Content provided in partnership with

Business Services Industry

Toward improved theory and research on business turnaround

Journal of Management, Fall, 1993 by John A. Pearce, II, Keith Robbins

<< Page 1 Continued from page 13. Previous | Next

Research Methodology

Most Popular Articles in Business: Research and Markets : Tesco Plc - SWOT Framework Analysis; Do Us a Flavor - Ben & Jerry's Issues a Call for Euphoric New Flavors; eBay made easy: ready to start an eBay business? These 5 simple steps will ...; Katrina's lawsuit surge: a legal battle to force insurers to pay for flood ...; Wal-Mart's newest distribution center opened last month near the southwest ...; More »

Precise operational definitions of turnaround situations and turnaround strategies are needed to advance systematic theory-building research, as are the use of industry-anchored performance measures to facilitate multiple industry studies of turnaround. The ability to study multiple industries is an important pursuit since few industries contain sufficient numbers of turnaround firms to allow for generalizable findings. A major limitation of published turnaround research is the lack of large numbers of participants to represent the interrelationships among cause, situation severity, retrenchment, recovery response, and performance. Extending the research into multiple industries will afford researchers the sample size needed to systematically assess the generalizability of turnaround models against the effects of organizational factors such as size, structure, technology (including service versus manufacturing) and diversity. With sufficient numbers of firms, each with varying turnaround situations, it will be possible to observe concentrations of firms representing the entire continuum on each of these dimensions. It will be possible to compare the responses and successes of high external causality firms against those of high internal causality firms. It will be possible to compare the responses and successes of the high situation severity (virtually insolvent) firms against those of the low situation severity firms.

Conclusion

The attributes of successful turnaround strategies are often inferred from the actions taken in high profile successes: quick and forceful decision making, deep cost cutting, divestitures and an emphasis on quality. While interesting, such perceptions are neither universally accurate nor consistently beneficial. Furthermore, they do not provide substantiated prescriptions for managers of firms facing declining financial or competitive performance. The need is for systematic theory building based on carefully designed and skillfully executed empirical research on turnaround situations and responses. Hopefully, the model developed in this article from prior empirical contributions will provide new momentum for advancing productive research on business unit turnaround.

Appendix

Glossary of Terms

Degree of retrenchment. The relative net reductions in costs and assets achieved by the troubled firm in preparation for its recovery efforts.

Duration. The longevity of the retrenchment process; the period of time over which the firm persists with cost and asset reductions.

Focus of retrenchment. The target areas of retrenchment. Focus options are seen in terms of reductions of costs (advertising, R&D, direct labor, and materials) and assets (receivables, cash, plant and equipment).

Operating turnaround. Efforts of a financially troubled firm to pursue its current strategy more efficiently-therefore, it is also known as an efficiency turnaround. It typically consists of efforts to control costs, more efficiently utilize assets, and improve production processes and their associated managerial and structural changes.

Business Services Industry

Toward improved theory and research on business turnaround

Journal of Management, Fall, 1993 by John A. Pearce, II, Keith Robbins

Find Research Guides for:

Find Featured Titles for: Reference

Most Popular Articles in Business

Most Popular Publications in Business