Retrenchment: Cause of turnaround or consequence of decline?

Abstract

In a recent investigation of the turnaround attempts of 32 U.S. textile firms, Robbins and Pearce (1992) concluded that retrenchment is an integral component of successful recovery from decline. In this note we critique, replicate and provide an alternative explanation for their findings using data from the same sample of firms attempting turnarounds. Based on our analyses, we find that little evidence exists to support the assertion that retrenchment is integral to turnaround. We conclude by offering several recommendations for turnaround researchers.

Organizational Decline Research Review: Challenges and Issues for a Future Research Agenda

“…Factor 1 Actions in decline and turnaround situations Barker and Mone (1994) We also conducted a factor analysis for partial periods (Table 3) in which we identified three factors for each period. The first period was for articles published before 1990.…”

“…For example, it is difficult to state the number of years that can be considered as decline. Authors tend to consider at least two years (Barker & Mone, 1994;Hambrick & Schecter, 1983;Robbins & Pearce, 1992) of negative financial performance indicators. The use of other measures and time lag also pose a challenge (Trahms et al, 2013).…”

Beyond the metaphor: The morphology of organizational decline and turnaround

“…Cameron et al, 1987;McKinley, 1993;Mentzer & Near, 1992;Whetten, 1980) and turnarounds (e.g. Barker & Duhaime, 1997;Barker & Mone, 1994;D'Aveni, 1989;D'Aveni & MacMillan, 1990;Grinyer & McKiernan, 1990;Hambrick & Schecter, 1983;Robbins & Pearce, 1992) have motivated an accumulating body of research in recent decades. The reason for the scholarly interest seems to be obvious, as organizational decline certainly is one of the most dramatic and stressing periods an organization may face.…”

Comparative Causal Analysis in Processual Strategy Research: A Study of Causal Mechanisms in Organizational Decline and Turnarounds

“…These notions help us to clear up, among other things, the confusion around the retrenchment and recovery strategies (see Barker & Mone, 1994;Pearce & Robbins, 1994). For example, in this study the activation of the causal mechanism that finally drove the organizations to explicit recovery required the same defining features that were needed in the activation of the mechanism generating retrenchment.…”

“…Research on turnaround strategies has been somewhat uneven and non-cumulative in nature (see Barker & Mone, 1994;Pearce & Robbins, 1994;Robbins & Pearce, 1992), although some attempts to converge divergent aspects have been presented (Arogyaswamy et al, 1995;Barker & Duhaime, 1997). Disagreement has mainly been due to the confused relationship between retrenchment and recovery strategies (Robbins & Pearce, 1992).…”