Description
Description explain about building a case for inclusion of organizational identity in turnaround research.
IIMK/WPS/26/OB&HR/2007/14
BUILDING A CASE FOR INCLUSION OF
ORGANIZATIONAL IDENTITY
IN TURNAROUND RESEARCH
S. Jeyavelu
1
1
Assistant Professor, Indian Institute of Management Kozhikode, Kozhikode – 673 570
(email:[email protected])
2
BUILDING A CASE FOR INCLUSION OF ORGANIZATIONAL IDENTITY IN
TURNAROUND RESEARCH
The objective of this paper is to build a case for inclusion of organizational identity construct
in turnaround research. After a brief review of various perspectives in turnaround research,
the paper traces the major findings in turnaround actions and types. Based on the
exhaustive list of turnaround actions, seven turnaround action themes were identified - top
management change, asset reconfiguration, organizational restructuring, strategic change,
substantive changes in membership, transformational change, and functional/ efficiency
changes. These seven turnaround themes are mapped into the three organizational identity
conceptual criteria – ideational (collective answers to the question ‘who are we?’),
definitional (the conceptual domain of central, enduring and distinguishing characteristics of
an organization) and phenomenological (a context of profound organizational experience)
(Whetten 2006). To extend support four turnaround typologies are also mapped onto these
criteria. The analysis clearly indicates the pervasiveness of identity related dynamics in
turnaround. The plausible organizational identity dynamics in each of the themes and the
managerial implications are enumerated in detail. The paper concludes with suggestions for
further building the case for including organizational identity in turnaround research.
Keywords Organizational Identity, Decline, Turnaround
INTRODUCTOIN
Performance decline is an ever present danger and an integral part of organizational reality.
The Asian economic crisis in the 1990s is indicator of the stark reality of the impact of the
emerging context on firm performance (Ahlstrom and Bruton 2004; Mellahi and Wilkinson
2004). Research on organizational decline and turnaround has grown substantially from days
of Whetten’s (1980) call for increasing focus on decline as compared to best practices and
excellence. Still many questions remain unanswered on the nature, content, context and
process of decline and turnaround (Arogyaswamy, Barker and Yasai-Ardekani 1995;
Chowdhury 2002; Khandwalla 2001; Maheswari and Ahlstrom 2004). Turnarounds are
special situations that involve intense emotions due to changes in management cadre,
retrenchment and downsizing, and changes in the organizational structure, systems and
processes. It might include change in the nature of an organization itself due to drastic
changes in the internal organization and changes in asset-resource configurations.
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Organizational identity (OI) a construct considered critical under profound organizational
experiences has not been studied by organizational researchers in the context of decline and
turnaround.
OI is interlinked with decline and turnaround, and is relevant to both turnaround academicians
and practitioners because of the following reasons. First, turnaround context indicates a
deviation from achieving organizational objectives and hence a threat to the continued
existence. Such a context warrants self reflection and introspection, specifically in self
definitional domains. Managers when faced with reducing performance and likely extinction
raise questions like ‘why are we doing what we are doing?’, ‘what business are we in?’, and
‘what is the purpose of our existence?’ and so on. Such questions give raise to answers that
reflect the OI, i.e. the answers broadly indicate the themes of answers to the question ‘who are
we?’ even if that was not asked directly (Whetten and Godfrey 1998).
Second, turnaround constitutes changes in the organizational configuration – change in asset-
resource configuration, change in top management, change in organizational membership due
to retrenchment/downsizing, change in organizational strategy, structure, systems and
processes, and also change in organizational image & reputation (Albert and Whetten 1985;
Khandwalla, 2001; Whetten 2006; Whetten and MacKey 2002). Many of these changes are in
the domain of those characteristics that define an organization and hence turnaround is likely
to involve OI response except in cases where the turnaround changes organizational
characteristics that are not part the collective self definition.
Finally, most turnarounds involve a major over haul of the top management including the
CEO (Barker and Patterson 1996). The top management is the default spokesperson for the
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organization; they shape the OI over time by their decisions; and interpret OI for strategic
decisions on behalf of the organization. Any change in the top management under decline is
likely to change the dynamics between the OI, strategy and its interpretation, and top
management as the shaper and interpreter of OI (Hatch and Schultz 1997).
Turnaround management without OI will be complicated with managers addressing collective
identity level issues through dummy variables like organizational culture, brand, image and
reputation among stakeholders (Whetten and Mackey 2002). Turnaround managers might be
less effective without understanding the inter play between an organizational members’ “Who
are we?” and “How do we do things here?”; reciprocal linkages between identity, projected
image and reputation; and the impact of change implementation on collective self definitions
and members’ response to it. Researchers might be able to theorize better with OI as it is
deeper level construct then the current variables in turnaround research. Since, how
turnaround happens is not yet fully explained by the existing theories, OI might provide the
additional explanation to understand how a declining organization is turned around.
ORGANIZATIONAL IDENTITY
Organizational Identity (OI) is a self definitional concept extrapolated from self identity
literature and applied to organizations. It is the collective self definition of an organization by
its members, consisting of those attributes that define the organization, differentiates it from
comparable others and is stable over time (Albert and Whetten 1985; Whetten 2006). OI is
considered as the claims an organization’s members make about its defining characteristics
(Albert and Whetten 1985); or the shared beliefs or a mental model of what the organization
is (Fiol 1991 & 2001; Hatch and Schultz 1997). It is also construed from the self reflective
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narratives of the organizations and its members especially the elites (Brown and Humphreys
2006; Chreim 2005). Organizational identity is not only the most referred to attributes but also
the deep rooted values and beliefs in the collective psyche of the organization that the
members themselves may not be aware of (Brown and Starkey 2000). OI discourse is
observed under profound experiences and in the process of making long term high impact
decisions (Corley, Harquail, Pratt, Glynn, Fiol, and Hatch 2006; Whetten 2006).
Albert and Whetten’s (1985) seminal conceptualization describes organizational identity as
satisfying the three criteria – “claimed central character…claimed distinctiveness…claimed
temporal continuity” (p265). Whetten (2006) later defined OI as members’ claims of central,
enduring and distinguishing (CED) characteristics of an organization. Centrality in OI refers
to the core versus the peripheral characteristics, characteristics shared by all members,
essential characteristics or fundamental and deep rooted characteristics versus surface level
characteristics (Corley et. al. 2006). OI characteristics tend to remain stable over time which
is referred as the enduring nature. These attributes differentiate an organization from its
comparable others and also serve the function of distinguishing it as special in itself (Whetten
2006).
Elucidation of an organization’s identity is done by extracting the themes in the collective
answers to the question, ‘who are we?’. Organizational identity also involves intense
emotions. OI is referred to, experienced or triggered during profound organizational
experience. Reflecting on the evolution of the field of organizational identity, Whetten
clarifies that the original OI conceptualization was based on the three components - “…the
ideational component equated organizational identity with members’ shared beliefs regarding
the question “who are we as an organization?”; the definitional component proposed a
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specific conceptual domain for organizational identity, characterized as CED features of an
organization; and finally the phenomenological component posited that identity related
discourse was most likely to be observed in conjunction with profound organizational
experiences” (Whetten 2006: 220).
OI is referred to rarely and only under special conditions and not in every day living. A
manager would not refer to OI when deciding on the sales promotions but would refer to OI
when deciding between alternative marketing channels like direct selling and through
distributors. Organizational members refer to their collective self definitions only when they
are faced with long term high impact decisions, there is a threat to the existing identity, a key
person or founder who has been key OI defining factor leaves the organization, there is a
change in the classification of organization due to product-market changes, an organization is
merged with another, an organization is acquired, an unit of an organization is spun off, there
is substantial change in organizational membership due to retrenchment or voluntary attrition,
a major change in an organization’s asset/resource configuration, a major change in the
organizational processes and outcomes, when there is a difference or conflict between the
experienced identity and organizational actions leading to cognitive distress (or identity
dissonance), and when the organizational identity attributes become obscure and ambiguous
(Albert and Whetten 1985, Corley and Gioia 2004, Corley et. al. 2005, Dutton and Dukerich
1991, Elsbach and Kramer 1996, Gioia and Thomas 1996, Gioia, Schultz and Corley 2000,
Whetten and Godfrey 1998, Whetten 2006).
The fluidity and dynamism of the OI is heatedly debated with no emerging consensus. Some
argue that if it changes than it is not identity, whereas others attribute a dynamism to OI.
Gioia, Schultz and Corley (2000) differentiate organizational characteristics as enduring or
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continuing in nature. The central and distinctive characteristics of an organization may retain
the meanings associated with the labels over time leading to the enduring nature. It is also
possible that the labels may remain the same over time but the meanings might change
leading to a continuing characteristic. Researchers have pointed to the need for both
continuity and change in identity, arguing that stability in organizations can be achieved by
adopting intangible or abstract identity attributes that allow for a variety of applications as the
environment changes (Ashforth and Mael, 1996; Barney et al., 1998; Gustafson and Reger,
1995).
For an organization’s identity to change it goes through a process of de-identification, situated
re-identification and identification with core ideology (Fiol 2002). De-identification is the
process of breaking of the individuals’ identification with the organization. Alternative
attributes are provided which are then identified by individuals i.e re-identification takes
place. The sum total of the individual identifications emerge as the new identity.
When an organization’s identity is threatened then members respond in a way that is coherent
with the OI. Identity dissonance is experienced by organizational members when there is a
perceived threat to the OI. Threats to OI could be in terms of a. image that does not match
with the OI, b. the managerial decisions are seen as conflicting with OI, c. an ambiguity in the
OI is experienced due to lack of strong OI referents or absence of OI referents (Dutton and
Dukerich 1991).
Organizational members identify with their organization through a process of self selection
and socialization. It is also possible that members dis-identify with their organization. The
members’ experiences are made sense in the context of the organizational culture, the
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collective meaning making process results in the collective conceptualization of the
organization. Organizational culture is the symbolic context for the development and
maintenance of the identity. Top management is the default spokesperson of the organization,
interpreter of the organizational identity and promoter of identity change. The top
management’s vision and leadership shapes the collective experiences and meaning making
and hence the identity (Hatch and Schultz 1997). Reger and Gustafson (1994) argues that the
top management of an organization would be able to transform the organization only if they
are able to change the organizational identity. Organizational identity is expressed and
enacted by its strategy and is inferred, modified or affirmed from it (Ashforth and Mael 1996).
An organization’s communication to the external stakeholders the essence of its identity is
called as the projected identity, the image held by the organization as that of the external
stakholders’ image of the organization is the construed image and the feedback given to the
organization in terms of acceptance of premium for its products and services and availability
of resources (human, financial and so on) constitute the reputation of the organization
(Whetten and MacKey 2002).
TURNAROUND
Organizational turnaround is the purposeful managerial action to bring an organization out of
decline and become profitable. Turnaround research gained prominence in the 1980s after
Whetten (1980) called for a systematic study of organizational decline and turnaround going
beyond the study of best practices. Irrespective of research trends, turnaround practice is ever
contemporary as indicated by the Asian economic crisis (Ahlstrom and Bruton 2004).
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Turnaround research has focused on turnaround actions (Lee, Mathur and Gleason 1998;
Schendel, Patton and Riggs 1976; Slatter 1984), turnaround strategies (Hambrick and
Schecter 1983; Hoffman 1989), contingent models of turnaround (Hofer 1980; Maheswari
2000), stage models of turnaround (Arogyaswamy et.al. 1995), process models of turnaround
(Bibeault 1982; Manimala 1991), turnaround typologies (Hambrick and Schecter 1983;
Khandwalla 1991, 1992, 2001; Schendel, Patton and Riggs 1976), retrenchment as choice in
turnaround (Khandwalla 1991; Pearce and Robbins 1994), and effect of country context on
turnaround (Ahlstrom and Bruton 2004; Fisher, Lee and Johns 2004; Khandwalla 1992,
2001).
Organizational decline or the turnaround situation may be caused by internal or external
factors (Pearce and Robbins 1993). Internally decline may be due to erosion of efficiency,
past managerial mistakes, inertia leading to mal adaptation, erosion of competitiveness,
availability of resources and so on. External factors that induce decline are changing customer
preferences, changes in socio-economic-political environments, technological discontinuities,
industry life cycle, economic deregulation and globalization (Barker and Duhaime 1997;
Bibeault 1982; Maheswari and Ahlstrom 2004; Pearce and Robbins 1993). Hambrick and
Schecter (1983) among others found that the turnaround strategies are dependent on the cause
of decline. Organizational that are declining due to operational causes opt for operational
turnaround actions and strategic causes of decline for strategic turnaround actions and rarely
were operational decline addressed with strategic turnaround actions.
The decline can vary in its pace. Decline can be sudden, gradual or creeping and lingering
depending upon the speed with which decline sets in (D’Aveni 1989). The period of decline
can also vary. In some organizations turned around fast and in rare cases it can go on for
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decades. Extended period of decline creates problems of legitimacy and hostility from
stakeholders (Maheswari and Ahlstrom 2004). Decline can vary in terms of severity also.
Research has found that the choice of turnaround actions and strategies depend on the severity
of the decline (Arogyaswamy et.al. 1995; Hofer 1980). The pace, period and severity of
decline determine the consequences of turnaround, the timing of such consequences and
turnaround strategies.
Turnaround can take place in two or more stages. The retrenchment / decline stemming stage
is the first stage of the two stage model followed by recovery stage (Arogyaswamy et.al.
1995; Robbins and Pearce 1992). Bibeault (1982) identified five stages in turnaround change
at top, evaluation, emergency, stabilization and re-posturing. Manimala (1991) found three
turnaround stages arresting sickness, reorienting, and institutionalization & growth in addition
to those mentioned above. Chowdhury (2002) identified four stages in turnarounds decline,
response initiation, transition and outcome, where as Balgobin and Pandit (2001) identified
seven - decline and crisis, triggers for change, recovery strategy formulation, retrenchment
and stabilization, and return to growth.
Researchers have also been fascinated with turnaround strategies. A dual strategy model
depicts turnaround strategies as strategic and operational (Schendel, Patton and Riggs 1976;
Hofer 1980). Hambrick & Schecter (1983) identified revenue generating, product-market
refocusing, -asset reduction and cost cutting turnaround strategies among successful
turnaround firms.
One of the major turnaround research themes was the impact of change of top management on
turnaround and choice of internal versus external person (Barker and Patterson 1996; Barker,
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Patterson and Mueller 2001; Lohrke and Bedeian 2004). In the context of developing
countries substantial retrenchment has been a major focus (Khandwalla 1992 & 2001).
Turnarounds across national cultures have also been gaining critical recognition (Ahlstrom
and Bruton 2004; Bruton, Ahlstrom and Wan 2003; Fisher and Lee 2004; Khandwalla 2001).
Turnaround Actions and Organizational Identity
Turnaround researchers have identified a large number of turnaround actions (refer table 1).
These actions can be classified into tough and tender elements, and internal versus external
focused elements (Khandwalla 2000); strategic and operational actions (Schendel, Patton and
Riggs 1976; Hofer 1980); fundamental and strategic actions (Khandwalla 1992); and
entrepreneurial and efficiency actions (Hambrick and Schecter 1983). Analysis of the
turnaround actions leads to seven broad themes that are found across studies - top
management change, asset reconfiguration, organizational restructuring, strategic change,
substantive changes in membership, transformational change, and functional/ efficiency
changes. Refer table 3 for the turnaround actions that constitute each of these themes. The
seven turnaround themes together address all the perspectives possible for turnaround –
strategic, entrepreneurial, tough, tender, external, internal, operational and efficiency focuses
for turnaround. (refer table 4).
Mapping of the seven themes on three OI criteria – ideational, definitional and
phenomenological criteria indicate that all except the last satisfy these. Each of the six of the
themes involve profound organizational and individual experiences, linked in someway to
changes in CED characteristics and relate to the changes in the answers to the question ‘who
are we?’. Functional and efficiency changes for turnaround might also involve the three
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criteria selectively. (refer table 5). This clearly indicates that organizational identity plays a
major role in the turnaround from decline.
Turnaround Types and Organizational Identity
Management and organization scholars have a tendency to resort to typologies to simplify
complex organizational phenomena. Both empirical typologies and conceptual taxonomies
have been a part of turnaround research. In turnaround, types reduce the complex
relationships across a large number of variables into cognitively manageable few. There are a
large number of turnaround actions and the possible combinations are very large but in reality,
rarely are all the possible combinations observed. Once types are identified either
conceptually or empirically, it is possible to elaborate exhaustively the intricate interactions
and relationships.
Schendel, Patton and Riggs (1976) empirically identified two turnaround types – the strategic
turnaround and the operational turnaround. Hofer (1980) predicted that the two types were
contingent on the strategic and operational health of the organization respectively. Hambrick
and Schecter (1983) identified three turnaround types – asset and cost surgery, selective
product/market pruning and piecemeal moves; and Khandwalla (1992) four types – surgical
reconstructive, surgical productivity / innovation oriented, non surgical innovation oriented
and non surgical transformation oriented turnaround. Later Khandwalla (2000) enumerated
eight basic turnaround types empirically extracted from one hundred and twenty cases based
on ten turnaround actions.
Mapping organizational identity construct criteria on the four typologies it is observed that
most of the types satisfy these. Others also show no indication of absence of these three
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criteria and depend on the turnaround actions deployed (refer table 2). Strategic,
entrepreneurial, surgical or transformational turnarounds, all involve high emotions, change in
defining attributes and discourse of collective identity. Table 2 explicates the presence of
linkages between turnaround and organizational identity.
ORGANIZATIONAL IDENTITY DYNAMICS AND MANAGERIAL
IMPLICATIONS IN TURNAROUND
The organizational identity dynamics during turnaround are many fold. Actions that are
expressions of the identity will find least resistance and can be implemented easily.
Turnaround actions if they are perceived to be incongruent with organizational identity
members will lead to experience of a cognitive dissonance or identity dissonance. When CED
characteristics are changed as a consequence of certain actions members experience distress
and identity dissonance is induced. When there is a sudden loss of identity referents or
changes in the collective there is an ambiguity in the collective self definitions. The living,
experienced, expressing and meaning making realities of the organizational members might
be changed in the course of turnaround.
Different turnaround actions have different effects on organizational members and the
collective identity dynamics. Table 3 elaborates the turnaround themes, specific actions that
constitute them, the organizational identity dynamics involved and implications for managers.
Functional and efficiency actions might change the day to day work behavior but
experientially it may not mean any change. Changes in the top management break the
organization from the past and the present and provide an opportunity for change. It also
creates a vacuum in the meaning making system in the organization. This leads to anxiety and
stress due to the abrupt break and uncertainty in the meaning making processes. It signals the
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determination for change and modifies the image held by stakeholders and their expectations.
Organizational restructuring changes the experienced reality as the changes in the
organizational structure, systems and processes change role expectations and behavior and the
experiencing of the organizational context. Members will start to de-identify with the
organization if they don’t participate in the process of restructuring due to break of the bond
of identification between the individual and organization. If the implemented changes are in
conflict with member expectations then they will dissociate themselves from the organization,
become mute observers and in extreme cases dis-identify with the organization.
Substantial changes in the organizational membership changes the sense of collective itself
lead to lack of confidence, collective self esteem. In certain contexts where there is an implicit
assumption of life time employment collective helplessness, anger and frustration will be
experienced. The survivors also experience distress and review their identification with the
organization. Since the collective as it was in the past does not exist, it is easier for the
managers to shape the identity. Transformational turnaround actions change the role/task
behavior, the experience of the work place and organization, forms of collective expressions
and the meaning making process leading to transformation of the collective self definitions
i.e. organizational identity. Transformation actions can lead to reinterpretation of the existing
identity, transform it or change it. It also changes in the image and reputation among
stakeholders.
Asset reconfiguration and strategic change actions change the schema of collective self
categorization by changing the reference points like industry, geography, customer
segmentation and so on. Acquisitions and mergers are can be sources of identity attributes.
Closures, shut down and spin offs can lead to fragmentation of the identity. Fragmentation
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might lead to compromising valuable resources for competitive advantage or core
competencies due to complex linkages between organizational parts, learning, knowledge,
identity and core competencies. Strategic change exposes the organization to alternative
images through interaction with stakeholders and can be a source of new identity attributes.
The interactions between the internal and external stakeholders and the changes in identity,
projected image and reputation harbingers a new cycle which can be virtuous or vicious.
Turnaround managers have the choice of continuing with the existing identity, reinterpret the
identity labels in the changed context, transform the identity or change the identity to
something new. Each of these choices has implications in terms of the available set of
turnaround actions. Turnaround managers should be conscious of the impact of their decisions
on organizational identity. There is a need for managers to clearly understand the identity and
its linkages to organizational phenomena before attempting any turnaround. Each turnaround
action should be vetted for their impact on organizational identity so that any there are no
surprises. Even simple efficiency improving actions should be clearly demarked in terms of
linkages to CED attributes.
Turnaround managers have to be vary of the following – organizational identity ambiguity,
organizational identity dissonance, identity fragmentation, de-identification and dis-
identification in its various forms. Collective identity ambiguity indicates lack of coherence in
the shared meanings or collective claims and can be a strategic choice for initiating a
movement from the existing identity. De-identification, ambiguity and re-identification should
be planned and anticipated process and not unexpected / unanticipated during turnaround.
Dis-identification can create negative consequences and is not desirable hence should avoided
during turnaround.
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SUMMARY AND CONCLUSION
This paper attempted to build a case for including organizational identity concept in to
turnaround research. Seven turnaround action themes covering eight perspectives and four
typologies were identified and the three organizational identity conceptual criteria were
mapped on to them. The analysis clearly shows that there organizational identity plays a role
in the organizational dynamics during turnaround. However to add to the case, it is possible to
map the organizational identity dynamics in other prominent turnaround research perspectives
like stage & process models (Arogyaswamy et. al. 1995; Bibeault 1982) and contingent
models of turnaround (Mone, McKinley and Barker 1998). The paper elaborated the
organizational identity dynamics involved in each of the seven turnaround themes and the
managerial implications. De-identification, dis-identification, fragmentation along with
identity dissonance and ambiguity are some of the prominent dynamics. The dynamics can
hinder the turnaround or act as a catalyst. Turnaround managers have the choice of continuing
of existing identity, reinterpreting of it in the context of changes, transforming it or creating a
new identity. Managers need to assess and understand the organizational identity and its
linkages and be clear of the impact of their turnaround action on the above. Organizational
identity dynamics should preferably be a managerial choice and not an unanticipated /
unexpected consequence in turnaround.
To integrate the organizational identity research with turnaround research the arguments of
this paper need to be validated empirically. Hopefully this paper would initiate meaningful
discussions leading to further empirical research and theoretical developments.
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Lohrke, F. T., Bedeian, A. G., & Palmer, T. B. (2004) The role of top management teams in
formulating and implementing turnaround strategies: a review and research agenda.
International Journal of Management Reviews, 5/6(2): 63-90.
Maheshwari, S. K., & Ahlstrom, D. (2004) Turning Around a State Owned Enterprise: The
Case of Scooters India Limited. Asia Pacific Journal of Management, 21(1/2): 75-101.
Manimala, M. (1991) Turnaround Management: Lessons from Successful Cases. ASCI
Journal of Manament, 20(4): 234-254.
Mellahi, K., & Wilkinson, A. (2004) Organizational failure: a critique of recent research and a
proposed integrative framework. International Journal of Management Reviews, 5/6(1):
21-41.
Mone, M. A., McKinley, W., & Barker III, V. L. (1998) Organizational Decline And
Innovation: A Contingency Framework. Academy of Management Review, 23(1): 115-
132.
Pearce, J. A., & Robbins, K. (1993) Toward improved theory and research on business
turnaround. Journal of Management, 19(3): 613-636.
Pearce, J. A., & Robbins, K. D. (1994) Retrenchment remains the foundation of business
turnaround. Strategic Management Journal, 15(5): 407-417.
Reger, R. K., & Gustafson, L. T. (1994) Reframing The Organization: Why Implementing
Total Quality Is Easier Said Than Done. Academy of Management Review, 19(3): 565-
584.
Robbins, D. K., & Pearce II, J. A. (1992) Turnaround: Retrenchment And Recovery. Strategic
Management Journal, 13(4): 287-309.
20
Schendel, D., Patton, G. R., & Riggs, J. (1976) Corporate Turnaround Strategies: A Study of
Profit Decline and Recovery. Journal of General Management, 3(3): 3-12.
Slatter, S. (1984) Corporate Recovery: Successful Turnaround Strategies and their
Implementation. Harwirdsworth, Midddlesex: Penguin.
Soenen, G., & Moingeon, B. (2002) The five facets of collective identities. 13-34.
Whetten, D. A. (1980) Organizational Decline: A Neglected Topic in Organizational Science.
Academy of Management Review, 5(4): 577.
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Organizational Identity. Journal of Management Inquiry, 15(3): 219.
Whetten, D. A., & Godfrey, P. C. (Eds.). (1998) Identity in Organizations: Building Theory
Through Conversations. Sage: New Delhi.
Whetten, D. A., & Mackey, A. (2002) A Social Actor Conception of Organizational Identity
and Its Implications for the Study of Organizational Reputation. Business & Society,
41(4): 393.
21
Table 1 Review of Turnaround Actions
Author Turnaround Actions
Bibeault (1982)
• Strong leadership
• Tight budgetary control
• Accounting responsibly
• Core business
• Redeployment of assets
• Cash flow forecasting
• Absolute control by management
• Attitude change
Fisher, Lee and Johns
(2004)
• Recognition of decline problem
• Matching the solution to the cause of
decline
• Replacement of the CEO or top
management team
• Ownership change
• Retrenchment
• Speed of action and
• Rate of (pre-turnaround) decline
of the distressed company
Hambrick & Schecter
(1983)
• Asset Cost Surgery
-significant reduction in R&D, marketing,
receivables and inventories
-significant reduction in plant and
equipment newness
• Increase in employee productivity
• Selective Product/Market Pruning
-increase in relative prices, direct
costs, and product quality
-decreased marketing expenses and
inventory expenses
-reduced receivables, decline in
capacity utilization
Khandwalla (1992;
2000)
• Managerial overhaul
• Asset-cost surgery
• Tighter controls and financial
mending
• Transformational changes
• Restructuring and empowerment
• Product market refocusing
actions
• Sales push
• Operational excellence actions
• Cost shedding
• Strategic shift
Lee, Mathur and
Gleason (1998)
• Asset sales
• Employee layoffs
• Executive replacement
• Acquisitions
• Debt restructuring
• Bankruptcy filing
• Dividend cut
• Financing
• Merger
Schendel, Patton and
Riggs (1976)
• Management change
• Organizational change
• Marketing changes
• New products and R&D
• Acquisitions
• Diversification
• Cost cutting
• New control systems
• Divestiture
• Decentralization
• Modernization
Slatter (1984)
• Change of management
• Financial control
• Organizational change
• Product/market reorientation
• Improved marketing
• Acquisitions
• Asset reduction
• Cost reduction
• Investment
• Debt reduction & other financial
strategies
22
Table 2 Turnaround Types and Applicability of Organizational Identity
Ideational Definitional Phenomenological
Turnaround
Types
Turnaround Type
Does it entail
profound
experience?
Is it about CED
characteristics?
Is it related to the
answer to the question
“Who are we?”
Is Organizational
Identity affected?
Strategic turnaround Yes Yes Yes Yes Schendel,
Patton &
Riggs
(1976);
Hofer
(1980)
Operating turnaround May be; No May be; No May be; No May be; No
Asset & cost surgery Yes; May be May be May be Yes, May be
Selective product/market
pruning
May be May be May be May be
Hambrick.
&
Schecter
(1983) Piecemeal moves No May be No No
Surgical reconstructive Yes Yes Yes Yes
Surgical productivity/
innovation oriented
Yes May be May be Yes; May be
Non-surgical innovation
oriented
May be May be May be May be; No
Khandwal
la (1992)
Non-surgical transformation Yes Yes Yes Yes
Tighter controls and financial
mending, product market
refocusing turnaround
Yes Yes Yes Yes
Managerial overhaul
turnaround
Yes Yes Yes Yes/Maybe
Tighter controls and financial
mending turnaround
Yes May be May be Maybe
Operating excellence
turnaround
Yes May be May be Maybe
Surgical, transformational,
empowerment, operating
excellence, cost shedding
turnaround
Yes Yes Yes Yes
Restructuring and
empowerment and sales push
turnaround
Yes Yes May be Yes
Strategic shift, cost shedding,
product market refocus
turnaround
Yes Yes Yes Yes
Khandwal
la (2001)
Cost shedding, operating
excellence, managerial
overhaul turnaround
Yes Yes Yes Yes
23
Table 3 Turnaround Themes and Organizational Identity Dynamics
Turnaround
Theme
Actions Organizational Identity Dynamics Managerial Implications
Top management
change
• Change of CEO / MD /
President
• Change in board configuration
• Change in top management
team
• Vacuum in the meaning making processes,
potential for new interpretation and change in
identity
• Change in the projected image & hence stakeholder
expectations
• Signals organizational determination for change &
break from past
• High anxiety and stress among internal
stakeholders due to uncertainty
How do we know who we are?
• Managerial actions not bound by history
• Potential for creating a new identity,
reinterpret the existing identity or transform
the existing identity
• New managers need to be aware of
implications of their actions on identity
• Assessment of the identity and it linkages to
past strategies & decisions, and decline is
critical
• Balancing the historical, emerging & aspired
identities important
Asset
reconfiguration
• Spin off
• Divestiture
• Acquisition
• Merger
• Plant closure
• Changes in classification / comparative schema
• Organizational identity dissonance if actions are
seen as incongruent with identity
• Organizational identity dissonance if expunged part
holds CED characteristic
• Acquisitions & mergers a source of new identity
attributes
• Can lead to fragmentation of identity
What are we?
• A choice in organizational identity
management, pruning of self classification
schema
• Acquisitions can inspire identity change
process or hamper it
• Asset reconfiguration without appropriate
diagnosis can stall turnaround and
compromise core competencies
Organizational
restructuring
• Organizational redesign
• Decentralization
• Business process
reengineering
• Flat / horizontal structure
• Team based structure
• SBU / profit centered structure
• Changes in systems &
processes of various functions
• Change in everyday behavior and living of the
collective
• Organizational identity dissonance if turnaround
actions and/or consequential changes are seen as
incongruent with identity
• Change in historical manifestation of identity
• Can initiate dis-identification & de-identification
• Change in the experienced reality
How are we a collective?
• Process of restructuring plays critical role in
achieving objectives of retaining or
changing identity
• Resistance to change due to work culture
can be more effectively managed with an
identity based approach
• Identity can be indirectly addressed by
changes in power distribution, structure,
roles and behavioral expectations
Strategic Change • Change in competitive &
growth strategies
• Changes in core competencies
• Domain changes
• Product /market changes
• Changes in classification / comparative schema
• Organizational identity dissonance if turnaround
actions and/or consequential changes are seen as
incongruent with identity
• Exposure to alternative images of stakeholders
• Changes in strategies have potential for
changing identity, so it should be a choice
• Clarity in short, medium and long term
effects & influences on identity is required
• Can change identity over time without the
24
How do we fulfill our reason for existence? organization realizing it
Substantive
changes in
membership
• Retrenchment of workers
• Retrenchment of managers
• Voluntary retirement schemes
• Shift from permanent workers
to contractual workers
• Survivor syndrome, reduction in morale &
collective self esteem, and collective helplessness
• Collective as defined in the past does not exist –
hence change ready
• Questioning and review of membership and
identification
• Disruption in collective meaning making process
• Individual and organizational identities are
intertwined in developing lifetime employment
contexts mass scale identity problems
Who constitute the WE/US ?
• Managers need to be aware of the impact of
substantive changes in membership on
survivors, retrenched employees and image
• Alternatives need to be actively considered
in contexts where social security is absent
• If necessary retrenchment processes should
safe guard the individual’s dignity in a
honorable way
• In developed economy context retrenchment
process communicates the top management
style and their interpretation of
organizational reality
Transformational
Change
• Participative change
• Empowerment
• Change agent programs
• Stakeholder management
• Mindset change
• Culture change
• Creation of a new identity
• Transformation of the existing identity or
• Reinterpretation of existing identity labels
• Transformational processes enable collective
meaning making, ie identity formulation and
evolution
• Transformation of the living, experiencing,
expressing and meaning making reality
• Changes external attributions and reputation
How are we different from who we were?
• Transformational changes can reinterpret or
transform the existing identity or create a
new identity
• Organization wide changes that are likely
penetrate deep & remain for long in to the
organization
• The cost of transformational changes should
be balanced with the expected results
• Apt for decline caused by deep rooted
internal and external causes
Functional/
efficiency
changes
• Change in debt equity ratio
• Training for competency
• Change in budgeting &
accounting
• Shop floor reorganization
• Changes for productivity &
quality improvement
• Sales push, pricing changes,
promotions, etc
• Change is most likely to be change in expression of
organizational identity and not have much impact
on identity and is easily manageable
• Rarely it might be a change in CED characteristics-
-might lead to resistance, anxiety and stress
How can we exist more efficiently?
• Clear delineation of CED characteristics
from other attributes is important for change
implementation
• Attributes that can become future identity
attributes should be promoted
• Actions with quick results can initiate new
CED characteristics under identity
ambiguity & effectively used
25
Table 4 Turnaround Themes and Focus of Turnaround
Turnaround
Theme
Strategic
Focus
Entrepreneurial
Focus
Tough
Focus
Tender
Focus
External
Focus
Internal
Focus
Operational
Focus
Efficiency
Focus
Top
management
change
Yes Yes Yes Yes
Asset
reconfiguration
Yes Yes Yes Yes Yes Yes Yes
Organizational
restructuring
Yes Yes Yes Yes
Strategic change Yes Yes Yes Yes
Substantive
changes in
membership
Yes Yes Yes Yes
Transformational
change
Yes Yes Yes Yes Yes Yes Yes Yes
Functional/
efficiency
changes
Yes Yes Yes Yes
Table 5 Turnaround Theme and Applicability of Organizational Identity
Ideational Definitional Phenomenological
Does it entail
profound
experience?
Is it about CED
characteristics?
Is it related to the
answers to the
question
“Who are we?”
Is Organizational
Identity affected?
Turnaround
Theme
Top management
change
Yes Yes Yes Yes
Asset
reconfiguration
Yes Yes Yes Yes
Organizational
restructuring
Yes Yes Yes Yes
Strategic Change Yes Yes Yes Yes
Substantive
changes in
membership
Yes Yes Yes Yes
Transformational
Change
Yes Yes Yes Yes
Functional/
efficiency changes
May be May be May be May be
26
Indian Institute of Management Kozhikode
Type of Document: (Working Paper/Case/
Teaching Note, etc.)
Working Paper
Ref. No.:
IIMK/WPS/26/OB&HR/2007/14
Title:
BUILDING A CASE FOR INCLUSION OF ORGANIZATIONAL IDENTITY
IN TURNAROUND RESEARCH
Author(s):
S.Jeyavelu
Indian Institute of Management Kozhikode
IIMK Campus PO-673570,
Kozhikode,Kerala,India
Ph
91-495) 2809244 email: [email protected]
Institution(s):
Indian Institute of Management Kozhikode,
Kozhikode, Kerala, India
Subject Areas: Organizational Behaviour &
Human Resource
Subject Classification Codes, if any:
Supporting Agencies, if any:
Research Grant/Project No.(s):
Date of Issue: August 2007
Supplementary Information, if any:
Number of Pages: 25
Abstract:
The objective of this paper is to build a case for inclusion of organizational identity construct in
turnaround research. After a brief review of various perspectives in turnaround research, the paper
traces the major findings in turnaround actions and types. Based on the exhaustive list of
turnaround actions, seven turnaround action themes were identified - top management change,
asset reconfiguration, organizational restructuring, strategic change, substantive changes in
membership, transformational change, and functional/ efficiency changes. These seven turnaround
themes are mapped into the three organizational identity conceptual criteria – ideational (collective
answers to the question ‘who are we?’), definitional (the conceptual domain of central, enduring and
distinguishing characteristics of an organization) and phenomenological (a context of profound
organizational experience) (Whetten 2006). To extend support four turnaround typologies are also
mapped onto these criteria. The analysis clearly indicates the pervasiveness of identity related
dynamics in turnaround. The plausible organizational identity dynamics in each of the themes and
the managerial implications are enumerated in detail. The paper concludes with suggestions for
further building the case for including organizational identity in turnaround research.
Key Words/Phrases: Organizational Identity, Decline, Turnaround
Referencing Style Followed:
doc_472366845.pdf
Description explain about building a case for inclusion of organizational identity in turnaround research.
IIMK/WPS/26/OB&HR/2007/14
BUILDING A CASE FOR INCLUSION OF
ORGANIZATIONAL IDENTITY
IN TURNAROUND RESEARCH
S. Jeyavelu
1
1
Assistant Professor, Indian Institute of Management Kozhikode, Kozhikode – 673 570
(email:[email protected])
2
BUILDING A CASE FOR INCLUSION OF ORGANIZATIONAL IDENTITY IN
TURNAROUND RESEARCH
The objective of this paper is to build a case for inclusion of organizational identity construct
in turnaround research. After a brief review of various perspectives in turnaround research,
the paper traces the major findings in turnaround actions and types. Based on the
exhaustive list of turnaround actions, seven turnaround action themes were identified - top
management change, asset reconfiguration, organizational restructuring, strategic change,
substantive changes in membership, transformational change, and functional/ efficiency
changes. These seven turnaround themes are mapped into the three organizational identity
conceptual criteria – ideational (collective answers to the question ‘who are we?’),
definitional (the conceptual domain of central, enduring and distinguishing characteristics of
an organization) and phenomenological (a context of profound organizational experience)
(Whetten 2006). To extend support four turnaround typologies are also mapped onto these
criteria. The analysis clearly indicates the pervasiveness of identity related dynamics in
turnaround. The plausible organizational identity dynamics in each of the themes and the
managerial implications are enumerated in detail. The paper concludes with suggestions for
further building the case for including organizational identity in turnaround research.
Keywords Organizational Identity, Decline, Turnaround
INTRODUCTOIN
Performance decline is an ever present danger and an integral part of organizational reality.
The Asian economic crisis in the 1990s is indicator of the stark reality of the impact of the
emerging context on firm performance (Ahlstrom and Bruton 2004; Mellahi and Wilkinson
2004). Research on organizational decline and turnaround has grown substantially from days
of Whetten’s (1980) call for increasing focus on decline as compared to best practices and
excellence. Still many questions remain unanswered on the nature, content, context and
process of decline and turnaround (Arogyaswamy, Barker and Yasai-Ardekani 1995;
Chowdhury 2002; Khandwalla 2001; Maheswari and Ahlstrom 2004). Turnarounds are
special situations that involve intense emotions due to changes in management cadre,
retrenchment and downsizing, and changes in the organizational structure, systems and
processes. It might include change in the nature of an organization itself due to drastic
changes in the internal organization and changes in asset-resource configurations.
3
Organizational identity (OI) a construct considered critical under profound organizational
experiences has not been studied by organizational researchers in the context of decline and
turnaround.
OI is interlinked with decline and turnaround, and is relevant to both turnaround academicians
and practitioners because of the following reasons. First, turnaround context indicates a
deviation from achieving organizational objectives and hence a threat to the continued
existence. Such a context warrants self reflection and introspection, specifically in self
definitional domains. Managers when faced with reducing performance and likely extinction
raise questions like ‘why are we doing what we are doing?’, ‘what business are we in?’, and
‘what is the purpose of our existence?’ and so on. Such questions give raise to answers that
reflect the OI, i.e. the answers broadly indicate the themes of answers to the question ‘who are
we?’ even if that was not asked directly (Whetten and Godfrey 1998).
Second, turnaround constitutes changes in the organizational configuration – change in asset-
resource configuration, change in top management, change in organizational membership due
to retrenchment/downsizing, change in organizational strategy, structure, systems and
processes, and also change in organizational image & reputation (Albert and Whetten 1985;
Khandwalla, 2001; Whetten 2006; Whetten and MacKey 2002). Many of these changes are in
the domain of those characteristics that define an organization and hence turnaround is likely
to involve OI response except in cases where the turnaround changes organizational
characteristics that are not part the collective self definition.
Finally, most turnarounds involve a major over haul of the top management including the
CEO (Barker and Patterson 1996). The top management is the default spokesperson for the
4
organization; they shape the OI over time by their decisions; and interpret OI for strategic
decisions on behalf of the organization. Any change in the top management under decline is
likely to change the dynamics between the OI, strategy and its interpretation, and top
management as the shaper and interpreter of OI (Hatch and Schultz 1997).
Turnaround management without OI will be complicated with managers addressing collective
identity level issues through dummy variables like organizational culture, brand, image and
reputation among stakeholders (Whetten and Mackey 2002). Turnaround managers might be
less effective without understanding the inter play between an organizational members’ “Who
are we?” and “How do we do things here?”; reciprocal linkages between identity, projected
image and reputation; and the impact of change implementation on collective self definitions
and members’ response to it. Researchers might be able to theorize better with OI as it is
deeper level construct then the current variables in turnaround research. Since, how
turnaround happens is not yet fully explained by the existing theories, OI might provide the
additional explanation to understand how a declining organization is turned around.
ORGANIZATIONAL IDENTITY
Organizational Identity (OI) is a self definitional concept extrapolated from self identity
literature and applied to organizations. It is the collective self definition of an organization by
its members, consisting of those attributes that define the organization, differentiates it from
comparable others and is stable over time (Albert and Whetten 1985; Whetten 2006). OI is
considered as the claims an organization’s members make about its defining characteristics
(Albert and Whetten 1985); or the shared beliefs or a mental model of what the organization
is (Fiol 1991 & 2001; Hatch and Schultz 1997). It is also construed from the self reflective
5
narratives of the organizations and its members especially the elites (Brown and Humphreys
2006; Chreim 2005). Organizational identity is not only the most referred to attributes but also
the deep rooted values and beliefs in the collective psyche of the organization that the
members themselves may not be aware of (Brown and Starkey 2000). OI discourse is
observed under profound experiences and in the process of making long term high impact
decisions (Corley, Harquail, Pratt, Glynn, Fiol, and Hatch 2006; Whetten 2006).
Albert and Whetten’s (1985) seminal conceptualization describes organizational identity as
satisfying the three criteria – “claimed central character…claimed distinctiveness…claimed
temporal continuity” (p265). Whetten (2006) later defined OI as members’ claims of central,
enduring and distinguishing (CED) characteristics of an organization. Centrality in OI refers
to the core versus the peripheral characteristics, characteristics shared by all members,
essential characteristics or fundamental and deep rooted characteristics versus surface level
characteristics (Corley et. al. 2006). OI characteristics tend to remain stable over time which
is referred as the enduring nature. These attributes differentiate an organization from its
comparable others and also serve the function of distinguishing it as special in itself (Whetten
2006).
Elucidation of an organization’s identity is done by extracting the themes in the collective
answers to the question, ‘who are we?’. Organizational identity also involves intense
emotions. OI is referred to, experienced or triggered during profound organizational
experience. Reflecting on the evolution of the field of organizational identity, Whetten
clarifies that the original OI conceptualization was based on the three components - “…the
ideational component equated organizational identity with members’ shared beliefs regarding
the question “who are we as an organization?”; the definitional component proposed a
6
specific conceptual domain for organizational identity, characterized as CED features of an
organization; and finally the phenomenological component posited that identity related
discourse was most likely to be observed in conjunction with profound organizational
experiences” (Whetten 2006: 220).
OI is referred to rarely and only under special conditions and not in every day living. A
manager would not refer to OI when deciding on the sales promotions but would refer to OI
when deciding between alternative marketing channels like direct selling and through
distributors. Organizational members refer to their collective self definitions only when they
are faced with long term high impact decisions, there is a threat to the existing identity, a key
person or founder who has been key OI defining factor leaves the organization, there is a
change in the classification of organization due to product-market changes, an organization is
merged with another, an organization is acquired, an unit of an organization is spun off, there
is substantial change in organizational membership due to retrenchment or voluntary attrition,
a major change in an organization’s asset/resource configuration, a major change in the
organizational processes and outcomes, when there is a difference or conflict between the
experienced identity and organizational actions leading to cognitive distress (or identity
dissonance), and when the organizational identity attributes become obscure and ambiguous
(Albert and Whetten 1985, Corley and Gioia 2004, Corley et. al. 2005, Dutton and Dukerich
1991, Elsbach and Kramer 1996, Gioia and Thomas 1996, Gioia, Schultz and Corley 2000,
Whetten and Godfrey 1998, Whetten 2006).
The fluidity and dynamism of the OI is heatedly debated with no emerging consensus. Some
argue that if it changes than it is not identity, whereas others attribute a dynamism to OI.
Gioia, Schultz and Corley (2000) differentiate organizational characteristics as enduring or
7
continuing in nature. The central and distinctive characteristics of an organization may retain
the meanings associated with the labels over time leading to the enduring nature. It is also
possible that the labels may remain the same over time but the meanings might change
leading to a continuing characteristic. Researchers have pointed to the need for both
continuity and change in identity, arguing that stability in organizations can be achieved by
adopting intangible or abstract identity attributes that allow for a variety of applications as the
environment changes (Ashforth and Mael, 1996; Barney et al., 1998; Gustafson and Reger,
1995).
For an organization’s identity to change it goes through a process of de-identification, situated
re-identification and identification with core ideology (Fiol 2002). De-identification is the
process of breaking of the individuals’ identification with the organization. Alternative
attributes are provided which are then identified by individuals i.e re-identification takes
place. The sum total of the individual identifications emerge as the new identity.
When an organization’s identity is threatened then members respond in a way that is coherent
with the OI. Identity dissonance is experienced by organizational members when there is a
perceived threat to the OI. Threats to OI could be in terms of a. image that does not match
with the OI, b. the managerial decisions are seen as conflicting with OI, c. an ambiguity in the
OI is experienced due to lack of strong OI referents or absence of OI referents (Dutton and
Dukerich 1991).
Organizational members identify with their organization through a process of self selection
and socialization. It is also possible that members dis-identify with their organization. The
members’ experiences are made sense in the context of the organizational culture, the
8
collective meaning making process results in the collective conceptualization of the
organization. Organizational culture is the symbolic context for the development and
maintenance of the identity. Top management is the default spokesperson of the organization,
interpreter of the organizational identity and promoter of identity change. The top
management’s vision and leadership shapes the collective experiences and meaning making
and hence the identity (Hatch and Schultz 1997). Reger and Gustafson (1994) argues that the
top management of an organization would be able to transform the organization only if they
are able to change the organizational identity. Organizational identity is expressed and
enacted by its strategy and is inferred, modified or affirmed from it (Ashforth and Mael 1996).
An organization’s communication to the external stakeholders the essence of its identity is
called as the projected identity, the image held by the organization as that of the external
stakholders’ image of the organization is the construed image and the feedback given to the
organization in terms of acceptance of premium for its products and services and availability
of resources (human, financial and so on) constitute the reputation of the organization
(Whetten and MacKey 2002).
TURNAROUND
Organizational turnaround is the purposeful managerial action to bring an organization out of
decline and become profitable. Turnaround research gained prominence in the 1980s after
Whetten (1980) called for a systematic study of organizational decline and turnaround going
beyond the study of best practices. Irrespective of research trends, turnaround practice is ever
contemporary as indicated by the Asian economic crisis (Ahlstrom and Bruton 2004).
9
Turnaround research has focused on turnaround actions (Lee, Mathur and Gleason 1998;
Schendel, Patton and Riggs 1976; Slatter 1984), turnaround strategies (Hambrick and
Schecter 1983; Hoffman 1989), contingent models of turnaround (Hofer 1980; Maheswari
2000), stage models of turnaround (Arogyaswamy et.al. 1995), process models of turnaround
(Bibeault 1982; Manimala 1991), turnaround typologies (Hambrick and Schecter 1983;
Khandwalla 1991, 1992, 2001; Schendel, Patton and Riggs 1976), retrenchment as choice in
turnaround (Khandwalla 1991; Pearce and Robbins 1994), and effect of country context on
turnaround (Ahlstrom and Bruton 2004; Fisher, Lee and Johns 2004; Khandwalla 1992,
2001).
Organizational decline or the turnaround situation may be caused by internal or external
factors (Pearce and Robbins 1993). Internally decline may be due to erosion of efficiency,
past managerial mistakes, inertia leading to mal adaptation, erosion of competitiveness,
availability of resources and so on. External factors that induce decline are changing customer
preferences, changes in socio-economic-political environments, technological discontinuities,
industry life cycle, economic deregulation and globalization (Barker and Duhaime 1997;
Bibeault 1982; Maheswari and Ahlstrom 2004; Pearce and Robbins 1993). Hambrick and
Schecter (1983) among others found that the turnaround strategies are dependent on the cause
of decline. Organizational that are declining due to operational causes opt for operational
turnaround actions and strategic causes of decline for strategic turnaround actions and rarely
were operational decline addressed with strategic turnaround actions.
The decline can vary in its pace. Decline can be sudden, gradual or creeping and lingering
depending upon the speed with which decline sets in (D’Aveni 1989). The period of decline
can also vary. In some organizations turned around fast and in rare cases it can go on for
10
decades. Extended period of decline creates problems of legitimacy and hostility from
stakeholders (Maheswari and Ahlstrom 2004). Decline can vary in terms of severity also.
Research has found that the choice of turnaround actions and strategies depend on the severity
of the decline (Arogyaswamy et.al. 1995; Hofer 1980). The pace, period and severity of
decline determine the consequences of turnaround, the timing of such consequences and
turnaround strategies.
Turnaround can take place in two or more stages. The retrenchment / decline stemming stage
is the first stage of the two stage model followed by recovery stage (Arogyaswamy et.al.
1995; Robbins and Pearce 1992). Bibeault (1982) identified five stages in turnaround change
at top, evaluation, emergency, stabilization and re-posturing. Manimala (1991) found three
turnaround stages arresting sickness, reorienting, and institutionalization & growth in addition
to those mentioned above. Chowdhury (2002) identified four stages in turnarounds decline,
response initiation, transition and outcome, where as Balgobin and Pandit (2001) identified
seven - decline and crisis, triggers for change, recovery strategy formulation, retrenchment
and stabilization, and return to growth.
Researchers have also been fascinated with turnaround strategies. A dual strategy model
depicts turnaround strategies as strategic and operational (Schendel, Patton and Riggs 1976;
Hofer 1980). Hambrick & Schecter (1983) identified revenue generating, product-market
refocusing, -asset reduction and cost cutting turnaround strategies among successful
turnaround firms.
One of the major turnaround research themes was the impact of change of top management on
turnaround and choice of internal versus external person (Barker and Patterson 1996; Barker,
11
Patterson and Mueller 2001; Lohrke and Bedeian 2004). In the context of developing
countries substantial retrenchment has been a major focus (Khandwalla 1992 & 2001).
Turnarounds across national cultures have also been gaining critical recognition (Ahlstrom
and Bruton 2004; Bruton, Ahlstrom and Wan 2003; Fisher and Lee 2004; Khandwalla 2001).
Turnaround Actions and Organizational Identity
Turnaround researchers have identified a large number of turnaround actions (refer table 1).
These actions can be classified into tough and tender elements, and internal versus external
focused elements (Khandwalla 2000); strategic and operational actions (Schendel, Patton and
Riggs 1976; Hofer 1980); fundamental and strategic actions (Khandwalla 1992); and
entrepreneurial and efficiency actions (Hambrick and Schecter 1983). Analysis of the
turnaround actions leads to seven broad themes that are found across studies - top
management change, asset reconfiguration, organizational restructuring, strategic change,
substantive changes in membership, transformational change, and functional/ efficiency
changes. Refer table 3 for the turnaround actions that constitute each of these themes. The
seven turnaround themes together address all the perspectives possible for turnaround –
strategic, entrepreneurial, tough, tender, external, internal, operational and efficiency focuses
for turnaround. (refer table 4).
Mapping of the seven themes on three OI criteria – ideational, definitional and
phenomenological criteria indicate that all except the last satisfy these. Each of the six of the
themes involve profound organizational and individual experiences, linked in someway to
changes in CED characteristics and relate to the changes in the answers to the question ‘who
are we?’. Functional and efficiency changes for turnaround might also involve the three
12
criteria selectively. (refer table 5). This clearly indicates that organizational identity plays a
major role in the turnaround from decline.
Turnaround Types and Organizational Identity
Management and organization scholars have a tendency to resort to typologies to simplify
complex organizational phenomena. Both empirical typologies and conceptual taxonomies
have been a part of turnaround research. In turnaround, types reduce the complex
relationships across a large number of variables into cognitively manageable few. There are a
large number of turnaround actions and the possible combinations are very large but in reality,
rarely are all the possible combinations observed. Once types are identified either
conceptually or empirically, it is possible to elaborate exhaustively the intricate interactions
and relationships.
Schendel, Patton and Riggs (1976) empirically identified two turnaround types – the strategic
turnaround and the operational turnaround. Hofer (1980) predicted that the two types were
contingent on the strategic and operational health of the organization respectively. Hambrick
and Schecter (1983) identified three turnaround types – asset and cost surgery, selective
product/market pruning and piecemeal moves; and Khandwalla (1992) four types – surgical
reconstructive, surgical productivity / innovation oriented, non surgical innovation oriented
and non surgical transformation oriented turnaround. Later Khandwalla (2000) enumerated
eight basic turnaround types empirically extracted from one hundred and twenty cases based
on ten turnaround actions.
Mapping organizational identity construct criteria on the four typologies it is observed that
most of the types satisfy these. Others also show no indication of absence of these three
13
criteria and depend on the turnaround actions deployed (refer table 2). Strategic,
entrepreneurial, surgical or transformational turnarounds, all involve high emotions, change in
defining attributes and discourse of collective identity. Table 2 explicates the presence of
linkages between turnaround and organizational identity.
ORGANIZATIONAL IDENTITY DYNAMICS AND MANAGERIAL
IMPLICATIONS IN TURNAROUND
The organizational identity dynamics during turnaround are many fold. Actions that are
expressions of the identity will find least resistance and can be implemented easily.
Turnaround actions if they are perceived to be incongruent with organizational identity
members will lead to experience of a cognitive dissonance or identity dissonance. When CED
characteristics are changed as a consequence of certain actions members experience distress
and identity dissonance is induced. When there is a sudden loss of identity referents or
changes in the collective there is an ambiguity in the collective self definitions. The living,
experienced, expressing and meaning making realities of the organizational members might
be changed in the course of turnaround.
Different turnaround actions have different effects on organizational members and the
collective identity dynamics. Table 3 elaborates the turnaround themes, specific actions that
constitute them, the organizational identity dynamics involved and implications for managers.
Functional and efficiency actions might change the day to day work behavior but
experientially it may not mean any change. Changes in the top management break the
organization from the past and the present and provide an opportunity for change. It also
creates a vacuum in the meaning making system in the organization. This leads to anxiety and
stress due to the abrupt break and uncertainty in the meaning making processes. It signals the
14
determination for change and modifies the image held by stakeholders and their expectations.
Organizational restructuring changes the experienced reality as the changes in the
organizational structure, systems and processes change role expectations and behavior and the
experiencing of the organizational context. Members will start to de-identify with the
organization if they don’t participate in the process of restructuring due to break of the bond
of identification between the individual and organization. If the implemented changes are in
conflict with member expectations then they will dissociate themselves from the organization,
become mute observers and in extreme cases dis-identify with the organization.
Substantial changes in the organizational membership changes the sense of collective itself
lead to lack of confidence, collective self esteem. In certain contexts where there is an implicit
assumption of life time employment collective helplessness, anger and frustration will be
experienced. The survivors also experience distress and review their identification with the
organization. Since the collective as it was in the past does not exist, it is easier for the
managers to shape the identity. Transformational turnaround actions change the role/task
behavior, the experience of the work place and organization, forms of collective expressions
and the meaning making process leading to transformation of the collective self definitions
i.e. organizational identity. Transformation actions can lead to reinterpretation of the existing
identity, transform it or change it. It also changes in the image and reputation among
stakeholders.
Asset reconfiguration and strategic change actions change the schema of collective self
categorization by changing the reference points like industry, geography, customer
segmentation and so on. Acquisitions and mergers are can be sources of identity attributes.
Closures, shut down and spin offs can lead to fragmentation of the identity. Fragmentation
15
might lead to compromising valuable resources for competitive advantage or core
competencies due to complex linkages between organizational parts, learning, knowledge,
identity and core competencies. Strategic change exposes the organization to alternative
images through interaction with stakeholders and can be a source of new identity attributes.
The interactions between the internal and external stakeholders and the changes in identity,
projected image and reputation harbingers a new cycle which can be virtuous or vicious.
Turnaround managers have the choice of continuing with the existing identity, reinterpret the
identity labels in the changed context, transform the identity or change the identity to
something new. Each of these choices has implications in terms of the available set of
turnaround actions. Turnaround managers should be conscious of the impact of their decisions
on organizational identity. There is a need for managers to clearly understand the identity and
its linkages to organizational phenomena before attempting any turnaround. Each turnaround
action should be vetted for their impact on organizational identity so that any there are no
surprises. Even simple efficiency improving actions should be clearly demarked in terms of
linkages to CED attributes.
Turnaround managers have to be vary of the following – organizational identity ambiguity,
organizational identity dissonance, identity fragmentation, de-identification and dis-
identification in its various forms. Collective identity ambiguity indicates lack of coherence in
the shared meanings or collective claims and can be a strategic choice for initiating a
movement from the existing identity. De-identification, ambiguity and re-identification should
be planned and anticipated process and not unexpected / unanticipated during turnaround.
Dis-identification can create negative consequences and is not desirable hence should avoided
during turnaround.
16
SUMMARY AND CONCLUSION
This paper attempted to build a case for including organizational identity concept in to
turnaround research. Seven turnaround action themes covering eight perspectives and four
typologies were identified and the three organizational identity conceptual criteria were
mapped on to them. The analysis clearly shows that there organizational identity plays a role
in the organizational dynamics during turnaround. However to add to the case, it is possible to
map the organizational identity dynamics in other prominent turnaround research perspectives
like stage & process models (Arogyaswamy et. al. 1995; Bibeault 1982) and contingent
models of turnaround (Mone, McKinley and Barker 1998). The paper elaborated the
organizational identity dynamics involved in each of the seven turnaround themes and the
managerial implications. De-identification, dis-identification, fragmentation along with
identity dissonance and ambiguity are some of the prominent dynamics. The dynamics can
hinder the turnaround or act as a catalyst. Turnaround managers have the choice of continuing
of existing identity, reinterpreting of it in the context of changes, transforming it or creating a
new identity. Managers need to assess and understand the organizational identity and its
linkages and be clear of the impact of their turnaround action on the above. Organizational
identity dynamics should preferably be a managerial choice and not an unanticipated /
unexpected consequence in turnaround.
To integrate the organizational identity research with turnaround research the arguments of
this paper need to be validated empirically. Hopefully this paper would initiate meaningful
discussions leading to further empirical research and theoretical developments.
17
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21
Table 1 Review of Turnaround Actions
Author Turnaround Actions
Bibeault (1982)
• Strong leadership
• Tight budgetary control
• Accounting responsibly
• Core business
• Redeployment of assets
• Cash flow forecasting
• Absolute control by management
• Attitude change
Fisher, Lee and Johns
(2004)
• Recognition of decline problem
• Matching the solution to the cause of
decline
• Replacement of the CEO or top
management team
• Ownership change
• Retrenchment
• Speed of action and
• Rate of (pre-turnaround) decline
of the distressed company
Hambrick & Schecter
(1983)
• Asset Cost Surgery
-significant reduction in R&D, marketing,
receivables and inventories
-significant reduction in plant and
equipment newness
• Increase in employee productivity
• Selective Product/Market Pruning
-increase in relative prices, direct
costs, and product quality
-decreased marketing expenses and
inventory expenses
-reduced receivables, decline in
capacity utilization
Khandwalla (1992;
2000)
• Managerial overhaul
• Asset-cost surgery
• Tighter controls and financial
mending
• Transformational changes
• Restructuring and empowerment
• Product market refocusing
actions
• Sales push
• Operational excellence actions
• Cost shedding
• Strategic shift
Lee, Mathur and
Gleason (1998)
• Asset sales
• Employee layoffs
• Executive replacement
• Acquisitions
• Debt restructuring
• Bankruptcy filing
• Dividend cut
• Financing
• Merger
Schendel, Patton and
Riggs (1976)
• Management change
• Organizational change
• Marketing changes
• New products and R&D
• Acquisitions
• Diversification
• Cost cutting
• New control systems
• Divestiture
• Decentralization
• Modernization
Slatter (1984)
• Change of management
• Financial control
• Organizational change
• Product/market reorientation
• Improved marketing
• Acquisitions
• Asset reduction
• Cost reduction
• Investment
• Debt reduction & other financial
strategies
22
Table 2 Turnaround Types and Applicability of Organizational Identity
Ideational Definitional Phenomenological
Turnaround
Types
Turnaround Type
Does it entail
profound
experience?
Is it about CED
characteristics?
Is it related to the
answer to the question
“Who are we?”
Is Organizational
Identity affected?
Strategic turnaround Yes Yes Yes Yes Schendel,
Patton &
Riggs
(1976);
Hofer
(1980)
Operating turnaround May be; No May be; No May be; No May be; No
Asset & cost surgery Yes; May be May be May be Yes, May be
Selective product/market
pruning
May be May be May be May be
Hambrick.
&
Schecter
(1983) Piecemeal moves No May be No No
Surgical reconstructive Yes Yes Yes Yes
Surgical productivity/
innovation oriented
Yes May be May be Yes; May be
Non-surgical innovation
oriented
May be May be May be May be; No
Khandwal
la (1992)
Non-surgical transformation Yes Yes Yes Yes
Tighter controls and financial
mending, product market
refocusing turnaround
Yes Yes Yes Yes
Managerial overhaul
turnaround
Yes Yes Yes Yes/Maybe
Tighter controls and financial
mending turnaround
Yes May be May be Maybe
Operating excellence
turnaround
Yes May be May be Maybe
Surgical, transformational,
empowerment, operating
excellence, cost shedding
turnaround
Yes Yes Yes Yes
Restructuring and
empowerment and sales push
turnaround
Yes Yes May be Yes
Strategic shift, cost shedding,
product market refocus
turnaround
Yes Yes Yes Yes
Khandwal
la (2001)
Cost shedding, operating
excellence, managerial
overhaul turnaround
Yes Yes Yes Yes
23
Table 3 Turnaround Themes and Organizational Identity Dynamics
Turnaround
Theme
Actions Organizational Identity Dynamics Managerial Implications
Top management
change
• Change of CEO / MD /
President
• Change in board configuration
• Change in top management
team
• Vacuum in the meaning making processes,
potential for new interpretation and change in
identity
• Change in the projected image & hence stakeholder
expectations
• Signals organizational determination for change &
break from past
• High anxiety and stress among internal
stakeholders due to uncertainty
How do we know who we are?
• Managerial actions not bound by history
• Potential for creating a new identity,
reinterpret the existing identity or transform
the existing identity
• New managers need to be aware of
implications of their actions on identity
• Assessment of the identity and it linkages to
past strategies & decisions, and decline is
critical
• Balancing the historical, emerging & aspired
identities important
Asset
reconfiguration
• Spin off
• Divestiture
• Acquisition
• Merger
• Plant closure
• Changes in classification / comparative schema
• Organizational identity dissonance if actions are
seen as incongruent with identity
• Organizational identity dissonance if expunged part
holds CED characteristic
• Acquisitions & mergers a source of new identity
attributes
• Can lead to fragmentation of identity
What are we?
• A choice in organizational identity
management, pruning of self classification
schema
• Acquisitions can inspire identity change
process or hamper it
• Asset reconfiguration without appropriate
diagnosis can stall turnaround and
compromise core competencies
Organizational
restructuring
• Organizational redesign
• Decentralization
• Business process
reengineering
• Flat / horizontal structure
• Team based structure
• SBU / profit centered structure
• Changes in systems &
processes of various functions
• Change in everyday behavior and living of the
collective
• Organizational identity dissonance if turnaround
actions and/or consequential changes are seen as
incongruent with identity
• Change in historical manifestation of identity
• Can initiate dis-identification & de-identification
• Change in the experienced reality
How are we a collective?
• Process of restructuring plays critical role in
achieving objectives of retaining or
changing identity
• Resistance to change due to work culture
can be more effectively managed with an
identity based approach
• Identity can be indirectly addressed by
changes in power distribution, structure,
roles and behavioral expectations
Strategic Change • Change in competitive &
growth strategies
• Changes in core competencies
• Domain changes
• Product /market changes
• Changes in classification / comparative schema
• Organizational identity dissonance if turnaround
actions and/or consequential changes are seen as
incongruent with identity
• Exposure to alternative images of stakeholders
• Changes in strategies have potential for
changing identity, so it should be a choice
• Clarity in short, medium and long term
effects & influences on identity is required
• Can change identity over time without the
24
How do we fulfill our reason for existence? organization realizing it
Substantive
changes in
membership
• Retrenchment of workers
• Retrenchment of managers
• Voluntary retirement schemes
• Shift from permanent workers
to contractual workers
• Survivor syndrome, reduction in morale &
collective self esteem, and collective helplessness
• Collective as defined in the past does not exist –
hence change ready
• Questioning and review of membership and
identification
• Disruption in collective meaning making process
• Individual and organizational identities are
intertwined in developing lifetime employment
contexts mass scale identity problems
Who constitute the WE/US ?
• Managers need to be aware of the impact of
substantive changes in membership on
survivors, retrenched employees and image
• Alternatives need to be actively considered
in contexts where social security is absent
• If necessary retrenchment processes should
safe guard the individual’s dignity in a
honorable way
• In developed economy context retrenchment
process communicates the top management
style and their interpretation of
organizational reality
Transformational
Change
• Participative change
• Empowerment
• Change agent programs
• Stakeholder management
• Mindset change
• Culture change
• Creation of a new identity
• Transformation of the existing identity or
• Reinterpretation of existing identity labels
• Transformational processes enable collective
meaning making, ie identity formulation and
evolution
• Transformation of the living, experiencing,
expressing and meaning making reality
• Changes external attributions and reputation
How are we different from who we were?
• Transformational changes can reinterpret or
transform the existing identity or create a
new identity
• Organization wide changes that are likely
penetrate deep & remain for long in to the
organization
• The cost of transformational changes should
be balanced with the expected results
• Apt for decline caused by deep rooted
internal and external causes
Functional/
efficiency
changes
• Change in debt equity ratio
• Training for competency
• Change in budgeting &
accounting
• Shop floor reorganization
• Changes for productivity &
quality improvement
• Sales push, pricing changes,
promotions, etc
• Change is most likely to be change in expression of
organizational identity and not have much impact
on identity and is easily manageable
• Rarely it might be a change in CED characteristics-
-might lead to resistance, anxiety and stress
How can we exist more efficiently?
• Clear delineation of CED characteristics
from other attributes is important for change
implementation
• Attributes that can become future identity
attributes should be promoted
• Actions with quick results can initiate new
CED characteristics under identity
ambiguity & effectively used
25
Table 4 Turnaround Themes and Focus of Turnaround
Turnaround
Theme
Strategic
Focus
Entrepreneurial
Focus
Tough
Focus
Tender
Focus
External
Focus
Internal
Focus
Operational
Focus
Efficiency
Focus
Top
management
change
Yes Yes Yes Yes
Asset
reconfiguration
Yes Yes Yes Yes Yes Yes Yes
Organizational
restructuring
Yes Yes Yes Yes
Strategic change Yes Yes Yes Yes
Substantive
changes in
membership
Yes Yes Yes Yes
Transformational
change
Yes Yes Yes Yes Yes Yes Yes Yes
Functional/
efficiency
changes
Yes Yes Yes Yes
Table 5 Turnaround Theme and Applicability of Organizational Identity
Ideational Definitional Phenomenological
Does it entail
profound
experience?
Is it about CED
characteristics?
Is it related to the
answers to the
question
“Who are we?”
Is Organizational
Identity affected?
Turnaround
Theme
Top management
change
Yes Yes Yes Yes
Asset
reconfiguration
Yes Yes Yes Yes
Organizational
restructuring
Yes Yes Yes Yes
Strategic Change Yes Yes Yes Yes
Substantive
changes in
membership
Yes Yes Yes Yes
Transformational
Change
Yes Yes Yes Yes
Functional/
efficiency changes
May be May be May be May be
26
Indian Institute of Management Kozhikode
Type of Document: (Working Paper/Case/
Teaching Note, etc.)
Working Paper
Ref. No.:
IIMK/WPS/26/OB&HR/2007/14
Title:
BUILDING A CASE FOR INCLUSION OF ORGANIZATIONAL IDENTITY
IN TURNAROUND RESEARCH
Author(s):
S.Jeyavelu
Indian Institute of Management Kozhikode
IIMK Campus PO-673570,
Kozhikode,Kerala,India
Ph
91-495) 2809244 email: [email protected]Institution(s):
Indian Institute of Management Kozhikode,
Kozhikode, Kerala, India
Subject Areas: Organizational Behaviour &
Human Resource
Subject Classification Codes, if any:
Supporting Agencies, if any:
Research Grant/Project No.(s):
Date of Issue: August 2007
Supplementary Information, if any:
Number of Pages: 25
Abstract:
The objective of this paper is to build a case for inclusion of organizational identity construct in
turnaround research. After a brief review of various perspectives in turnaround research, the paper
traces the major findings in turnaround actions and types. Based on the exhaustive list of
turnaround actions, seven turnaround action themes were identified - top management change,
asset reconfiguration, organizational restructuring, strategic change, substantive changes in
membership, transformational change, and functional/ efficiency changes. These seven turnaround
themes are mapped into the three organizational identity conceptual criteria – ideational (collective
answers to the question ‘who are we?’), definitional (the conceptual domain of central, enduring and
distinguishing characteristics of an organization) and phenomenological (a context of profound
organizational experience) (Whetten 2006). To extend support four turnaround typologies are also
mapped onto these criteria. The analysis clearly indicates the pervasiveness of identity related
dynamics in turnaround. The plausible organizational identity dynamics in each of the themes and
the managerial implications are enumerated in detail. The paper concludes with suggestions for
further building the case for including organizational identity in turnaround research.
Key Words/Phrases: Organizational Identity, Decline, Turnaround
Referencing Style Followed:
doc_472366845.pdf