Beyond the metaphor: The morphology of organizational decline and turnaround

Abstract

This study is based on the thesis that Vladimir Propp's (1928/2001) theory of folktale structure functions not only as a morphology of folktales, but also as a structural, deep-level model of any process that includes crisis and recovery. We essentially suggest that corporate decline and turnaround processes can be emplotted into a folktale-like structure that supports Propp's theory and thereby helps uncover deep-level mechanisms governing the process. The developed model describes seven mechanisms that drive the organization from initial strategic harmony to disharmony, and furthermore to the construction of a new strategic harmony, thus creating a perspective for the interpretation of long-term organizational decline and turnaround processes. Theoretical and practical implications are offered.

Power in Management and Organization Science

“…For example, access to crucial power bestowing resources can help organizations survive during periods of crisis (Lamburg and Pajunen, 2005). Finally, a study of human service organizations in the US found that firms with many linkages with the environment were able to control the coercive power wielded by larger organizations they depend upon for resources (Provan et al, 1980).…”

“…Formal Authority (Weber, 1947) Bases of power (French and Raven, 1959) Control of sources of uncertainty (Crozier, 1964) Control over valuable resources (Pfeffer and Salanick, 1974) CEO control over scarce resources (Hambrick, 1981) Control over resources need by stakeholders (Elg and Johansson, 1997) Organization use of resources to fend off unwanted environmental pressure (Lamburg & Pajunen, 2005) Social movements mobilize valuable resources to pressure change in firms (McCarthy & Zald, 1997) Undermining existing resource flows (Hiatt et al, 2009) …”

Corporate Turnarounds: The Duality of Retrenchment and Recovery

“…Formalization is not only associated with exploitation (March, 1991), but is also conducive to exploration (Farjoun, 2010) because it stimulates knowledge sharing (Baum and Wally, 2003) and provides guidance for non-routine activities (Dougherty, 2006). In a turnaround context, formalization fosters retrenchment by ensuring tighter resource control (Hoffman, 1989), but it can also help define expectations and ensure organizational commitment to recovery objectives (Lamberg and Pajunen, 2005;Simons, 1994). Conversely, participative settings not only enable exploration (Kang and Snell, 2009), but ensure employees' cooperation and mutual trust in exploitation activities (Adler et al, 2009).…”

“…Scholars explore two essential categories of turnaround activities: retrenchment and recovery (Robbins and Pearce, 1992;Sudarsanam and Lai, 2001). While retrenchment focuses on increasing efficiency through cost and asset reductions, recovery concentrates on improving a firm's market position through strategic change (Lamberg and Pajunen, 2005). Since prior research describes retrenchment and recovery as contradictory forces (Pearce and Robbins, 2008), scholars generally advise turnaround firms to opt for one or the other (e.g.…”

An Empirical Study of Corporate Turnaround Determinants on Chinese Small Companies

“…One approach to the study of turnaround identifies the actions taken by managers of turnaround businesses which reverse firm-threatening performance declines [1,2,3]. Another group of studies examines organizational responsiveness to change including crisis and decline [4,5,6]. The third group of studying corporate turnaround has involved identifying the changes in corporate financial characteristics and /or environmental contexts that associated with turnaround [7,8,9].…”