Advances in Applied Business Strategy, vol. 5: Turnaround Research: Past Accomplishments and Future Challenges. - Review - book review

Administrative Science Quarterly,  Sept, 2000  by Jane Banaszak-Holl

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Lawrence W. Foster, ed. Stamford, CT: JAI Press, 1998. 280 pp. $78.50.

The editor of this volume justifiably notes at the beginning that turnaround research has been neglected in the general strategy literature and that this volume reveals the extent and diversity of research in this area. This volume addresses some of the current problems in the turnaround literature that have made this literature inaccessible to those in general strategy. First, the authors work to differentiate the conditions under which turnarounds occur, which are often periods of decline and crisis in an organization, from the process by which managers attempt to turn around their organizations, which includes structural changes in the organization and/or market repositioning. In addition, the authors set out the wide variety of managerial responses used during periods of crises and decline that reflect more general processes, routines, and rituals of managerial decision making.

At the same time, the broader audience may continue to confuse the closely linked yet distinct events and issues that are common during periods of organizational turnaround. Lohrke and Bedeian's chapter reviews the empirical research on organizational turnaround and, in doing so, clarifies the language commonly used. Nonetheless, the chapters in this book, and the literature more generally, address not only organizational turnarounds but also organizational decline, crisis, retrenching, and downsizing. All of these concepts appear to overlap in their prevalence and effects in modern businesses. For example, Barker et al. find that downsizing occurs in a large number of firms that face decline, including those that turn around and those that do not.

One way in which the chapters in this book clarify which concepts are relevant and should be used is through the distinction between organizational processes and the context in which they occur. Retrenchment and downsizing are painful processes of organizational change because they follow periods of organizational decline. DeWitt et al. argue that turnarounds may occur too late in a downward spiral of organizational performance. Barker et al. recognize that the success of managerial attempts to turn around companies through downsizing may be dependent on market conditions. Bengtsson, in his case study of the world's oldest company, Stora, notes that the company's success has largely been dependent on political and economic change in Sweden that has been beyond the company's control. The authors in this volume also recognize that very often the inertia of organizational structure makes turnaround changes difficult to achieve.

Turnarounds require transforming organizational meso-structures (Chesley and Huff) and formalized control structures (Shook) and restructuring lines of communication within firms (Armenakis and Fredenberger; Ashmos and Duchon; Henderson et al.; Shook), all of which can be difficult to implement.

Despite the relevance of the context in which turnarounds occur, most of the chapters in this review emphasize the greater importance of managerial control in these situations and consider a broad range of managerial prescriptives. The importance of some of the prescriptives from this volume, such as DeWitt et al.'s generalities of "seizing victory" and "clarifying future opportunities" or McDaniel and Walls' promotion of the use of complexity theory in professional organizations, may be difficult to test empirically. Other prescriptions may be so well grounded in a specific organizational context, such as Henderson et al.'s description of the army's Center for Army Lessons Learned (CALL), that it would be hard to consider implementation in other settings. If anything, this volume lacks strong mid-level theory that discusses the operationalization and implementation of turnaround theory in future research.

The authors in the volume identify three substantial areas of managerial action that are key in turnaround situations: (1) decision-making processes, (2) lines of communication, and (3) market repositioning. This volume advances the theoretical basis for the importance of these actions in turnaround strategies. Earlier models of organizational decision making during periods of decline and turnaround focused on the retrenchment of managers during these periods and the prevalence of "threat-rigidity" in handling crisis situations. This volume elaborates the cognitive limitations of managers during crisis and turnaround beyond the most immediate threat response. Short et al. discuss the use of performance referents in evaluating an organization's relative decline or turnaround. McDaniel and Walls examine the importance of political dynamics and institutional norms for crisis response in professionally based organizations. Ashmos and Duchon evaluate the role of the individual in decision making using complexity t heory. Chesley and Huff examine the organizational meso-structures that constrain decision making. All of these chapters enrich our understanding of the larger organizational structures in which decision making is embedded.