What Do Managers Change When Performance Falls Below Aspirations?

Abstract

The theory of problemistic search has established that poor organizational performance can trigger organizational changes. However, the menu of possible changes is large. Prior theory provides limited guidance on how managers choose what to change when performance is unsatisfactory. We expand problemistic search theory by analyzing how managers generate causal interpretations of past events that attribute blame for poor performance amongst the organization’s key inputs. We describe two heuristics—a recency heuristic and a contrast heuristic—that guide managers’ causal interpretations. In an empirical study of Formula One motor racing, we find managers appear to attribute blame to input factors that they changed recently, especially when uncertainty over input quality is high. We also find that contrasting performance between two drivers helps guide managers’ causal interpretations. Our research moves forward several key debates over the process and consequences of problemistic search.