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Article
Publication date: 13 August 2020

Rayenda Khresna Brahmana, Hui Wei You and Maria Kontesa

This research aims to examine the moderating role of CEO power on the relationship between retrenchment strategy and firm performance by framing the relationship under an…

Abstract

Purpose

This research aims to examine the moderating role of CEO power on the relationship between retrenchment strategy and firm performance by framing the relationship under an agency theory, and power circulation theory.

Design/methodology/approach

This study focuses on a sample of 319 non-financial public listed companies in Malaysia from the year 2011–2016 and estimates the model under two-step GMM panel regression to eliminate the endogeneity issue.

Findings

The results show that the retrenchment strategy increased firm performance. Meanwhile, greater CEO power changes that retrenchment effect into increased performance. This study also indicates the CEO power strengthens the relationship between firm performance and retrenchment. However, CEO power does not have any effect on the performance of low retrenchment, and the performance of big firm size.

Research limitations/implications

The findings show that the higher CEO power cause higher firm performance and higher retrenchment. This research suggests that CEO power can make retrenchment strategy works and the decision made can affect the firm performance significantly.

Originality/value

This study examines the effect of CEO power on the performance of retrenchment strategy implementation by contesting agency theory, power circulation theory, and resource-based view theory within the emerging country context.

Details

Journal of Strategy and Management, vol. 14 no. 1
Type: Research Article
ISSN: 1755-425X

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Article
Publication date: 29 June 2020

Yan Tao, Gaoyan Xu and Hong Liu

This paper extends the current understanding of the retrenchment-–turnaround relationship in declined companies by introducing a compensation gap view. It argues that the…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Research limitations/implications

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.”

Practical implications

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.

Originality/value

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.

Details

Journal of Organizational Change Management, vol. 33 no. 5
Type: Research Article
ISSN: 0953-4814

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Article
Publication date: 11 May 2012

Michael Braun and Scott Latham

In this paper, the authors aim to build a prescriptive framework to help managers in turning around their ailing organizations. Their framework focuses on the extent of

Abstract

Purpose

In this paper, the authors aim to build a prescriptive framework to help managers in turning around their ailing organizations. Their framework focuses on the extent of contractionary and expansionary initiatives needed to rebuild long‐term competitive advantage. They make the case that managers engaging in a pro‐active and balanced approach to scaling down and growing their organizations can boost the success of their recovery efforts.

Design/methodology/approach

The authors build their framework based on academic research on corporate turnarounds, their scholarly work on corporate restructuring, and their combined experiences and observations in industry. Their framework proposes four possible outcomes of the turnaround process: comeback, adrift, running‐on‐empty, and collapse. They provide examples to describe each outcome.

Findings

The authors' framework suggests that the interaction between two restructuring actions – retrenchment and repositioning ‐ determines the outcome of corporate turnarounds. By overemphasizing downsizing, managers fail to jumpstart entrepreneurial growth that can propel the firm towards long‐term competitive advantage. Similarly, stresses arising from excessive growth programs can quickly drain firm resources. As such, all managers need to assess the alignment between downsizing efforts and growth‐oriented initiatives. By bringing awareness to the interdependency between retrenchment and repositioning, the authors' framework can guide managers in making necessary adjustments on the way to fixing their organization.

Originality/value

Retrenchment and repositioning represent the means available to managers attempting corporate turnaround. However, corporate turnarounds often fail due to an overemphasis on one phase of the restructuring process, at the expense of the other. This framework points to the delicate retrenchment‐repositioning required to achieve successful turnaround.

Details

Journal of Business Strategy, vol. 33 no. 3
Type: Research Article
ISSN: 0275-6668

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Article
Publication date: 1 August 2003

Sugumar Mariappanadar

Sustainable human resource (HR) strategies could help companies manage their human resources HRs to achieve “net optimality” of companies' objectives as well as a stable…

Abstract

Sustainable human resource (HR) strategies could help companies manage their human resources HRs to achieve “net optimality” of companies' objectives as well as a stable community. Using a theoretical model, an attempt is made to explain the “externality” of retrenchment and highlight the need for sustainable HR strategies to achieve the “unitary economics” of human life. Further, the sustainable benefit of HR conservation and HR recuperation in understanding the HR asset, and how this can be used in reducing the externality effect of retrenchment and downsizing strategies on the social and emotional web of the community is discussed.

Details

International Journal of Social Economics, vol. 30 no. 8
Type: Research Article
ISSN: 0306-8293

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Book part
Publication date: 23 December 2005

Kalle Pajunen

The lack of systematic methods for reducing the complex reality has hampered many of the contributions that processual research might have produced. This paper presents a…

Abstract

The lack of systematic methods for reducing the complex reality has hampered many of the contributions that processual research might have produced. This paper presents a methodology for processual strategy research that offers a systematic approach for causal explanation across complex sequences of events and enables theorization about underlying causal mechanisms driving the processes. In addition, a comparative analysis of two organizational decline and turnaround processes is presented in order to illuminate how the methodology is able to generate a substantial advancement in knowledge by indicating the causal mechanisms underlying the decline and turnaround processes. The findings show that the turnaround is produced by four causal mechanisms that cumulatively and interdependently work against the mechanism of decline.

Details

Strategy Process
Type: Book
ISBN: 978-1-84950-340-2

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Article
Publication date: 1 March 1991

Malcolm Getz

From time to time library budgets do not grow at a rate sufficient to sustain current library operations. In such circumstances, library managers must retrench. Although…

Abstract

From time to time library budgets do not grow at a rate sufficient to sustain current library operations. In such circumstances, library managers must retrench. Although strategic planning is often associated with new resources, it may be equally important for successful retrenchment. When is retrenchment likely to be necessary in academic libraries? How might management approach retrenchment?

Details

The Bottom Line, vol. 4 no. 3
Type: Research Article
ISSN: 0888-045X

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Article
Publication date: 1 October 2005

John D. Francis and Ashay B. Desai

To test the ability of situational variables, manageable pre‐decline resources, and specific firm responses to decline to classify performance outcomes (turnaround vs…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Research limitations/implications

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

Originality/value

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.

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Article
Publication date: 23 February 2021

Derek R Slagle, J.J. McIntyre, April Chatham-Carpenter and Heather Ann Reed

The purpose of this study is to examine the types of information that were shared by the institution, and faculty/staff responses to the information shared, with the goal…

Abstract

Purpose

The purpose of this study is to examine the types of information that were shared by the institution, and faculty/staff responses to the information shared, with the goal of providing recommendations for other institutions facing concurrent crises.

Design/methodology/approach

This mixed-methods case study examines a public university's experiences managing the Covid-19 pandemic crisis while simultaneously navigating financial challenges that had been building over time. Using data from university-wide mediated communications and a survey of on-campus stakeholders during the Covid-19 pandemic and university retrenchment process, this paper explores institutional communication, stakeholder response to organizational communication and faculty/staff reactions to information in the midst of concurrent crises.

Findings

The study found that the university used instructing and advising information within its messages from its top administrator but fell short of incorporating empathy for its stakeholders in its initial responses.

Research limitations/implications

Using the situational crisis communication theory (Coombs, 2019), which recommends the use of an ethical base response to crises, implications are provided for other organizations facing concurrent crises during the Covid-19 pandemic, to also incorporate empathy in their messages to stakeholders whose livelihoods are being affected, across multiple platforms.

Originality/value

Weathering the Covid-19 pandemic and long-term financial pitfalls have proven to be a disruptive phenomenon for higher education institutions. This research expands understanding of institutional communication and stakeholder reactions in a higher education institution facing both the Covid-19 crisis and a retrenchment.

Peer review

The peer-review history for this article is available at: https://publons.com/publon/10.1108/OIR-09-2020-0415.

Details

Online Information Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1468-4527

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Article
Publication date: 1 March 2014

Benedict S. Jimenez

Periods of fiscal decline present an opportunity for city officials to transform their local government into a leaner and more effective organization by targeting cuts to…

Abstract

Periods of fiscal decline present an opportunity for city officials to transform their local government into a leaner and more effective organization by targeting cuts to non-essential programs and services. However, the political nature of the fiscal retrenchment process means that such opportunity is often squandered. Could the application of strategic planning and performance management in cutback management lead to a more focused and targeted budget cutting? Advocates of rational management believe that information gathering, analysis and use in decision-making can help local governments adapt to a fiscal crisis by facilitating targeted cuts in expenditures that preserve administrative capacity, and avoiding across-the-board cuts that trim both the organization's muscle and fat. The results of this research show that rational analytic techniques do matter in budget cutting.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 26 no. 3
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 1 April 1994

Andrés E. Marinakis

The debate on the public sector has been central in structuraladjustment programmes applied in developing countries during recentyears. The common grounds of the…

Abstract

The debate on the public sector has been central in structural adjustment programmes applied in developing countries during recent years. The common grounds of the discussion have been the size of the public sector, its role and its efficiency in delivering services. The common criticisms of the 1980s are that the public sector is too big, overstaffed and inefficient. Examines these issues under a long‐term perspective. Finds that at the aggregated level there is no clear‐cut evidence to support those criticisms of the size of the public sector in developing countries. Compared with industrialized countries, there is no particular evidence of the public sector being too big in the developing world. However, it appears that the sequence of the adjustment process has negatively affected the performance of important parts of the public sector by distorting the proportion of wage and non‐wage expenditures, disregarding their complementarity. The consequent imbalance between inputs and employment has resulted in practical overstaffing.

Details

International Journal of Public Sector Management, vol. 7 no. 2
Type: Research Article
ISSN: 0951-3558

Keywords

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