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Book part
Publication date: 21 July 2016

Ramkrishnan (Ram) V. Tenkasi and Yehia Kamel

A neglected area of research in ODC is the turnaround of poorly performing firms such as those under bankruptcy protection. We researched 142 companies that attempted…

Abstract

A neglected area of research in ODC is the turnaround of poorly performing firms such as those under bankruptcy protection. We researched 142 companies that attempted reorganization under bankruptcy protection between 1983 and 2003. Firms deployed one or more of four distinct strategies to turnaround: rationalizing existing resources, developing existing resources, generating new resources, and investing in future resources. Firms that generated new resources, and developed and rationalized existing resources, had the highest probability of emergence. Interestingly firms that sustained their turnaround post-emergence invested in future resources in addition to generating, developing, and rationalizing resources. Implications for ODC are discussed.

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Research in Organizational Change and Development
Type: Book
ISBN: 978-1-78635-360-3

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Article
Publication date: 27 August 2019

Sharon Gotteiner, Marta Mas-Machuca and Frederic Marimon

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Research limitations/implications

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

Practical implications

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.

Originality/value

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.

Details

Management Research Review, vol. 42 no. 11
Type: Research Article
ISSN: 2040-8269

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Article
Publication date: 16 February 2015

Sunitha Panicker and Mathew J. Manimala

The purpose of this paper is to report on a research study aimed at comparing the causes of organisational decline and turnaround strategies involved in cases of…

Abstract

Purpose

The purpose of this paper is to report on a research study aimed at comparing the causes of organisational decline and turnaround strategies involved in cases of successful and unsuccessful turnarounds, with a view to identifying the differences, if any, between the two groups, which in turn is expected to provide useful information to academics, practitioners and policy makers.

Design/methodology/approach

Since turnaround is a business phenomenon of general interest, their stories are often published in business periodicals, which are a rich source of data on them. In order to tap this data source, the present paper employed a method of content analysis for the proposed investigation on the cause of organisational decline and turnaround strategies used. In order to quantify the data, a three-point scale was developed, where the presence of a cause/strategy is rated as “3”, its ambivalence as “2” and its absence as “1”, whose validity was assessed through the inter-rater agreement indices. The data thus generated are amenable to statistical analyses, using which the more commonly prevalent causes of organisational decline and the strategies commonly employed for turnaround by the successful and unsuccessful companies are identified.

Findings

The findings of the present study have generated a few useful insights. First, the primary causes for organisational decline are the internal weaknesses of the organisation; in fact the external changes can adversely affect the organisation only if it is internally weak. Second, organisational decline caused by multiple factors (which is usually the case) can be managed effectively by adopting a variety of strategies; hence a single-pronged strategy is often found to be ineffective. Third, the more successful turnarounds had a diverse portfolio of strategies including those of institution-building, often employed in a phased manner, consistent with the stage theories of turnaround.

Research limitations/implications

The limitations of this research arise mainly from the generation of data from published sources and the consequent biases, which can be managed, to a large extent, by using multiple sources for the same case for reducing the publishers’ biases as well as by having multiple raters for identifying the researcher’s biases, if any.

Originality/value

The study has highlighted the need for addressing the internal causes of organisational decline on a priority-basis rather than blaming the external factors, besides pointing to the need for adopting a variety of strategies for dealing with the diversity of causes affecting the organisation’s health, particularly the need for institutionalising the changes. These findings can be of help especially to turnaround managers and policy-makers in dealing with organisational decline and thus contribute to the creation and enhancement of economic value.

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Journal of Strategy and Management, vol. 8 no. 1
Type: Research Article
ISSN: 1755-425X

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Article
Publication date: 31 October 2008

Marius Pretorius

PurposePorter's generic strategy matrix often proves inadequate for use by distressed firms, because it assumes that ventures operate “normally” in competitive

Abstract

PurposePorter's generic strategy matrix often proves inadequate for use by distressed firms, because it assumes that ventures operate “normally” in competitive environments. Leaders of troubled ventures facing turnaround situations need to interpret the complex factors involved, as generic strategies alone prove insufficient. Researchers have not yet come up with a model for selecting strategies in turnaround situations to match Porter's model for generic competition. This paper fills this specific void. Design/methodology/approachA model for strategies which could be applied in the turnaround situation was proposed, based on grounded research methodology. This model was then evaluated by a focus group of expert credit risk managers with turnaround experience. The research answers three questions: What are the key determinants of a turnaround situation? What complementary strategy will result in a turnaround of each situation? What strategic practices support the different complementary strategies? FindingsResource munificence and causality (origin of distress) are the key determinants in the model, which posits four types of turnaround situation: performing well; underperformance; distress; and crisis. For each associated strategic practices are recommended. Application to the case example of Starbucks illustrates its value. Practical implicationsThe proposed model was well accepted by the expert panel, in some cases immediately applied. Participants expanded the practices recommended for each strategy. Originality/valueThe study breaks new ground in this field and challenges other researchers to dispute the model's assumptions. The model's straightforward application assists turnaround managers to clarify complex situations.

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Journal of Business Strategy, vol. 29 no. 6
Type: Research Article
ISSN: 0275-6668

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Article
Publication date: 26 April 2013

Richard Schoenberg, Nardine Collier and Cliff Bowman

Against a backdrop of continued weak economic conditions and with many firms experiencing declining financial performance, this paper presents a synthesis of the business…

Abstract

Purpose

Against a backdrop of continued weak economic conditions and with many firms experiencing declining financial performance, this paper presents a synthesis of the business turnaround literature. It aims to identify which turnaround and recovery strategies have been effective historically, based on the evidence provided by previous empirical research.

Design/methodology/approach

The authors review literature that includes 22 empirical studies, which investigated business turnarounds in previous recessionary environments. This literature was reviewed in its entirety, rather than as individual contributions, to synthesise the lessons available for businesses operating in today's challenging economic environment.

Findings

The literature review revealed convergence in the findings of the prior studies. In total, six effective turnaround strategies were consistently identified and four of these relate to the content of the turnaround, namely: cost efficiencies, asset retrenchment, a focus on the firm's core activities and building for the future and two relate to accompanying change processes required for implementation: reinvigoration of firm leadership and culture change.

Research limitations/implications

The authors highlight areas where knowledge on business turnarounds remains limited and suggest potentially fruitful directions for future research.

Practical implications

The authors discuss the elements involved in each of the six effective turnaround strategies identified. The authors also provide a contemporary example to illustrate the application of these strategies in the current economic environment.

Originality/value

The paper offers practitioners an evidence‐based view on effective business turnaround and recovery strategies, in addition to providing researchers with an accessible review of the existing literature.

Details

European Business Review, vol. 25 no. 3
Type: Research Article
ISSN: 0955-534X

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Article
Publication date: 1 January 1980

Charles W. Hofer

No matter what the state of the economy, no company is immune from internal hard times—stagnation or declining performance. How can management pinpoint the right turnaround

Abstract

No matter what the state of the economy, no company is immune from internal hard times—stagnation or declining performance. How can management pinpoint the right turnaround strategy when it is needed—and make it work?

Details

Journal of Business Strategy, vol. 1 no. 1
Type: Research Article
ISSN: 0275-6668

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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: 10 April 2007

Olivier Furrer, J. Rajendran Pandian and Howard Thomas

The paper aims to assess the impact of corporate strategy on shareholder value in decline and turnaround situations.

Abstract

Purpose

The paper aims to assess the impact of corporate strategy on shareholder value in decline and turnaround situations.

Design/methodology/approach

A sample of 45 turnaround firms was selected and matched against a control sample which did not face continuous decline over the time period studied. The impact of corporate strategy on shareholder value was tested using cumulative beta excess return measures to capture the long‐term basis of corporate strategy.

Findings

The paper finds that the beta excess return measures captured the hypothesized relationships between strategy and shareholder value for the sample firms studied.

Practical implications

Beta excess return measures are superior to case studies or event studies for identifying the long‐term effects of corporate strategy.

Originality/value

Relatively few studies have compared the strategies of turnaround firms with a matched sample of non‐declining firms. The use of cumulative beta excess returns to assess long‐term valuation of corporate strategy is original.

Details

Management Decision, vol. 45 no. 3
Type: Research Article
ISSN: 0025-1747

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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: 18 November 2019

Som Sekhar Bhattacharyya and Aakash Malik

The purpose of this study is to provide a comprehensive understanding regarding corporate turnaround. An integrated discussion regarding different corporate failure…

Abstract

Purpose

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.

Design/methodology/approach

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).

Findings

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.

Research limitations/implications

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.

Practical implications

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.

Originality/value

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.

Details

International Journal of Organizational Analysis, vol. 28 no. 2
Type: Research Article
ISSN: 1934-8835

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1 – 10 of over 4000