Organizational Decline Research Articles

The Effect of Accounting and Performance Indicators on Public Accountants' Perceptions of Organizational Decline

AbstractThis study explores the reliance public accountants place on information about an organization's financial indicators, fiscal control system, technology, and human resources when making assessments about organizational decline. Case scenarios, which systemically varied the presence/absence of a fixed set of decline determinants, were given to 44 partners and managers from 12 different accounting offices. The accountants were asked to provide their assessment of each case organization's likelihood of declining. Consistent with the study's basic research assumption, information about an organization's financial indicators, human resources, technology, and fiscal control system helped to explain public accountants' perceptions of organizational decline. Furthermore, support was found for the study's primary research proposition that public accountants' assessments of organizational decline are principally determined by the quality of the organization's financial indicators (e.g., return on assets, liquidity, etc.). This behaviour, however, may result in the provision of incorrect information to the investment community. Financial indicators are best viewed as either warning signals of further organizational decline (for organizations which are still infected with such seeds of decline as poor fiscal control systems, technology, and/ or human resources) or historical reminders of the organization's past decline (for organizations which have only recently exorcised the seeds of decline from their system). Public accountants appear to misunderstand this causal sequence.RésuméCette étude porte sur la confiance que les experts‐comptables accordent aux indicateurs financiers, aux systèmes de contrôle financier, à la technologie et aux ressources humaines d'une organisation lorsqu'ils jugent qu'elle est sur son déclin. Des cos types, variant systématiquement la présencé/l'absence d'indicateurs de déclin, ont été donnés à 44 partenaires et gestionnaires de 12 bureaux comptables différents. Les comptables devaient donner leur appréciation du déclin éventuel de chacune des organisations. En accord avec l'hypothèse à la base de cette recherche, les renseignements concernant les indicateurs financiers, les ressources humaines, la technologie et les systèmes de contrôle financier ont contributé à expliquer la perception qu'ont les experts‐comptables du déclin d'une organisation. De plus, nos recherches ont révélé que, selon les experts‐comptables, le facteur déterminant dans l'évaluation du déclin d'une organisation est la qualité des indicateurs financiers (ex. rendement de l'actif, liquidités, etc). Toutefois, ce comportement peut entraîner la diffusion d'informations erronées aux investisseurs. Il est préférable de percevoir les indicateurs financiers soit comme des signes de déclin organisationnel (pour des organisations qui sont encore aux prises avec des systèmes de contrôle financier, une technologie ou des ressources humaines inadéquats) ou comme un rappel d'un déclin antérieur (pour les organisations qui viennent tout juste d'éliminer de leur système les causes du déclin). Les experts‐comptables ne semblent pas comprendre ce lien de causalité.

Top Management Team Tenure and Top Manager Causal Attributions at Declining Firms Attempting Turnarounds

Do members of long-tenured top management teams perceive organizational problems differently than members of shorter-tenured teams? We examined this question using the reasons that chief executive officers and other top managers at firms attempting turnarounds offered for their firms' performance declines. Drawing insights from social psychology and the literature on organizational decline and turnaround, we predicted that top managers who were members of management teams where many top executives had been replaced would be more likely to attribute performance problems to causes that were internal to the firm, stable, and controllable than top managers from longer-tenured teams. The results confirmed our predictions and suggest that the composition of the top management team, which can be altered through the replacement of executives, is strongly associated with the perception of problems at firms attempting to recover from firm-threatening performance declines.

Managing the company turnaround process: A case study of the Australian heavy engineering industry

Abstract The purpose of this paper is to improve understanding of the company turnaround process. Three Australian firms engaged in the heavy engineering industry undergoing the transition from organisational decline to recovery were studied in depth in a period of significant change for the industry. The turnaround performance of these firms was compared with that of a less successful rival. Effective turnaround management involved making a series of holistic changes to strategies, structures and practices throughout the organisations. The concept of the “self-calibrating” organisation is developed which provides new insights into the turnaround process and which challenges conventional prescriptions for company revival in a mature industry.

The Myth of the M-Form? Governance, Consent, and Organizational Change

Efficiency accounts of the firm arghe that the multidivisional governance structure (M-form) arose and succeeded because it reduced costs by creating a clear distinction between strategic and tactical planning. Examining new evidence in the paradigmatic case of General Motors (GM), this article shows that such approaches are poorly equipped to explain changes in the M-form. For most of its history, GM intentionally violated the axioms of efficient organization to create managerial consent. The GM case suggests that the textbook M-form may actually undermine order within the firm, thus leading to organizational decline.

Exploring the Seeds of Organisational Decline

This study develops a composite model and a two‐dimensional classification illustrating the seeds of organisational decline. In the first dimension, the origins of decline are shown as being internal or external to the organisation. The second dimension links the nature of the decline problem to people, technology, or fiscal policy factors. A Delphi study lent preliminary support to the conceptual model and suggested certain amendments. The revised model was then tested using a sample of 44 public accountants. The results suggest that accountants use information about an organisation's people, technology, and fiscal policies when assessing its likelihood of declining, and that human resources is the most powerful of the three factors.

Corporate Downsizing and Profitability in Canada

AbstractThree competing models of downsizing—the “rational,” asymmetrical/hysteretic, and institutional approaches—were tested, using data from large Canadian companies. Although none of the approaches was fully supported, it was noted that there was no consistent relationship between past profit and propensity to downsize, nor was there any consistent relationship between extent of downsizing and future profit.Résumél'auteur examine trois modèles différents duphénomène de la réduction des effectifs des enterprises, soit les modèles “rationnel,” asymétrique‐hystérésique et institutional, à l'aide de données sur diverses grandes sociétés canadiennes. Aucune des trois approches n'est complètement validée par les données étudiées. l'analyse révèle aussi qu'il n'y a pas de relation systématique entre la rentabilité antérieure et la tendance d'une entreprise à réduire ses effectifs, d'une part, ou d'autre part, entre l'ampleur des réductions de personnel et les bénéfices futurs.

Organon of business failure: phase model of organizational decline

This study defines and measures a multi-phase model of organization failure in medium to large size publicly held firms older than five years in a nationwide sample of manu facturing, communications, transportation, finance, insur ance, real estate and services industries. The utility of the progressive phases is demonstrated by their capability for discriminating with 23 variables (adapted from Miller's Failure Syndromes) the propensity toward business decline and to distinguish regular variation on a continuum of 16 measures widely used to evaluate the quality of financial performance and cause of failure. The analysis supports Miller's earlier notion of a stepwise movement in clustering of syndromes from impulsiveness to stagnation to leader lessness in heightening the likelihood of bankruptcy and demonstrates concurrent validity of progressive phases associated with perceived deterioration in the quality of business organization.

Mental imagery

The role of managerial cognitive processes has so far been largely neglected within strategy research which examines organizational decline and recovery. Proposes that heuristics used by managers such as: availability, representativeness, adjustment and anchoring may contribute to the declining performance of the organization. Suggests that mental imagery could be used to adjust these heuristics and change the cognitive processes of the existing managers instead of replacing the top management team in declining organizations. This change in cognitive processes could help increase the ability of a declining firm to improve its performance.

Auditors' perceptions of client firms: The stigma of decline and the stigma of growth

This paper examines the relationship between auditors' perceptions of client organizations' growth/ decline status and the auditors' assessments of client managers' competence and integrity. It is hypothesized that perceived growth/decline status will have an inverted-U relationship with perceived management competence and integrity. If client organizations are perceived by auditors as rapidly declining or rapidly growing, the auditors' evaluations of their managers' competence and integrity will be lower than if the organizations are perceived as stable. Results from a study of auditors' perceptions of 123 actual client organizations are partially supportive of the hypotheses. We conclude that rapid organizational decline may be stigmatizing in the eyes of auditors because it raises questions about management competence. Rapid organizational growth also may be stigmatizing, but for a different reason: it creates auditor doubts about management integrity. The results of the study are discussed from the perspectives organization studies and auditing research after which suggestions for future investigation are made.

Procedural fairness and organizational commitment under conditions of growth and decline

We surveyed employees from seven relocating firms undergoing either an expansion or decline. Employees' judgments of procedural fairnes regarding the decision procedures used to implement the change showed a stronger effect on normative commitment for sites undergoing decline than for those undergoing growth. Procedural fairness concerns therefore seem to be more important to employees experiencing organizational decline. The finding has implications for research and for the management of organizational decline.

Women in the Vanishing Cloister: Organizational Decline in Catholic Religious Orders in the United States

Women in the Vanishing Cloister: Organizational Decline in Catholic Religious Orders in the United States

The Effects of Hospital Characteristics and Radical Organizational Change on the Relative Standing of Health Care Professions

This paper examines the effects of hospital characteristics and radical organizational change on the relative representation of health care professions in hospitals over the period of the 1980s. Health care organizations, and hospitals in particular, represent organizations where multiple professional groups make competing claims of expertise that often conflict. The question our research seeks to answer is whether different constellations of organizational characteristics and organizational changes affect the outcome of these professional conflicts. Using the annual census of hospitals compiled by the American Hospital Association, we examine the effects of several characteristics of community hospitals on the relative representation of specific professional groups. We find that hospital mergers favor physicians at the expense of administrators, and multihospital system affiliation favors technical core occupations at the expense of administrators. Measures of organizational growth and decline increase the relative representation of physicians and administrators compared to nurses, and increase the probability that hospitals will employ physicians' assistants and nurse practitioners. Our results are evaluated in light of recent developments in the sociology of medicine and research on the relative standing of occupations in other industries.

Feminist attitudes in times of depoliticization of women's issues

Abstract. Based on data from Denmark from the end of the 1970s and 1980s the paper analyzes the development of feminist attitudes during a period characterized, on the one hand, by a high, and still growing, integration of women into the labour market and political life, and on the other, by an organizational decline of the women's movement and a decline in the politicization of women's issues. At the end of the 1970s, feminist attitudes, especially among women, were unidimensionally structured and closely related to other political factors. The most feminist were the young, the well‐educated, the politically interested, and left‐wing women. At the end of the 1980s, feminist attitudes were at the same level as ten years before, but different dimensions had emerged, a social and political dispersion of feminist attitudes had taken place, and feminism no longer influenced political behaviour. In many respects, the experience of the United States in the 1970s was reversed in Denmark in the 1980s.

Outside Director Responses to Organizational Decline: Exit, Voice, Loyalty, and Neglect

Using previous theory and research on responses to organisational decline, this paper extends the literature into the boardroom to predict outside director behaviour. In so doing, this paper refocuses the corporate governance research towards individual outside directors as opposed to the traditional focus on the overall board. We argue that this contextual and individualistic focus on outside directors’ behaviour may yield some new and useful insights into the corporate governance literature as well as refine and extend Hirshman's theory of responses to organisational decline.

Meeting the change challenge: managing growth in the nonprofit and public human services sectors.

The current economic climate has been particularly hard on non-profit and public human services organizations, frequently resulting in managing organizational decline. The authors believe that the dominant concern should be with fostering organizational growth. To this end, they suggest that nonprofit board members and executives, as well as public sector leaders, need to concern themselves with the concurrent management of two agendas: Running the Shop and Meeting the Change Challenge. This can be done effectively through the use of strategic issue management, which is a set of techniques that represents a blend of traditional strategic management and change management approaches.

Management Strategy, the CEO′s Cognitive Style and Organizational Growth/Decline

Develops a model which links organizational growth and decline to competitive strategy, the strategy‐making process and the personal characteristics of the chief executive officer. The model was empirically tested for private liberal art colleges where the size of the student enrolment is a dominant factor for the vitality of the institution. The major findings of the study are: enrolment growth is associated with focused strategy, the CEO innovative style, differentiation and assertive strategy‐making process; and the major discriminating factors between institutions experiencing enrolment growth and institutions experiencing enrolment decline are focused strategy and the CEO innovator cognitive style. Discusses and examines the policy implications of the study.

Explaining Russian military quiescence: The “paradox of disintegration” and the myth of a military coup

This paper seeks to explain the Russian military's unexpected quiescence—particularly the absence of a widely-predicted military coup—during the past several years of political and economic turbulence. It specifically asks why the military has not carried out a coup d'état even though it has had a powerful motive to do so; why, despite substantial social unrest and weak political and economic institutions—the casebook description of a “praetorian” society—has the military not acted against the government? Through the use of military survey data and Russian press reports, this paper argues that the military's quiescence is due not to lack of motive, but to Russian officers' weak assessment of their capabilities to carry out a coup. This assessment has resulted from the military's steady organizational decline and disintegration over the past several years. This disintegration has provided officers with a formidable motive to carry out a coup, while at the same time presenting substantial barriers to doing so—a phenomenon I have labeled the “paradox of disintegration.” While particular attention is paid to 1992 and 1993, the period of greatest unrest and potential intervention, the implications of this analysis are still relevant today. The danger of a military coup has been, and essentially remains, largely a myth, perpetuated by panicky publics and politicians, both Western and Russian alike.

Strategy and Bankruptcy: An Exploration in to Organizational Death

Because an organizations existence is a prerequisite for its accomplishments, one would expect that researchers would be intensely interested in those factors which could lessen the likelihood of organizational decline and failure. Yet, until recently little research appeared regarding this topic and very little of it focused on the effectiveness of strategy on the likelihood of corporate bankruptcy. This research will review some of the strategy variables and investigate avenues that are most likely to hold the greatest potential for altering a firm’s likelihood of failure. An exploratory model was developed to study the effects of corporate and business level strategies, as well as cooperative interorganizational and financial strategies. A consistent, significant positive relationship was discovered between survival and a firm’s number of interorganizational linkages in the form of director interlocks. A consistent, significant negative relationship was discovered between survival and a firm S financial leverage. It was also discovered that as failing firms move closer toward bankruptcy they exhibit a degree of isomorphism with their surviving counterparts regarding certain interorganizational arrangements. That such changes in the interorganizational arrangements of failing companies do little to help save them suggests that turnaround efforts must start early in a firm 2 decline of it is to overcome the substantial amount of organizational inertia present in the corporation.

Women in the Vanishing Cloister: Organizational Decline in Catholic Religious Orders in the United States.

Religious orders for women have existed for fifteen centuries, but their future in this century is bleak. In 1966, 180,000 women belonged to Catholic orders; by 1986 that number had decreased to 126,000. Helen Rose Ebaugh tells the story of the decline of these orders, set against the back drop of rapid social change and religious reform.To illustrate the problem, Ebaugh takes us into a declining order, here named the Sisters of Service. In 1990, only one candidate sought admission to the order, and the median age of members reached 70. While these demographic changes were occurring, the sisters adapted themselves to the reforms of Vatican II. The concept of a cloistered life faded. Nuns sought college degrees, gave up their habits, moved into apartments, and began to identify with the outside world. Vatican II further encouraged the nuns to democratize and decentralize. Many nuns accepted jobs that paid poorly but were consistent with their goal of social service. They identified with the feminist movement and in turn influenced it. Ebaugh shows how declining orders have not followed the sociological model of organizational decline, one typically marked by centralized authority, a fear of risk taking, lack of direction, internal conflicts over turf, and low morale. Rather, they have established democratic structures, reduced internal positions in favor of committing resources to empowering the poor, abandoned security in favor of diversity in jobs and missions, minimized conflicts over scarce resources, and exhibited a sense of freedom rather than poor morale. Although Ebaugh is convinced that Catholic orders in the U.S. will not continue for long, non-canonical communities of women and associate programs are growing. Dedicated women can perpetuate the mission and spirit of the order without becoming vowed members.

Women in the Vanishing Cloister: Organizational Decline in Catholic Religious Orders in the United States. By Helen Rose Fuchs Ebaugh. Rutgers University Press, 1993.200 pp. Cloth, $35.00; paper, $15.00

Women in the Vanishing Cloister: Organizational Decline in Catholic Religious Orders in the United States. By Helen Rose Fuchs Ebaugh. Rutgers University Press, 1993.200 pp. Cloth, $35.00; paper, $15.00