper extends the current understanding of the retrenchment-–turnaround relationship in declined companies by introducing a compensation gap view. It argues that the effectiveness of the retrenchment strategy is contingent on reducing the executive-employee compensation gap in the turnaround process.

Drawing from a two-stage turnaround model and insights from the literature on executive-employee compensation gap, we develop and test a theoretical model that explains how five attributes, which refer to executive-employee compensation gap, asset retrenchment, cost retrenchment, ownership and size, affect the outcome of the organizational turnaround. This paper uses the fuzzy-set qualitative comparative analysis (fsQCA) method and based on the samples of 112 listed companies that experience the decline between 2005 and 2013.

This paper concludes two valid causal paths and finds that small companies with small executive-employee compensation gap have a higher likelihood of successful turnaround when they implement cost or asset retrenchment actions. As for large state-owned companies, they should reduce the costs and maintain a small executive-employee compensation gap. An excessive compensation gap can be problematic, which could impair the organizational ability to cope with adversity and decline.

First, this paper taps the vital role of employees in the turnaround process besides the mainstream “organizational decline-layoffs” logic, which hints a new human resource management strategy when organizations are facing decline. Second, this paper reveals the theoretical linkage between pay dispersion, internal stakeholder and organizational resilience. Third, as a methodological contribution, we introduce fsQCA, overcoming the shortcomings of turnaround strategy research with case and regression analysis and breaking through the paradigm of “specific factor-turnaround.”

Organizational turnaround is a systematic process that constitutes multiple factors together. When organizations take the asset retrenchment to stop bleeding, reducing the executive-employee compensation gap will help enhance employee's cognition of organizational values and strategic goals, eliminate feelings of exploitation in retrenchment implementation and thus effectively promote turnaround. This paper also provides a basis for executive compensation restrictions and re-examines pay dispersion and economic inequality.

This study sheds some light on the importance of the executive-employee compensation gap in retrenchment strategy and contributes to both organizational turnaround and pay dispersion theories. Also, it reveals the theoretical linkage between internal stakeholders, organizational resilience and long-term orientation.

Most mature organizations face a major decline in performance at some time during their existence. For more than three decades, it has been suggested that the management practices that could cure a troubled company could have also kept it well. Inspired by this concept, this paper is proposing a preventive approach to early implementation of turnaround strategies as an alternative for otherwise traumatic rescue efforts, further along the downward spiral.

Corporate turnaround strategies and associated risks are integrated with a risk-based approach, along with a proactive decision-making process. The link between turnaround research, resource-based view, the sources of organizational decline, and the governance of organizational-decline-related risks – is explained.

The integrated model streamlines a preventive organizational process for considering the suitability of commonly used turnaround practices – for the non-crisis business routine of a mature company. By considering and adjusting the risks associated with such practices, it addresses risk aversion at the early stages of decline and determines the optimal sequence and timing of retrenchment and recovery activities. As such, it encourages mature companies to take actions for reducing their exposure to organizational decline. Accordingly, the model is named the “Anti-Aging” framework.

Empirical testing of the suitability of turnaround strategies for non-crisis situations is proposed as a direction for future research.

The Anti-Aging framework opens an opportunity for the senior management of a mature organization to respond earlier to organizational decline and avoid the trauma associated with otherwise more challenging conditions, for the benefit of all stakeholders.

The Anti-Aging framework proposes an innovative way of bridging the gap between the benefits of early implementation of turnaround strategies, and major obstacles faced by willing, traditional management teams of mature organizations.

The purpose of this paper is to review the literature from the organizational sciences to develop a grounded narrative of turnaround leadership.

The paper is a review of literature, which employs a ten‐step process to explore and make sense of the turnaround literature from the organizational sciences. The paper relies on strategies appropriate for document analysis, and borrows analytic strategies (e.g. memoing, coding) employed with interview data.

The paper finds three defining themes that flow from the review of empirical and theoretical work on organizational recovery in firms, non‐educational public agencies, and not‐for‐profit organizations: leadership as the critical variable in the turnaround equation; change of leadership as a generally essential element in organizational recovery; and type of leadership, but not style, as important in organizational reintegration work.

The paper posits that the literature on turning around failing organizations in sectors outside of education provides blueprints for recovery activity in failing schools. The implications for turnaround leadership are particularly strong.

This paper is the first systematic effort to mine research in the corporate, not‐for‐profit, and public sectors to develop insights for leadership in failing schools.

This paper aims to investigate the role of resource orchestration in turnaround attempts following the organizational decline in the context of an emerging economy.

Multicase study of three Brazilian textile firms, following their trajectory from 1997 to 2009. We did a “historical reconstruction using the methodology” proposed by Mintzberg and McHugh (1985) to guide our data collection and analysis procedures. The methodology is geared towards the study of the evolution of organizations over a past period, wherein the researcher reconstructs the events after they have occurred, having developed them from documentary analysis and oral history.

The results indicate that resource orchestration is a critical capability for ensuring the coordinated implementation of operational and strategic actions in a turnaround. Moreover, in a context involving severe environmental jolts, the conservation of organizational slack appears to influence the effectiveness of resource orchestration and explains the different outcomes the firms in this study achieved in their turnaround attempts.

This paper may be useful to practitioners involved in turnarounds, helping them evaluate the consequences of decisions involving the acquisition, reconfiguration, bundling and divestment of firm resources.

Besides contributing to the advancement of theory-informed research on decline and turnaround, this paper may be useful to practitioners involved in turnarounds, when they consider the consequences of decisions involving firm resources.

This paper helps advance theory-informed research on decline and turnaround in developing economies, helping address a gap in the extant literature, primarily focused on firms in developed countries.

Investigar, en el contexto de una economía emergente, el papel de la orquestación de recursos en los intentos de recuperación después del declive organizacional`.

Estudio multicaso de tres empresas textiles brasileñas siguiendo su trayectoria desde 1997 hasta 2009. Hicimos una “reconstrucción histórica utilizando la metodología” propuesta por Mintzberg y McHugh (1985) para guiar nuestra recopilación de datos y procedimientos de análisis. La metodología está orientada hacia el estudio de la evolución de organizaciones en un período pasado, en el que el investigador reconstruye los eventos después de que han ocurrido, habiéndolos desarrollado a partir del análisis documental y la historia oral.

Nuestros resultados indican que la orquestación de recursos es una capacidad crítica para garantizar la implementación coordinada de acciones operativas y estratégicas en un processo de recuperación. Adicionalmente, en un contexto que implica impactos ambientales significativos, mantener la holgura organizacional parece influir sobre la eficacia de la orquestación de recursos y explica la diferencia de los resultados que las empresas encuestadas alcanzaron en sus tentativas de recuperación.

Este artículo puede ser útil para los profesionales implicados en procesos de recuperación, ayudándoles a evaluar las consecuencias de las decisiones que implican la adquisición, reconfiguración, agrupación y desecho de recursos de la empresa.

Este estudio contribuye al avance de la investigación de base teórica sobre declive y recuperación en economías en desarrollo, ayudando a eliminar una laguna en la literatura existente, la cual se a centrado principalmente en empresas en países desarrollados.

Investigar o papel da orquestração de recursos nas tentativas de turnaround após o declínio organizacional, no contexto de uma economia emergente.

Estudo multicaso de três empresas têxteis brasileiras, seguindo sua trajetória de 1997 até 2009. Fizemos uma “reconstrução histórica usando o metodologia” proposta por Mintzberg e McHugh (1985) para guiar nossa coleta de dados e procedimentos de análise. A metodologia é voltada para o estudo da evolução de organizaçöes ao longo de um período passado, em que o pesquisador reconstrói os eventos após ocorreram, tendo-os desenvolvido a partir da análise documental e da história oral.

Nossos resultados indicam que a orquestração de recursos é uma capacidade crítica para garantir a implementação coordenada de ações operacionais e estratégicas num turnaround. Adicionalmente, num contexto envolvendo choques ambientais significativos, a preservação da folga organizacional parece influenciar a eficácia da orquestração de recursos e explicar a diferença dos resultados que as empresas pesquisadas alcançaram nas suas tentativas de turnaround.

Este artigo pode ser útil para profissionais envolvidos em turnarounds, ajudando-os a avaliar as consequências de decisões envolvendo a aquisição, reconfiguração, agrupamento e descarte de recursos da empresa.

Este estudo contribui para o avanço da pesquisa de base teórica sobre declínio e turnaround em economias em desenvolvimento, ajudando a eliminar uma lacuna na literatura existente, focada principalmente em empresas em países desenvolvidos.

The purpose of this study is to empirically examine the effect of top management team (TMT) characteristics on corporate turnaround performance in declining firms under conditions of environmental stability and turbulence.

Theoretical hypotheses were developed and tested using data collected from 98 US manufacturing firms that experienced performance decline and turnaround during the periods 1990‐1994 and 1995‐2000 respectively. Data were collected from the COMPUSTAT database and annual filings and analyzed using a moderated regression analysis.

The results of moderated regression analysis indicate an adverse effect of long organizational tenure on corporate turnaround, especially in turbulent environments. Hence, if was found that the effect of top team composition on corporate turnaround varies depending on the environmental context.

The study contributes to the ongoing corporate turnaround research by examining the interplay between TMT characteristics and turnaround performance under different environmental contexts. Consequently, the findings of the study suggest that the environmental context in which declining firms operate matter just as much as the nature and characteristics of their top team in determining the success of their turnaround attempt.

The results of the study shed some light on corporate governance issues, specifically on the importance of matching top management change efforts in declining firms with the respective environmental context.

The study contributes to the corporate turnaround literature by addressing the recent call for research in the TMT‐turnaround relationship under environmental contingencies (i.e. environmental stability/turbulence).

To test the ability of situational variables, manageable pre‐decline resources, and specific firm responses to decline to classify performance outcomes (turnaround vs non‐turnaround) in declining firms.

Using a longitudinal methodology and a multi‐firm sample, the paper studies the relative role of situational factors concerning the environment and a firm's decline, along with various internal resources and strategies that can enable a firm to recover from decline.

The results indicate that contextual factors such as the urgency and severity of decline, firm productivity and the availability of slack resources, and firm retrenchment can determine the ability of sample firms to turnaround. Overall, factors under the control of managers contribute more to successful turnarounds than situational characteristics.

This study does not identify the exact cause of firm decline. The authors believe this is beyond the scope of this multi‐firm study.

This study contributes to the existing research by theoretically explicating and empirically testing the influences of multiple situational and organizational factors on turnaround outcomes. While several studies have investigated conceptually unique sets of actions applied by managers attempting to turn around declining firms, this paper integrate these actions as they can often impact each other and the eventual turnaround. The authors believe their research design affords a more holistic view to the turnaround process. In order to direct executives efforts, the findings are summarized into some practical applications.

Despite an improved understanding of the role of top executives in declining firms, research is still needed to explore the role of environmental scanning and strategy formulation processes in an organizational decline context. Drawing from the attention‐based view and the literature on environmental scanning, the purpose of this paper is to examine the relationship among executive attention patterns, industry dynamism and corporate turnaround performance in declining firms.

In order to test theoretically‐driven hypotheses, data were collected from 70 US manufacturing firms that experienced serious performance decline and subsequent performance turnaround between 1990‐2000. The hypothesized relationships among market‐related, input‐related environmental scanning, industry dynamism and corporate turnaround performance were tested using a moderated regression analysis.

The findings indicate that declining firms operating in dynamic industry environments tend to improve their turnaround performance when executives focus their attention more on market‐related sectors (i.e. customer, competitor and technological sectors). Conversely, the findings also indicated that corporate turnaround performance of declining firms seems to be adversely affected by a disproportionate focus on input‐related sectors of the task environment (i.e. suppliers and creditors).

The paper's findings contribute to the ongoing corporate turnaround research by highlighting the important role executive attention patterns and selective perceptions play in improving the extent of corporate turnaround in declining firms. More importantly, the findings also indicate that environmental context (in this case dynamism) is a critical part of successful corporate turnaround since it dictates the impact of relevant external actors on the organization.

Executives of declining firms attempting turnaround may find it particularly useful, based on the paper's findings, to focus their attention and information search on specific aspects of the task environment in order to facilitate corporate turnaround. Such focus becomes especially necessary if the declining firm is operating in dynamic industries.

The paper contributes to the corporate turnaround literature by highlighting the importance of both executive attention patterns and environmental context in any successful turnaround attempt.

In this article, the authors aim to review the extant literature and analyze the theoretical influence in the academic research of organizational decline and related topics (turnaround and bankruptcy, for example). They examine the theoretical contribution and the most influential authors to better understand the intellectual structure that connects theories and authors that have researched organizational decline. This study makes it possible not only to understand the current state of the art of research on organizational decline but also to uncover and guide future studies on organizational decline, based on the conceptual gaps identified.

Empirically, the authors conduct a bibliometric study involving analyses of citations and co‐citations to uncover the connections between authors and theories used. The bibliometric study was performed in 18 top‐ranked management journals. Their sample of 104 articles was retrieved from ISI Web of Knowledge.

The authors identified four clusters of research areas, and conclude that evolutionary theories support a considerable number of works, including studies on the effects of inertia, isomorphism and adaptation. Sociological approaches have also been used, namely examining the adjustment of the internal structures and actions to enhance positioning. Other research on decline is based on works on learning and decision making as well as on decline and turnaround strategies.

The main limitations concern the methods and the sample. Although the authors selected 18 top management journals, they do not encapsulate the entire stock of existing knowledge.

Well‐known and reputable corporations, not only the small entrepreneurial firms, also face organizational decline and failure. Although organizational decline is a reality, there is a notable scarcity of research on the topic. Organizational decline is more often studied in small companies and attributed to the liability of newness and a lack of several types of physical, technological, financial and social resources. Although the authors expected a priori to identify works using a resource‐based view, that was not the case, perhaps because since the 1990s strategy scholars' interest in studying organizational decline diminished. Notwithstanding, organizational ecologists continue to work on organizational decline as it is one of the central areas of their work.

The learning outcomes of this study are as follows: ■ understand organizational turnaround and its sustainability;■ applying the understanding of turnarounds to distinguish between operational and strategic levers of a turnaround strategy; ■ analyze and evaluate past and present turnarounds from a sustainability perspective; and ■ formulate managerial actions to make turnaround sustainable.

Braithwaite Company Ltd. (Braithwaite) was a specialized engineering firm headquartered in Kolkatta, India. It primarily undertook structural steel fabrication to make railway wagons and bridge structures. It was incorporated as a private enterprise almost a century back. However, since its nationalization five decades ago, it has been operating as a public sector undertaking (PSU) under the aegis of Indian Railways, a department of the Government of India. The case documents the past three decades of the firm’s journey, during which it experienced three episodic turnarounds. Details of the first two turnarounds are presented as the background, in light of which sustainability of the third turnaround is to be examined. The case explores the sustainability of organizational turnarounds from the perspective of the current Chairman and Managing Director (CMD), the case protagonist. Braithwaite underwent financial and operational distress in 1992, 2005 and 2015 and negotiated them under different leaders. These leaders from diverse backgrounds used distinct tactics and strategies to bring about organizational turnarounds. The case provides data and information to assess the sustainability of the third turnaround. Hence, it allows a class to explore the paradoxical observation that while “turnaround” inherently implies sustenance of good performance over time, turnaround sustainability is not spontaneous in the real world. The case deals with the performance issues of PSUs, which make significant contributions to the national economy in the case of emerging economies (for example, 5%–8% of the Indian National gross domestic product is contributed by PSUs; https://swarajyamag.com/ideas/psus-are-crucial-for-indias-growth-but-only-if-they-play-a-strategic-role). Under government ownership and management, the poor performance of PSUs is often attributed to bad decision-making by its top management. In contrast, Braithwaite’s top management’s sound contextual decision-making resulted in a jump in its performance during each turnaround phase, but unsound fundamentals resulted in the unsustainability of the turnarounds. Hence, the case enables an exploration of the unique challenges faced by PSU that emanate from legacy roles, monopolistic markets and dual purpose – the concurrent pursuit of profits and social welfare. Consequently, the case allows an examination of the reasons for the distress of PSUs and the viability of turnaround strategies in the context of the broader Business–Government–Society landscape in emerging economies.

The case is written for use in the MBA elective course covering “Strategic Revival and Turnaround Strategies.” It can be used at the beginning of the course to identify reasons for organizational failure/distress or in the later part of the course to discuss the implementation of operational and strategic turnaround strategies.

Teaching notes are available for educators only.

CSS 10: Public Sector Management.

The purpose of this study is to provide a comprehensive understanding regarding corporate turnaround. An integrated discussion regarding different corporate failure factors, conditions, symptoms followed by turnaround strategies and its results have been provided.

Authors have done a comprehensive systematic and integrated literature review study of research articles on corporate turnaround. The paper reviewed discussed different dimensions of turnaround management. The authors applied thematic reductionist categorisation with logical arguments to develop an integrated turnaround canvas (ICT).

An ICT has been developed. ICT is a holistic framework to comprehend turnaround strategy. Impact of precondition and turnaround levers on cash flow dynamics and the operational and strategic levers for successful turnaround performance of the firm has also been presented. Authors have also tabulated the entire spectrum of corporate turnaround.

This conceptual work would help researchers interested in turnaround research to anchor their study at different points in ICT canvas. This could be at the decline precondition stage, corporate failure state, turnaround levers (strategic and operational) application phase and in terms of turnaround performance.

The ICT canvas would help managers to identify the set of corporate failure preconditions which might lead their firm to decline phase. The ICT canvas would also help managers based upon the identification of decline preconditions to select an appropriate turnaround interventions required to arrest the corporate failure. Finally, the ICT canvas would help in identifying the operational and strategic levers for successful turnaround implementation and thus achieving the desired corporate performance.

This is one of the first studies to provide an integrated perspective on corporate turnaround as the developed ICT canvas consisted of identification of decline preconditions, corporate failure, turnaround levers (strategic and operational ) and turnaround performance.