Article

Changing tires on a moving car: the role of timing in hospitality and service turnaround processes

Authors:
To read the full-text of this research, you can request a copy directly from the authors.

Abstract

Corporate turnaround processes consist of two main strategies: retrenchment and recovery. Whereas retrenchment focuses on efficiency and cost reduction, recovery entails strategic repositioning for long-term growth. Prior research has emphasized the timing of turnaround strategies as critical for the overall turnaround success and proposed a sequential or simultaneous timing of retrenchment and recovery. However, a sequential timing of turnaround strategies may have important disadvantages in the particular context of the service sector, given that it may quickly lead to staff demotivation, declining service quality and loss of customers. This research investigates the timing of retrenchment and recovery activities in service industry turnarounds with a multi-method approach. 35 service industry turnarounds in the German-speaking markets of Western Europe (Austria, Germany, and Switzerland) were analyzed. Based on the results of the first study, the research was complemented with a qualitative study of six turnaround cases in the Swiss hospitality industry. The converging evidence from both studies suggests that retrenchment and recovery activities interact in predicting the performance of service turnarounds. This suggests that a simultaneous turnaround process provides a more adequate timing for turnarounds in the specific service environment. The findings have important implications for turnaround theory and for managerial practice in service turnarounds.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the authors.

... O sector de actividade da organización é outra variable que parece ter influencia nos tempos das accións de retrenchment e de recuperación. A posta en marcha de forma secuencial destas accións pode ser especialmente problemática para as organizacións do sector servizos, dado que os recortes propios da etapa de retrenchment poderían derivar en desmotivación dos empregados e, por conseguinte, nunha menor calidade do servizo ofrecido (Schmitt, Raub, Schmid e Harrigan, 2019). As accións de retrenchment tampouco non ofrecen bos resultados para as organizacións de industrias en crecemento (Ndofor, Vanevenhoven e Barker, 2013). ...
Article
Este trabajo realiza una revisión de la investigación en el ámbito de la reflotación y del declive empresarial desde mediados de los años setenta del siglo pasado hasta la actualidad. Tomando como base los trabajos de Pearce y Robbins (1993) y de Trahms, Ndofor y Sirmon (2013), se presentan los principales hallazgos realizados por la investigación previa junto con las carencias fundamentales de este campo de investigación. Además, se muestran también los avances sucedidos con posterioridad a la revisión de Trahms et al. (2013), junto con la perspectiva futura de la investigación en el área.
Article
Full-text available
This article proposes that a failing organization goes through a sequence of four stages before finally landing in the morass of death. A four-stage model is proposed to describe this journey, which can lead to failure or to turnaround. By categorizing the elements of failure or turnaround, the model explains how the elements germane to each stage, when combined, facilitate the progression of an organization from crippling deterioration in performance to eventual death or to re-stabilizing survival. To support our contention, we focus on the Canadian retail industry, and specifically on the story of the once very successful but now extinct merchandising icon T. Eaton Co. Ltd., contrasting its fortunes with those of fellow Canadian retail survivors Hudson's Bay Company and Canadian Tire. (c) 2005 Elsevier Ltd. All rights reserved.
Book
Full-text available
Creating and marketing value in today’s increasingly service and knowledge-intensive economy requires an understanding of the powerful design and packaging of ‘intangible’ benefits and products, high-quality service operations and customer information management processes, motivated and competent front-line employees, a loyal and profitable customer base, and the development and implementation of a coherent service strategy to transform these assets into improved business performance.
Article
Full-text available
This paper addresses a major gap in reported research on open innovation (OI) literature: How do service firms adopt open innovation? This research focuses on data from eighteen service SMEs in Belgium from high-tech and knowledge-intensive service industries. Based on analysis, we find new insights regarding open innovation practices (i.e., inbound and outbound) and sub-practices (i.e., acquiring, sourcing, selling and revealing) for service firms. More specifically, the study showed that service SMEs are more inclined to use inbound practices due to reasons associated with firm size, industry, and knowledge intensity in the market, whereas the decision about which sub-practice to adopt seems to be strongly influenced by the type of actor, the firm’s vulnerability and internal managerial skills, and the existence of complementarities. Thus, we contribute to OI literature as well as capability literature through providing initial insights regarding the adoption of OI by service firms.
Article
Full-text available
I propose four ideal types of planned change processes, each with distinct temporal and nontemporal assumptions, and each associated with altering a distinct organizational element. These types are commanding, engineering, teaching, and socializing. I then argue that large-scale change involves an alteration of multiple organizational elements, thus requiring enactment of multiple intervention ideal types. This requires change agents to display temporal capability skills to effectively sequence, time, pace and combine various interventions.
Article
Full-text available
This paper posits that the efficacy of different retrenchment strategies depends upon the firm's core rent creation mechanism. We focus on two distinct mechanisms of rent creation: Ricardian rent creation based on the exploitation of resources and Schumpeterian rent creation based on explorative capabilities. We argue that cost retrenchment may have detrimental effects on firms with a relatively high Schumpeterian rent focus. On the other hand, asset retrenchment may erode the basis for future rent creation for firms with a higher Ricardian rent focus. Our findings based on a sample of large nondiversified Japanese firms highlight the differing degrees of fragility and recoverability of the two rent creation mechanisms in the context of different retrenchment strategies. Copyright © 2012 John Wiley & Sons, Ltd.
Article
Full-text available
Research suggests that unit-level ambidexterity positively impacts subsequent unit performance but theory and testing on this impact remain impoverished. We develop a cross-level model suggesting that structural and resource attributes of the organizational context significantly shape the relationship between unit ambidexterity and performance. Using multisource and lagged data from 285 organizational units located within 88 autonomous branches, results from hierarchical linear modeling show that this relationship is boosted when the organization is decentralized, more resource munificent, or less resource interdependent. We also find that structural differentiation of the organization does not condition the unit ambidexterity-performance relationship. Through this cross-level theory and testing, we develop a richer explanation of the effectiveness of ambidextrous units operating in multiunit contexts.
Article
Full-text available
Corporations often find themselves in a situation where performance declines occur. This study reviews the research on corprate turnaround strategies. Based on these studies, the corporate turnaround cycle and its major causes are indentified. Five generic strategies that are used by firms in turnaround situations are also identified and described. Implications for future research and practice are discussed.
Article
Full-text available
In today’s business environment, employee downsizing is a widespread strategy aimed at improving firm performance and competitiveness. The literature, however, highlights unequivocal findings that many downsizing initiatives fail to retain critical skills, capabilities, experience and knowledge. Employee downsizing may therefore lead to deteriorating quality, productivity and effectiveness. This article builds on this dilemma and develops a comprehensive framework to explore the relationships between employee downsizing and knowledge retention. By holding specific organizational levels responsible for knowledge retention, we derive propositions that contribute to a better understanding of how firms can retain and avoid critical knowledge losses during employee downsizing.
Article
Full-text available
Executive Overview This paper examines the concept of acquisition performance, proposing a model linking task-, transaction-, and firm-level constructs under different time horizons and testing it with a unique dataset created by surveying partners and directors of a major consulting firm advising on the postacquisition integration process of 146 acquisitions across industries and geographies. Results of factor and structural equations analysis reveal that (a) M&A performance is a multifaceted construct; there is no one overarching factor capturing all the different ways used to proxy it, (b) there is a path linking integration process performance to long-term firm performance (both accounting and financial returns) via customer retention and overall synergy realization, and (c) short-term window event studies are not linked to any of the other performance metrics. Implications are drawn and recommendations made for theory development, research design, and data analysis in future studies of acquisition performance, as well as for practicing managers.
Article
Full-text available
Although research has made progress in building our understanding of effective turnaround strategies, significant gaps remain in our knowledge about the strategic processes managers can employ to formulate and implement these strategies. Using a historical case of organizational turnaround employed by the U.S. government during the U.S. Civil War, the authors generate new insights into the turnaround process while confirming some previous findings. Through the turnaround actions of President Lincoln and his administration, the U.S. (Union) forces surmounted threats to the country’s survival, turned around the war effort, and ultimately reunited the country while ending the institution of chattel slavery in the United States. The authors’ review of extant turnaround research in tandem with results from this rich case history provides the basis for reexamining existing models of the turnaround process as well as developing propositions to guide future turnaround research, particularly in the areas of crisis reaction, organizational learning, and transformational leadership.
Article
Full-text available
The concept of customer centricity and its benefits have been discussed for more than 50 years. Despite this fact, many firms are still struggling to fully align themselves to the customer-centric paradigm. This article identifies fundamental issues and challenges that typically deter a firm from becoming customer-centric. These are mainly related to the organizational culture, structure, processes, and financial metrics of the firm. To overcome these barriers, the article suggests a path to customer centricity that is driven by a strong leadership commitment, organizational realignment, systems and process support, and revised financial metrics. The article concludes with directions for further research.
Article
Full-text available
Statistics on business failure rates corroborate the conclusion that neither academics nor practitioners have succeeded in designing a model to guide strategic management action during periods of financial decline. Therefore, a comprehensive review was conducted on the turnaround literature from multiple disciplines and related research streams. The product of this work is an empirically-driven conceptual model of business level turnaround. Building on data-supported hypotheses from prior research and confirmatory anecdotal evidence from practitioner literature, the model is intended to help focus future theory testing efforts and to accelerate the advancement of strategic management practice.
Article
Full-text available
Past research on restaurant failures has focused mostly on quantitative factors and bankruptcy rates. This study explored restaurant ownership turnover rates using qualitative data, longitudinal data (1996-1999), and data from Dun and Bradstreet reports. In contrast to frequently repeated statistics, a relatively modest 26.16 percent of independent restaurants failed during the first year of operation. Results from this study indicated marginal differences in restaurant failures between franchise chains (57.2 percent) and independent operators (61.4 percent). Restaurant density and ownership turnover were strongly correlated (.9919). A qualitative analysis indicated that effective management of family life cycle and quality-of-life issues is more important than previously believed in the growth and development of a restaurant.
Article
Full-text available
This article proposes that a failing organization goes through a sequence of four stages before finally landing in the morass of death. A four-stage model is proposed to describe this journey, which can lead to failure or to turnaround. By categorizing the elements of failure or turnaround, the model explains how the elements germane to each stage, when combined, facilitate the progression of an organization from crippling deterioration in performance to eventual death or to re-stabilizing survival. To support our contention, we focus on the Canadian retail industry, and specifically on the story of the once very successful but now extinct merchandising icon T. Eaton Co. Ltd., contrasting its fortunes with those of fellow Canadian retail survivors Hudson's Bay Company and Canadian Tire.
Article
Full-text available
In strategic management, an impressive body of literature on turnaround has accumulated over the last three decades; however, the topic remains largely idiosyncratic and open-ended. Based mainly on the tenets of the life-cycle family of process theory, this paper presents a composite four-stage model that unfolds the dynamics of turnaround and provides a basis for the development of a theory on which to draw further. By categorizing the elements of turnaround as three critical requirements - incidents, events, and concepts - the model explains how the elements germane to each stage, when combined, facilitate the progression from a crippling deterioration in performance to an enduring success or to an eventual death. An analysis of the turnaround of Chrysler Corporation provides preliminary support for the model. The model's implications for theory, research, and practice are also given.
Article
Full-text available
Research done primarily in the United States has shown that firms in decline enjoy better odds of returning to health when strong measures are taken. The culture of the Overseas Chinese of East Asia has helped to shape the region's prior commercial success but it also impacts responses to firm decline and turnaround. This research provides the first empirical investigation of the turnaround strategies of Overseas Chinese firms in East Asia. The evidence gathered shows that the utility of the predominantly U.S. model of firm turnaround has limits in East Asia. In particular, the role of strong owner-managers and the importance of relationships among business people constrain the applicability of prior U.S. research to East Asia. Copyright © 2003 John Wiley & Sons, Ltd.
Article
This research explores the relationship between multinationality and firm performance (M-P) in the context of micro-multinational enterprises (mMNEs) within the service sector. We examine the moderating effects of industry characteristics using a data set of 1082 Spanish service mMNEs over an eight-year period. The empirical results provide statistical evidence that knowledge-intensive service mMNEs exhibit an inverted U-shaped M-P relationship, while capital-intensive service mMNEs present a U-shaped relationship. Our findings demonstrate that knowledge-intensive service mMNEs increase their performance in the initial stage of multinationality, encounter a threshold of internationalization at relatively low levels of multinationality and have a propensity to over-internationalize. By comparison, capital-intensive service mMNEs experience negative performance effects at low levels of multinationality and positive ones as they further internationalize. Given that their operations are scale-sensitive, they tend to expand internationally by concentrating their operations in few foreign markets as a means to overcome the liabilities of internationalization and smallness. We contribute to the literatures on multinationality research in the service sector and on SME internationalization by showing that the effects of multinationality on the performance of mMNEs depend on industry characteristics and that such contextual factors provide a better understanding of the M-P relationship.
Article
In this work we test the general assumption in the turnaround literature that time is critical for firm survival, especially during the retrenchment stage. We study three time dimensions of change at this stage: timing, speed and rhythm. Drawing on the downward spiral and threat-rigidity perspectives, we posit that the positive impact these time dimensions have on turnaround performance is highly contingent on two types of environment. Our findings, based on a sample of 263 declining US firms over a 26-year period (1983–2009), demonstrate that an early timing of retrenchment has a positive impact on performance when the environment is munificent. On the contrary, an early timing has a negative impact when the environment is dynamic. We also note that a fast pace of retrenchment positively impacts firm performance in dynamic environments. Finally, we find that declining firms display better performances when following an irregular rhythm of retrenchment, both in highly munificent and highly dynamic environments. Our results indicate that, in general, declining firm performance improves with time-aggressive retrenchment actions in both types of environment. We discuss the contribution of our research to the turnaround literature, and the downward spiral and threat-rigidity perspectives.
Article
Empirical evidence suggests that retrenchment enhances a firm's recovery from declining performance. Identifying exactly when and how to retrench is the next step in applying retrenchment research to managerial practice. Our research reports in-depth analysis of retrenchment during the past recession and offers guidance to small firms facing the next recession. First, retrenchment is identified as a common but not universal response to recession for small firms: over two-thirds of the firms sampled retrenched during the 1990-1991 recession. Second, a theoretical explanation of the priorities placed on the retrenchment of certain factors of production is advanced. Retrenchment is best undertaken on factors that are easily traded on markets and that lack "asset specificity" as transaction-cost scholars have defined the term. Empirical findings based upon a survey of U.S. small manufacturing businesses support the theoretical hypotheses.
Article
We consider four scenarios that can unfold when organizations either innovate or respond rigidly to organizational decline. Two of the scenarios are downward spirals that threaten an organization with possible death, and two of the scenarios are turnarounds. These scenarios are important because they can determine the fate of an organization-survival or death. We explore the conditions under which each of these scenarios is likely to emerge, developing original theory and specifying propositions about those conditions. In developing this theoretical framework, we distinguish between flexible and inflexible innovations as factors in turnaround success or failure. Our model extends current theory on organizational decline to highlight the feedback effects of the consequences of decline and to explain the circumstances in which particular feedback effects are likely to occur.
Article
This study extends current understanding of the retrenchment-turnaround relationship in declining firms by introducing a temporal approach and arguing that the effectiveness of retrenchment as a strategy is contingent on its adoption early in turnaround attempts. Drawing from the two-stage turnaround model and insights from the literature on downward spirals in organizations, we develop and test a theoretical model that explains how temporal considerations in retrenchment influence the likelihood of successful turnaround. Using a matched pair sample of 96 U.S. firms, we find that declining firms that implement retrenchment actions early have a higher likelihood of successful turnaround. The findings also indicate that while two specific retrenchment actions, early divestments and early geographic market exits, significantly contribute to the likelihood of successful turnaround, early layoffs do not. Overall, the findings shed some light on the importance of timing strategic actions in organizational turnarounds. Implications for research and practice are discussed. This article is protected by copyright. All rights reserved.
Article
Corporate turnaround research has described retrenchment and recovery as contradictory forces that should be addressed separately. While a few scholars have argued that retrenchment and recovery are interrelated and may have to be integrated, others have contended that such arguments are flawed since they downplay the contradictions between the two activities. In this paper, we clarify the nature of the retrenchment–recovery interrelations, as well as their importance for turnaround performance. Drawing on the paradox literature, we argue that retrenchment and recovery form a duality: they are both contradictory and complementary. Integrating the two activities allows turnaround firms to create benefits that exceed the costs of their integration, which affects turnaround performance positively. We test our arguments through an empirical study of 107 Central European turnaround initiatives and find evidence for the assumed duality between retrenchment and recovery. Our main contribution is integrating the hitherto disparate theory perspectives of corporate turnaround into an overarching framework.
Article
Researchers have argued that top management team changes are an important force spurring change at declining firms. Yet, studies find that top executives at some firms are able to avoid being replaced even though their firms perform poorly. Also, despite support from numerous case analyses, there is little systematic evidence that replacing top managers leads to substantial organizational change at declining firms. In this study, we examine these issues by looking at levels of top management team replacement at a sample of declining firms attempting turnarounds. We find that top management team replacement levels vary with the presence of inertial or change-creating forces within firms. In particular, reduced levels of top management team replacement occur during turnaround attempts at large firms and those that have followed the same strategic orientation for a long period of time. Meanwhile, increases in outsider control of the board are associated with increased levels of replacement. We further find that higher levels of top management team replacement are associated with greater changes in firm competitive strategy and firm structure and controls during turnaround attempts. Overall, our findings show that organizational-level forces play an important role in top management and strategic change processes at declining firms.
Article
Rather than searching for a universal optimal level of multinationality for all firms, we argue that firm-specific attributes should result in firm-specific optimal levels of multinationality. Specifically, we draw upon transaction cost and internalization theory to argue that there will be different optimal levels of multinationality for individual firms, and if firms internalize foreign operations to an extent less than or greater than their individual optimal levels, transaction costs will increase and performance will decrease. To test this idea, we use transaction cost models in the context of large US law firms during the time period from 1986 through 2008 to estimate firm-specific optimal multinationality. Next, we test relationships between alignment with, or deviations from, firm-specific optimal levels of multinationality and performance (MA–P). Consistent with the MA–P hypothesis, insufficient and excessive levels of multinationality are both negatively related to financial performance. In addition, excessive multinationality is positively associated with downside performance risk. One key implication is that an MA–P approach may offer greater theoretical validity and clarity than traditional multinationality and performance (M–P) approaches.
Article
Investigations into management actions that reverse organizational decline have produced inconsistent findings. Prior studies have focused on the value of retrenchment actions versus strategic actions to engineer a performance turnaround. These studies, however, have generally not controlled for the cause of firm decline, overlooking a major theoretical contingency. Examining prepackaged software firms in the 1990s, we test the association of strategic and retrenchment actions in facilitating turnarounds in a munificent industry. The results show that measures of strategic actions—new product introductions, strategic alliances, and acquisitions—were positively associated with turnarounds. Conversely, measures of retrenchment actions—layoffs, asset reductions, and product withdrawals—were negatively associated with performance recovery. Our results suggest declining firms in munificent industries cannot retrench their way back to prosperity. Copyright © 2013 John Wiley & Sons, Ltd.
Article
Purpose – In this paper, the authors aim to build a prescriptive framework to help managers in turning around their ailing organizations. Their framework focuses on the extent of contractionary and expansionary initiatives needed to rebuild long‐term competitive advantage. They make the case that managers engaging in a pro‐active and balanced approach to scaling down and growing their organizations can boost the success of their recovery efforts. Design/methodology/approach – The authors build their framework based on academic research on corporate turnarounds, their scholarly work on corporate restructuring, and their combined experiences and observations in industry. Their framework proposes four possible outcomes of the turnaround process: comeback, adrift, running‐on‐empty, and collapse. They provide examples to describe each outcome. Findings – The authors' framework suggests that the interaction between two restructuring actions – retrenchment and repositioning ‐ determines the outcome of corporate turnarounds. By overemphasizing downsizing, managers fail to jumpstart entrepreneurial growth that can propel the firm towards long‐term competitive advantage. Similarly, stresses arising from excessive growth programs can quickly drain firm resources. As such, all managers need to assess the alignment between downsizing efforts and growth‐oriented initiatives. By bringing awareness to the interdependency between retrenchment and repositioning, the authors' framework can guide managers in making necessary adjustments on the way to fixing their organization. Originality/value – Retrenchment and repositioning represent the means available to managers attempting corporate turnaround. However, corporate turnarounds often fail due to an overemphasis on one phase of the restructuring process, at the expense of the other. This framework points to the delicate retrenchment‐repositioning required to achieve successful turnaround.
Article
Countering the widely held view that chief executive officer (CEO) succession is generally beneficial in turnaround situations, we adopt an executive fit/refit logic, proposing that the implications of CEO replacement depend integrally on the incumbent's degree of misfit and the successor's degree of fit to the contextual conditions at hand. Drawing from prior turnaround research, we identify several prominent forms of CEO fit/misfit that are especially germane to troubled firms. In testing our hypotheses, we find substantial support for the fit/refit theory: troubled companies have substantially better performance to the extent that they replace incumbents who are poorly suited to the conditions at hand and when they appoint new CEOs who are well matched to those conditions. Further reaffirming the fit/refit model, we find that CEO replacement per se has no general effect on the improvement of troubled firms.
Article
In the 20 years since the last review on organizational decline and turnaround, the scope of turnaround research has expanded dramatically; however, research on this phenomenon remains empirically and theoretically fragmented. Recent research has incorporated managerial cognition, strategic leadership, and stakeholder management and has identified simultaneous and complex resource-based actions beyond the two-stage model developed in the last review by Pearce and Robbins two decades ago. Thus, herein we build from Pearce and Robbins’ review by cataloguing the past 20 years of empirical evidence related to turnaround, developing a descriptive model of organizational decline and turnaround, and concluding with a theory-based research agenda for organizational decline and turnaround. In doing so, this article summarizes what we know about organizational decline and turnaround, and proposes what we need to study, while providing a theoretical road map to guide this future research.
Article
The U.S. hospitality industry has recently experienced the highest rate of business failures since the ‘Great Depression’. Hundreds of businesses have declared bank-ruptcy. Even more have gotten into financial distress such as earnings slumps, cash flow deficiencies and mismanagement of resources that could lead to bankruptcy. These problems will not go away. They must be managed away.This article examines the major contributing factors to the declining performance of lodging firms in the recent past, explores the current economic environment in the industry and addresses the challenges that it will most likely continue to face in the future. The focus of the article will be on the importance of operational analysis as a management tool to identify problem areas that need corrective action thereby leading to a business turnaround. Using a case study of two hotels in financial distress, the authors demonstrate the use of operational analysis.
Article
Drawing on the strategic leadership and leadership cognition literature, we develop a theoretical framework linking personal characteristics of strategic leaders with their perceptions of organizational decline and retrenchment activities. Our hypotheses are tested using a sample of 110 experienced MBA students in a scenario-based study. The findings of this exploratory study suggest that strategic leaders' perceptions of the severity of a firm's decline play an important role in the recommendation of extensive retrenchment activities in response to decline. However, perceptions of the severity of decline vary substantially across decision makers and are influenced by an individual's locus of strategic control, functional background and maturity. The study's findings that perceptions of decline and planned responses to decline vary substantially and predictably across individuals are discussed in light of existing theory and practice.
Article
An exploratory study conducted among 595 U.S. quick service restaurant hourly employees and managers for the purpose of measuring their level of work alienation finds that a significant proportion of the respondents expressed feelings of work alienation. The feelings seemed to be more prevalent among hourly employees, males, those younger, those more educated, and African Americans. But most important, the study indicates that employees' alienation was unequally distributed among the restaurants within the sample, therefore possibly suggesting that work alienation is not necessarily caused by the technology employed and/or the nature of the jobs but rather by the managerial styles and practices in each restaurant.
Article
A limited number of studies have identified multilevel determinants of chief executive officer (CEO) commitment to the status quo (CSQ). Using an unintrusive measure of CEO CSQ developed through computer-aided content analyses of CEO letters to shareholders, this study confirmed that determinants of CEO CSQ are multilevel, including factors at the individual (CEO age and tenure), organizational (size and financial slack), and industry (extent of industry discretion) levels of analysis. In addition, as an important extension to prior research, the authors find that CEO CSQ is associated with future performance changes depending on a firm’s industry environment. They find that in high-discretion industries, firms whose CEOs are committed to the status quo suffer future financial and market performance declines as compared with their competitors, whereas such performance deterioration does not occur in low-discretion environments. Indeed, when future performance is market based and measured as Tobin’s Q, the authors find that compared with competitors, a firm’s performance actually improves in low-discretion industries if its CEO is committed to the status quo.
Article
In 1994 a wealthy investor purchased controlling interest in Fairmont Hotels, but in 1991 there was no guarantee the five-property chain would even be in operation by 1994. The year 1991 began Fairmont's turnaround when the owners, the Swig family, hired Robert Small, most recently of Walt Disney World hotels, to run the company. Small focused on a top-line strategy of boosting occupancy and market share at the expense of average rate. He wooed travel-industry suppliers by promising performance to keep clients happy. Since corporate customers were also feeling the effects of recession, Small set rates and policies to meet their needs. To fill empty rooms in slow times he implemented price promotions for leisure travelers. To ensure that the company delivered on its promises, Small and his team restructured marketing and human-resources departments. Overhead was cut by trimming accounting and other back-office functions. The result was a steady increase in occupancy with no substantial loss in revenue per available room. Subsequent economic recovery allowed Fairmont to increase rates until it attracted the buyer's attention.
Article
After a $50-million refurbishment, the Biltmore's owners rightly expected a successful hotel operation. When the numbers went sour, it was time for stern management action—on both the top line and the bottom line
Article
Past researchers have observed that declining organizations often experience mechanistic structural changes that centralize authority, increase reliance on formalized procedures, and reduce the amount of information flowing to top managers. Many have proposed that this "mechanistic shift" in declining organizations reduces their adaptive capability by making innovative organizational change in response to decline less likely. However, despite much research on declining firms and their turnaround attempts, many questions about mechanistic shifts remain, such as: (1) To what extent do declining firms become systematically mechanistic when trying to recover from decline? (2) What aspects of declining firms' situations make mechanistic shifts more likely? (3) Do mechanistic shifts reduce the likelihood of large-scale strategic reorientation as declining firms attempt to recover? We sought answers to these questions through an analysis of data from in-depth interviews with top managers (mostly CEOs) at 29 U.S. firms attempting turnarounds from decline. Our primary finding was that mechanistic structure shifts did restrict firms' abilities to change their strategic orientations in response to decline. Highlighting the important role of the context of turnaround attempts, we further found the average declining firm attempting a turnaround did not become more mechanistic, but that turnaround attempts launched from financial crises were significantly more likely to lead to mechanistic shifts. Also, we found that the common practice of replacing the firm's CEO during turnaround attempts had conflicting and paradoxical effects on firms' abilities to enact strategic reorientations.
Article
The cure for this poorly run hotel was to switch managers, preserve the franchise affiliation, cut extraordinary expenses, and expand marketing efforts
Article
Early corporate turnaround theorists argued that strategic reorientations are central to the recovery process at many declining firms. However, subsequent large-sample empirical studies have reported that performance turnarounds for declining firms are primarily associated with cutback actions that increase efficiency, thus creating a gap between theory and empirical findings. We close this gap by presenting and empirically supporting a model proposing that the extent of strategic change initiated in a successful turnaround varies systematically with a declining firm’s need and capacity to reorient its strategy. Based on our model, we offer explanations for why past large-sample researchers were not able to verify the role of strategic change in the turnaround process and we reassert the adaptive role that strategic reorientations have in the turnaround attempts of declining firms with weak strategic positions. © 1997 by John Wiley & Sons, Ltd.
Article
Extant research on corporate turnaround from financial distress has prescribed a range of strategies to effect corporate recovery. However, no large sample study has examined the general applicability and effectiveness of these strategies. We set out to test the effectiveness of strategies and identify the underlying factors of effectiveness – the impact of timing, intensity and implementation of strategies on corporate recovery. We examine a sample of 166 potentially bankrupt UK firms drawn from 1985 to 1993 and track their turnaround strategies for a period of three years from distress. These strategies include operational, asset, managerial and financial restructuring. Our results show recovery and non-recovery firms adopt very similar sets of strategies, and managers of non-recovery firms restructure more intensively than recovery firms Nevertheless, non-recovery firms seem far less effective in strategy implementation than their recovery counterparts. Whereas recovery firms adopt growth-oriented and external-market focused strategies, non-recovery firms engage in fire-fighting strategies.
Article
This study uses a sample of 2,903 small to medium-sized firms to examine the manner in which HR problems vary over the organizational life cycle. We found that a four-stage model was appropriate. Interestingly, firm age did not emerge as a significant indicator of stage—the firms' HR problems varied across stages defined by growth. Training problems were highest in high-growth firms and lowest in low-growth firms; compensation problems were highest in moderate-growth firms and lowest in high-growth firms; and recruiting problems were highest in no-growth firms and lowest in low-growth firms. © 2004 Wiley Periodicals, Inc.
Article
This article uses the structure/conduct/performance framework as an underpinning to investigate the attributes of turnaround firms. Turnaround is defined as a substantial improvement of the firms's return on assets relative to the average return of its industry. Industry and firm structural characteristics including concentration, industry growth, R&D, advertising, market share, size, diversification, capital intensity and margins are identified. The results of a series of univariate and multivariate tests run on a sample of turnaround and non-turnaround firms indicate that size, R&D, and an interaction between operating margin and advertising can be helpful in explaining some turnaround situations.
Article
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.