Description
This paper deals with Turnaround Management Strategies in failing local authorities. The paper suggests that while the New Public Management reform resulted in some achievements, some public organizations are persistently failing.
Political Studies Association of Ireland - Annual Conference 2006
Recovering Failing local authorities - Is There a Need for
Turnaround Management Strategies?
Itai Beeri
Abstract
This paper deals with Turnaround Management Strategies in failing local authorities. The paper suggests that
while the New Public Management reform resulted in some achievements, some public organizations are persistently
failing. Although there is no clear-cut distinction between failing and good performing public organizations, the paper
points out some of their characteristics. The Paper analyzes the efforts to recover English local authorities made by the
Audit Commission. These efforts included persistent measurement, inspection, and supervision directed toward local
authorities’ performance improvement. The paper concludes that despite the efforts the success was partial due to two
main reasons: first, the lack of experience and grounded knowledge and second, the use of inappropriate strategies.
The paper suggests that in order to recover an organization there is need to implement unique and distinguish
strategies named Turnaround Management Strategies. In order to gain grounded information for this study, qualitative
data was collected. In addition to documents that were analyzed, four face-to-face interviews were conducted with
local authorities’ leaders, who were deeply involved in successful recoveries.
Introduction
Turnaround Management Strategies have been researched widely in the private sector as part
of the organizational study area. However, only recently these strategies have been researched in
the public sector and specifically in the local authorities’ context. Addressing failing local
authorities should have been one of the first priorities of governments. However, traditionally,
failing public organizations were not a major concern among decision makers. This paper’s aim is
1
to draw attention to the importance of Turnaround Management Strategies and their impact on
local authorities’ recovery. The wide interest in New Public Management created a different reality
that has less tolerance toward failures (Boyne, 2002; Christensen, & Laegreid, 1999; Glynn
& Murphy, 1996). As this paper would show, these changes increase the relevance of Turnaround
Management Strategies.
In order to gain grounded information on this topic qualitative data was collected. Semi-
structured interviews were conducted with four leaders from two English local authorities who
were deeply involved in a successful recovery process over the last four years. In addition, relevant
documents provided by the local authorities and from the Audit Commission website were
analyzed.
Local Authorities Improvements
Traditionally, public services have been perceived as deficient performers. Consumers and
politicians claimed that public services have not been responsive enough to the environmental
changes and to clients’ needs (Cornforth & Paton, 2004). As a result and in response to the
increasing criticism, the ‘New Public Management’, a central multidimensional reform, has
changed the face of public administration (Boyne, 2002). Basically, New Public Management
emphasizes modernization of political and administrative systems (Christensen, & Laegreid 1999)
by implementing financial standards like, economy, efficiency, and effectiveness and, by
introducing professional management committed to these standards.
The New Public Management reform created new conditions, motivations, and expectations
among politicians, managers, and consumers (Cutler, 2004). Management’s performance has been
a major concern for government policy makers, especially in the UK (Cornforth & Paton, 2004). In
2
England, huge efforts have been made to encourage best practices, and to promote stronger
leadership. As part of these efforts to improve performance, the Audit Commission measured, and
inspected local authorities.
The Audit Commission’s methodology, as described by Andrews, Boyne, & Walker (2006),
scored (from 0-lowest to 4-highest) all the main areas of local government activities. These scores
derive from a mixture of existing measurement systems, self-assessment, inspection judgments,
and evidence from performance indicators. Since 2002 and once a year the local authorities are
assessed in a process named Comprehensive Performance Assessment (CPA). The strength of
CPA is that it assesses performance from various perspectives, which provide a more complete
picture and a better understanding of activities (Audit commission, 2005). The rates are given
relatively to ideal standards, to the local authority’s former performance, and to their relative
performance in comparison to other local authorities. Given this methodology, some local
authorities had to be rated as failing, at least at the first measurement. In the following section we
would try to point out the characteristic of these failing local authorities.
Failing Local Authorities
Generally, private organizations could be easily classified as failing according to financial
ratios. Conversely, identifying failing local authorities is not an easy task. Due to complexities of
performance measurement, the distinction between failing and non-failing public organizations is
not a clear-cut one (Walshe et al., 2004). Though it is not obvious which are the failing local
authorities, some characteristics of failing public organizations can be found in the literature.
Generally speaking, failing organizations suffer from unfitness to their environment and thus,
unresponsiveness to their consumers’ needs (Mellahi, J ackson, & Sparks, 2002). According to the
3
interviews’ analysis the symptoms of failing organization were classified into external and internal
groups.
Externally, failing organizations deal with stakeholders’ criticism and poor reputation. For
example, one of the local authorities had even been labelled by the public opinion as “the worst
council in England”. This criticism resulted in pressure from politicians to bring about a recovery
(J oice, 2004). This pressure was noticed by the interviewees who described that they felt that the
government put their local authority under heavy pressure to change the situation, creating in this
way a stressed relationship.
Internally, failing organization’s management is described as poor, centralized, stagnated,
and inflexible (Balgobin & Pandit, 2001). The interviewees reported that the leadership managed
the crisis unprofessionally, and in an “Old fashion” way. Internal services were neglected or
completely missing. In addition, employees of failing organizations suffer from negative feelings
like guilt, regret, and even shame. Therefore, they have negative attitudes; they go through
discomforts and conflicts; they face lack of information and togetherness, and they feel their jobs
are under a threat of discharge (J oice, 2004; Mellahi, J ackson, & Sparks, 2002). From the
interviewees’ point of view the attitudes of both leaders and employees toward the failure itself
were of denial and resistance to change, as stated by one of the leaders: ”people had difficulties to
accept the governmental reports that actually said that we are a rubbish organization”.
In sum, from the above description we can conclude that failing local authorities can be
characterized as organization failing both externally and internally. However, these characteristics
are not conclusive and drawing the line between failing and non-failing local authorities, is still a
hard task.
4
Dealing with Failing Local Authorities
As part of the New Public Management reform, continues efforts to improve the management
and performance of failing local authorities in England have been made since the early 80’s.
However, the Audit Commission, in 2002 identified and labeled 13 local authorities as ‘poor
performers’ and 21 local authorities as ‘weak performers’ (Audit commission, 2002). These 34
local authorities (23% of 150 inspected) provide quite strong evidence that in spite of the efforts,
some local authorities were still failing. In order to track the achievements of recovery processes in
these local authorities, it is important to follow them since the publication of this report.
Stewart (2003) claimed that the British authorities processes have led to significant
improvements in performances. According to the Audit Commission (2005), since 2002, council
services have improved significantly. However, the improvements were usually achieved within
moderate and good performers. Within the poor performers, as rated in 2002, 39 percent have not
recovered yet and are still rated as poor/weak performers in 2005 (see table 1). Within all the poor
and weak performers in 2002, after 3 years of efforts, 12 percent have not made any progress, and
38 percent have made a minor progress. 68 percent of the local authorities are still performing
poorly/weakly/fairly (Audit Commission, 2005).
Pointing out a recovery process as successful, like pointing out a failing organization, is not
an easy task. J oice (2004) defined a public sector organization that experiences a recovery process
as an ’organization moving from being poor performer to being a good performer’. Accordingly,
moving from being a poor performer to being a weak performer would not be considered as a
significant recovery. Given that three years after the first publication of the CPA half of the local
authorities that had failed in 2002 are persistently failing, we can conclude that this data reflects a
5
Table 1: Local Authorities’ Comprehensive Performance Assessment over 2002 & 2005 – N (%)
2002 2005
0 stars 1 stars 2 stars 3 stars 4 stars
0 stars 13 (100) 1 (8) 4 (31) 6 (46) 2 (15) 0 (0)
1 stars 21 (100) 0 (0) 3 (14) 9 (43) 9 (43) 0 (0)
0-1 stars 34 (100) 1 (3) 7 (21) 15 (44) 11 (32) 0 (0)
Source: Audit Commission (2002-5)
partial success in recovering local authorities and there is still a need for better solutions for failing
local authorities.
Turnaround Management Strategies
The roots of Turnaround Management Strategies can be found in the private sector.
However, the Turnaround management rhetoric is gaining popularity in the public sectors as well
(see for example, Walshe et al., 2004; Turner et al., 2004, Boyne, 2004; Paton & Mordaunt, 2004;
Cornforth & Paton, 2004; J oyce, 2004; J as and Skelcher, 2005). Many of the ideas, concepts, and
models that have been developed in the for-profit sector have at least some application to the
public service. As Cornforth & Paton (2004) noted, as a result of imperfect and erratic market-
driven processes “cycles of relative decline and recovery are commonly observed among
companies…similar cycles … occur in the public and non-profit setting”.
The cycles of decline and recovery are affected by the strategies implemented by the
management, which were straightforwardly defined by Pandit (2000) as ‘the actions taken to bring
about a recovery in performance in a failing organization’. Pandit’s definition refers to the
managerial aspect of the recovery process, and to the management’s actions directed toward
6
achieving a successful recovery, or in other words, the Turnaround Management Strategies.
According to Boyne (2004), there are three general, major Turnaround Management Strategies
named the 3Rs: Retrenchment, Repositioning, and Reorganization.
Retrenchment is a strategy that deals with efficiency. It includes a reduction in the scope or
the size of the organization. One of the main objectives of these steps is to release resources from
unproductive sections that can be reinvested in more productive ones. As a result of this
reinvestment higher quality of performance and better outcomes would be delivered to the public
(Boyne, 2004). The implementation of retrenchment in a public organization might be more
complex than its implementation in the private sector. Cessation or the reduction of the scope of a
service would be determined not by the profitability test but other considerations will be evaluated.
Although these complications might arrive there is growing evidence that suggests that
retrenchment is one of the basic and common sets of activities in successful recoveries.
The second strategy, Repositioning, deals with effectiveness. Repositioning emphasizes
growth and innovation (Schendel & Paton, 1976). As a response to failure, repositioning suggests
to redefine the core missions and activities of an organization. Implementing repositioning
includes improving the existing services or supplying brand new services to current consumers or
to new variety of consumers (Schendel & Paton, 1976; Borins, 1998). The introductions of cost-
effective services immediately improve the performance of the organization. Nevertheless,
implementation of repositioning strategies requires creativity and managers in failing organizations
are usually stuck in traditional ways of working rather than innovative ones (Boyne, 2004).
Finally, the third R is Reorganization. The strategy could be regarded as any internal
organizational change, including changes within leadership personnel. The purpose of
reorganization is either to support the implementation of retrenchment and repositioning or simply
7
to improve the organization performance. Reorganization might involve for example, changes in
the extent of centralization, changes in human resources management styles, or in the
organizational climate.
From the above description it is not obvious in what way Turnaround Management Strategies
are unique and distinctive. It could be claimed that there is no need for distinguished Strategies for
failing local authorities. Although improvement strategies might indeed make some changes in the
performance of a failing organization, their ability to bring about a full recovery is limited. The
following six factors would illustrate a deeper explanation for Turnaround Management Strategies’
uniqueness:
1. The Aim, scope, and Proportionality– The aim of Turnaround Management Strategies is to
create a radical organizational change and not a minor upgrading of the existing performance
(Boyne, 2004). The scope of Turnaround Management Strategies is broader than the scope of
improvements strategies and was described by the interviewees as radical. The strategies are
substantial (Paton & Mordaunt’s, 2004) and would probably affect all parts and stakeholders
of a local authority (Boyne, 2004). In other words, to achieve a successful recovery the tools
used should be proportional to the aim that the tools are meant to achieve- radical tools for
radical changes.
2. Time restriction –Turnaround Management Strategies are rapid (Paton & Mordaunt’s 2004),
and they occur in a defined and restricted period of time. A recovery process is not an endless,
ongoing routine process while improvement could be a persistent practice needed during all
the organization’s lifetime.
3. Urgency – Turnaround Management Strategies were described by the interviewees as urgent,
because they are implemented as a reaction to a crisis or as an attempt to prevent one.
8
Improvement strategies are more moderate. Consequently, they may be less efficient in urgent
situations.
4. Inspection & Examination – Turnaround Management Strategies are usually forced, inspected,
and supervised by external stakeholders (Turner et al., 2004). The leadership has less degree of
freedom to choose whether, when, and which strategies to implement. Usually, competition
between local authorities, union strikes, increasing demands, or coming elections might
increase the pressure to bring about a successful recovery. This situation was identified by the
interviewees who claimed that the leadership was under pressures and demands from the press,
the wide public, and governmental officers. The culmination of these pressures was the
takeover threat over the leaders themselves.
5. The Management – Poor management is one of the significant causes of organizational failure
(Walshe et al., 2004; Audit Commission). Therefore, replacement of the leadership was found
as one of the most common and necessary Turnaround Management Strategies, in the private
sector (Hofer, 1980; Boyne & Dahya, 2002; Walshe et al., 2004; Turner et al., 2004). Whether
or not that is the case in the public sector, Turnaround Management Strategies would be
usually implemented either by an experienced but poor management, or by new management
who is unfamiliar with the organization.
6. The Organizational Climate – Turnaround Management Strategies would be generally
implemented in a negative climate. For instance, the leadership would probably face lack of
motivation, antagonism, conflicts, and resistance to change of employees, consumers, and
other external stakeholders (Balgobin & Pandit, 2001; Mellahi, J ackson, & Sparks, 2002).
In sum, the nature of Turnaround Management Strategies as discussed above, differs
quantitatively and qualitatively from improvement strategies. A different set of strategies is
9
required to recover a failing local authority than the set that is required to transform a local
authority from being a good to being an excellent performer. Consequently, Turnaround
Management Strategies are the key for a successful recovery process. However, any recovery
process is unique and requires an adjusted and appropriate set of strategies. Combining the nature
and extent of these strategies with the characteristics of the organization is essential to the success
of the process. In the next section we would try to figure out to what extent these strategies are
known to English managers and decision makers, and to what extent they have been in use.
The Reasons for the Partial Success in Recovering Failing Local Authorities
Public sector performance is currently a significant issue for management practice and policy,
especially for organizations delivering less than acceptable results (J as and Skelcher, 2005). From
the English case it is clear that there was an increasing and ongoing interest in improving
performance. Accordingly, these growing interests made the government introduce a more robust
intervention (Cornforth & Paton, 2004). As part of this intervention, efforts were made to
recognize failing local authorities, to supply them the necessary support, and to supervise them
(Walshe et al., 2004).
Although failing local authorities have received special and adapted treatment, these
treatments have been introduced only lately, and previous experience and grounded knowledge
were severely missing. As Cornforth & Paton (2004) pointed out, “little is known about whether,
how often and why ‘normal’ cycles of decline, and recovery may be arrested”. Managers in the
public sector suffer from a lack of appropriate tools for predicting a failure, preventing it, and
dealing with a crisis after it occurred (Mellahi, J ackson, & Sparks, 2002; Melahi & Wilkinson,
10
2004; Paton, 2003). Therefore, a full and coherent understanding of the failure and recovery
dynamic in local authorities is still needed.
According to Walshe et al., (2004) data and theoretical knowledge in the public sector
context is missing. Detailed case studies that describe failing public organizations are infrequent.
The existing study cases are mostly focused on the causes of failure, their symptoms, and the
triggers for change. They are not focused on Turnaround Management Strategies and the way they
contribute to recovery (see for example, Turner et al., 2004; J as and Skelcher, 2005; Paton &
Mordounnt, 2004; J oyce, 2004; Mordaunt & Cornforth, 2004). The theoretical papers do not
develop explanations for a successful recovery process as well (see for example, Walshe et al.,
2004; Boyne, 2004; Willmott, 1999). Above all, empirical quantitative study that analyzes
Turnaround Management Strategies and tests their impact on recovery is completely missing
(Boyne, 2003).
In the field, the lack of experience and grounded knowledge created a gap between the
needed and the actual available tools. The vacuum created by this gap was probably filled by the
implementation of known and common improvement strategies. As we demonstrated, the
improvement strategies are not fully appropriate and effective for persistent failing local
authorities. Therefore, it is not surprising that the English efforts resulted in partial success. Which
Turnaround Management Strategies, if any, have been implemented, to what extent and, what has
been their contribution to successful recoveries is still unclear.
This unclearness has not arisen incidentally. J as & Skelcher (2005) and Cornforth & Paton
(2004) explained that this lack is rooted in the governments’ policy and the predominant ethos that
focuses on excellence. As a result of this policy, most research dismisses poorly performing cases
and strategies engaged in consistent failures.
11
This tendency can be recognized in the Audit Commission measurement policy, which is
focused on outcomes, and does not deal with the strategies behind successful/unsuccessful
recoveries. Given that, and taking into account the lack of research on this topic, the ability of the
Audit Commission to give valuable guidance to failing local authorities is limited.
From here, it becomes clearer that further research is needed. In order to achieve the most
effective recoveries, governments and local authorities should base their policy on grounded
evidences. As Boyne (2004) argued: Turnaround Management Strategies in local authorities “have
received scant attention by public management researchers”, although this is a topic of “huge
practical significance”. The existing theory of Turnaround Management is currently either
inadequate (Barker & Duhaime, 1997) or not existing (Pearce & Robbins, 1993). Thus, we
conclude that further research to point out which Turnaround Management Strategies are
effectively implemented should be carried out.
Conclusion
Along with the positive changes under the umbrella of the New Public Management, some
local authorities have stayed in the back. Decision makers have figured out that failing local
authorities’ leadership needs adjusted supervision for recovering. At this point, a partial success
has been achieved and bringing failing local authorities up to the highest standards is still a
challenge. Through this paper we examined the reasons behind this partial success and concluded
that unique and more effective strategies are required. Thus, a better understanding and tracking of
Turnaround Management Strategies is required in order to reach full recoveries.
12
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14
doc_486696712.pdf
This paper deals with Turnaround Management Strategies in failing local authorities. The paper suggests that while the New Public Management reform resulted in some achievements, some public organizations are persistently failing.
Political Studies Association of Ireland - Annual Conference 2006
Recovering Failing local authorities - Is There a Need for
Turnaround Management Strategies?
Itai Beeri
Abstract
This paper deals with Turnaround Management Strategies in failing local authorities. The paper suggests that
while the New Public Management reform resulted in some achievements, some public organizations are persistently
failing. Although there is no clear-cut distinction between failing and good performing public organizations, the paper
points out some of their characteristics. The Paper analyzes the efforts to recover English local authorities made by the
Audit Commission. These efforts included persistent measurement, inspection, and supervision directed toward local
authorities’ performance improvement. The paper concludes that despite the efforts the success was partial due to two
main reasons: first, the lack of experience and grounded knowledge and second, the use of inappropriate strategies.
The paper suggests that in order to recover an organization there is need to implement unique and distinguish
strategies named Turnaround Management Strategies. In order to gain grounded information for this study, qualitative
data was collected. In addition to documents that were analyzed, four face-to-face interviews were conducted with
local authorities’ leaders, who were deeply involved in successful recoveries.
Introduction
Turnaround Management Strategies have been researched widely in the private sector as part
of the organizational study area. However, only recently these strategies have been researched in
the public sector and specifically in the local authorities’ context. Addressing failing local
authorities should have been one of the first priorities of governments. However, traditionally,
failing public organizations were not a major concern among decision makers. This paper’s aim is
1
to draw attention to the importance of Turnaround Management Strategies and their impact on
local authorities’ recovery. The wide interest in New Public Management created a different reality
that has less tolerance toward failures (Boyne, 2002; Christensen, & Laegreid, 1999; Glynn
& Murphy, 1996). As this paper would show, these changes increase the relevance of Turnaround
Management Strategies.
In order to gain grounded information on this topic qualitative data was collected. Semi-
structured interviews were conducted with four leaders from two English local authorities who
were deeply involved in a successful recovery process over the last four years. In addition, relevant
documents provided by the local authorities and from the Audit Commission website were
analyzed.
Local Authorities Improvements
Traditionally, public services have been perceived as deficient performers. Consumers and
politicians claimed that public services have not been responsive enough to the environmental
changes and to clients’ needs (Cornforth & Paton, 2004). As a result and in response to the
increasing criticism, the ‘New Public Management’, a central multidimensional reform, has
changed the face of public administration (Boyne, 2002). Basically, New Public Management
emphasizes modernization of political and administrative systems (Christensen, & Laegreid 1999)
by implementing financial standards like, economy, efficiency, and effectiveness and, by
introducing professional management committed to these standards.
The New Public Management reform created new conditions, motivations, and expectations
among politicians, managers, and consumers (Cutler, 2004). Management’s performance has been
a major concern for government policy makers, especially in the UK (Cornforth & Paton, 2004). In
2
England, huge efforts have been made to encourage best practices, and to promote stronger
leadership. As part of these efforts to improve performance, the Audit Commission measured, and
inspected local authorities.
The Audit Commission’s methodology, as described by Andrews, Boyne, & Walker (2006),
scored (from 0-lowest to 4-highest) all the main areas of local government activities. These scores
derive from a mixture of existing measurement systems, self-assessment, inspection judgments,
and evidence from performance indicators. Since 2002 and once a year the local authorities are
assessed in a process named Comprehensive Performance Assessment (CPA). The strength of
CPA is that it assesses performance from various perspectives, which provide a more complete
picture and a better understanding of activities (Audit commission, 2005). The rates are given
relatively to ideal standards, to the local authority’s former performance, and to their relative
performance in comparison to other local authorities. Given this methodology, some local
authorities had to be rated as failing, at least at the first measurement. In the following section we
would try to point out the characteristic of these failing local authorities.
Failing Local Authorities
Generally, private organizations could be easily classified as failing according to financial
ratios. Conversely, identifying failing local authorities is not an easy task. Due to complexities of
performance measurement, the distinction between failing and non-failing public organizations is
not a clear-cut one (Walshe et al., 2004). Though it is not obvious which are the failing local
authorities, some characteristics of failing public organizations can be found in the literature.
Generally speaking, failing organizations suffer from unfitness to their environment and thus,
unresponsiveness to their consumers’ needs (Mellahi, J ackson, & Sparks, 2002). According to the
3
interviews’ analysis the symptoms of failing organization were classified into external and internal
groups.
Externally, failing organizations deal with stakeholders’ criticism and poor reputation. For
example, one of the local authorities had even been labelled by the public opinion as “the worst
council in England”. This criticism resulted in pressure from politicians to bring about a recovery
(J oice, 2004). This pressure was noticed by the interviewees who described that they felt that the
government put their local authority under heavy pressure to change the situation, creating in this
way a stressed relationship.
Internally, failing organization’s management is described as poor, centralized, stagnated,
and inflexible (Balgobin & Pandit, 2001). The interviewees reported that the leadership managed
the crisis unprofessionally, and in an “Old fashion” way. Internal services were neglected or
completely missing. In addition, employees of failing organizations suffer from negative feelings
like guilt, regret, and even shame. Therefore, they have negative attitudes; they go through
discomforts and conflicts; they face lack of information and togetherness, and they feel their jobs
are under a threat of discharge (J oice, 2004; Mellahi, J ackson, & Sparks, 2002). From the
interviewees’ point of view the attitudes of both leaders and employees toward the failure itself
were of denial and resistance to change, as stated by one of the leaders: ”people had difficulties to
accept the governmental reports that actually said that we are a rubbish organization”.
In sum, from the above description we can conclude that failing local authorities can be
characterized as organization failing both externally and internally. However, these characteristics
are not conclusive and drawing the line between failing and non-failing local authorities, is still a
hard task.
4
Dealing with Failing Local Authorities
As part of the New Public Management reform, continues efforts to improve the management
and performance of failing local authorities in England have been made since the early 80’s.
However, the Audit Commission, in 2002 identified and labeled 13 local authorities as ‘poor
performers’ and 21 local authorities as ‘weak performers’ (Audit commission, 2002). These 34
local authorities (23% of 150 inspected) provide quite strong evidence that in spite of the efforts,
some local authorities were still failing. In order to track the achievements of recovery processes in
these local authorities, it is important to follow them since the publication of this report.
Stewart (2003) claimed that the British authorities processes have led to significant
improvements in performances. According to the Audit Commission (2005), since 2002, council
services have improved significantly. However, the improvements were usually achieved within
moderate and good performers. Within the poor performers, as rated in 2002, 39 percent have not
recovered yet and are still rated as poor/weak performers in 2005 (see table 1). Within all the poor
and weak performers in 2002, after 3 years of efforts, 12 percent have not made any progress, and
38 percent have made a minor progress. 68 percent of the local authorities are still performing
poorly/weakly/fairly (Audit Commission, 2005).
Pointing out a recovery process as successful, like pointing out a failing organization, is not
an easy task. J oice (2004) defined a public sector organization that experiences a recovery process
as an ’organization moving from being poor performer to being a good performer’. Accordingly,
moving from being a poor performer to being a weak performer would not be considered as a
significant recovery. Given that three years after the first publication of the CPA half of the local
authorities that had failed in 2002 are persistently failing, we can conclude that this data reflects a
5
Table 1: Local Authorities’ Comprehensive Performance Assessment over 2002 & 2005 – N (%)
2002 2005
0 stars 1 stars 2 stars 3 stars 4 stars
0 stars 13 (100) 1 (8) 4 (31) 6 (46) 2 (15) 0 (0)
1 stars 21 (100) 0 (0) 3 (14) 9 (43) 9 (43) 0 (0)
0-1 stars 34 (100) 1 (3) 7 (21) 15 (44) 11 (32) 0 (0)
Source: Audit Commission (2002-5)
partial success in recovering local authorities and there is still a need for better solutions for failing
local authorities.
Turnaround Management Strategies
The roots of Turnaround Management Strategies can be found in the private sector.
However, the Turnaround management rhetoric is gaining popularity in the public sectors as well
(see for example, Walshe et al., 2004; Turner et al., 2004, Boyne, 2004; Paton & Mordaunt, 2004;
Cornforth & Paton, 2004; J oyce, 2004; J as and Skelcher, 2005). Many of the ideas, concepts, and
models that have been developed in the for-profit sector have at least some application to the
public service. As Cornforth & Paton (2004) noted, as a result of imperfect and erratic market-
driven processes “cycles of relative decline and recovery are commonly observed among
companies…similar cycles … occur in the public and non-profit setting”.
The cycles of decline and recovery are affected by the strategies implemented by the
management, which were straightforwardly defined by Pandit (2000) as ‘the actions taken to bring
about a recovery in performance in a failing organization’. Pandit’s definition refers to the
managerial aspect of the recovery process, and to the management’s actions directed toward
6
achieving a successful recovery, or in other words, the Turnaround Management Strategies.
According to Boyne (2004), there are three general, major Turnaround Management Strategies
named the 3Rs: Retrenchment, Repositioning, and Reorganization.
Retrenchment is a strategy that deals with efficiency. It includes a reduction in the scope or
the size of the organization. One of the main objectives of these steps is to release resources from
unproductive sections that can be reinvested in more productive ones. As a result of this
reinvestment higher quality of performance and better outcomes would be delivered to the public
(Boyne, 2004). The implementation of retrenchment in a public organization might be more
complex than its implementation in the private sector. Cessation or the reduction of the scope of a
service would be determined not by the profitability test but other considerations will be evaluated.
Although these complications might arrive there is growing evidence that suggests that
retrenchment is one of the basic and common sets of activities in successful recoveries.
The second strategy, Repositioning, deals with effectiveness. Repositioning emphasizes
growth and innovation (Schendel & Paton, 1976). As a response to failure, repositioning suggests
to redefine the core missions and activities of an organization. Implementing repositioning
includes improving the existing services or supplying brand new services to current consumers or
to new variety of consumers (Schendel & Paton, 1976; Borins, 1998). The introductions of cost-
effective services immediately improve the performance of the organization. Nevertheless,
implementation of repositioning strategies requires creativity and managers in failing organizations
are usually stuck in traditional ways of working rather than innovative ones (Boyne, 2004).
Finally, the third R is Reorganization. The strategy could be regarded as any internal
organizational change, including changes within leadership personnel. The purpose of
reorganization is either to support the implementation of retrenchment and repositioning or simply
7
to improve the organization performance. Reorganization might involve for example, changes in
the extent of centralization, changes in human resources management styles, or in the
organizational climate.
From the above description it is not obvious in what way Turnaround Management Strategies
are unique and distinctive. It could be claimed that there is no need for distinguished Strategies for
failing local authorities. Although improvement strategies might indeed make some changes in the
performance of a failing organization, their ability to bring about a full recovery is limited. The
following six factors would illustrate a deeper explanation for Turnaround Management Strategies’
uniqueness:
1. The Aim, scope, and Proportionality– The aim of Turnaround Management Strategies is to
create a radical organizational change and not a minor upgrading of the existing performance
(Boyne, 2004). The scope of Turnaround Management Strategies is broader than the scope of
improvements strategies and was described by the interviewees as radical. The strategies are
substantial (Paton & Mordaunt’s, 2004) and would probably affect all parts and stakeholders
of a local authority (Boyne, 2004). In other words, to achieve a successful recovery the tools
used should be proportional to the aim that the tools are meant to achieve- radical tools for
radical changes.
2. Time restriction –Turnaround Management Strategies are rapid (Paton & Mordaunt’s 2004),
and they occur in a defined and restricted period of time. A recovery process is not an endless,
ongoing routine process while improvement could be a persistent practice needed during all
the organization’s lifetime.
3. Urgency – Turnaround Management Strategies were described by the interviewees as urgent,
because they are implemented as a reaction to a crisis or as an attempt to prevent one.
8
Improvement strategies are more moderate. Consequently, they may be less efficient in urgent
situations.
4. Inspection & Examination – Turnaround Management Strategies are usually forced, inspected,
and supervised by external stakeholders (Turner et al., 2004). The leadership has less degree of
freedom to choose whether, when, and which strategies to implement. Usually, competition
between local authorities, union strikes, increasing demands, or coming elections might
increase the pressure to bring about a successful recovery. This situation was identified by the
interviewees who claimed that the leadership was under pressures and demands from the press,
the wide public, and governmental officers. The culmination of these pressures was the
takeover threat over the leaders themselves.
5. The Management – Poor management is one of the significant causes of organizational failure
(Walshe et al., 2004; Audit Commission). Therefore, replacement of the leadership was found
as one of the most common and necessary Turnaround Management Strategies, in the private
sector (Hofer, 1980; Boyne & Dahya, 2002; Walshe et al., 2004; Turner et al., 2004). Whether
or not that is the case in the public sector, Turnaround Management Strategies would be
usually implemented either by an experienced but poor management, or by new management
who is unfamiliar with the organization.
6. The Organizational Climate – Turnaround Management Strategies would be generally
implemented in a negative climate. For instance, the leadership would probably face lack of
motivation, antagonism, conflicts, and resistance to change of employees, consumers, and
other external stakeholders (Balgobin & Pandit, 2001; Mellahi, J ackson, & Sparks, 2002).
In sum, the nature of Turnaround Management Strategies as discussed above, differs
quantitatively and qualitatively from improvement strategies. A different set of strategies is
9
required to recover a failing local authority than the set that is required to transform a local
authority from being a good to being an excellent performer. Consequently, Turnaround
Management Strategies are the key for a successful recovery process. However, any recovery
process is unique and requires an adjusted and appropriate set of strategies. Combining the nature
and extent of these strategies with the characteristics of the organization is essential to the success
of the process. In the next section we would try to figure out to what extent these strategies are
known to English managers and decision makers, and to what extent they have been in use.
The Reasons for the Partial Success in Recovering Failing Local Authorities
Public sector performance is currently a significant issue for management practice and policy,
especially for organizations delivering less than acceptable results (J as and Skelcher, 2005). From
the English case it is clear that there was an increasing and ongoing interest in improving
performance. Accordingly, these growing interests made the government introduce a more robust
intervention (Cornforth & Paton, 2004). As part of this intervention, efforts were made to
recognize failing local authorities, to supply them the necessary support, and to supervise them
(Walshe et al., 2004).
Although failing local authorities have received special and adapted treatment, these
treatments have been introduced only lately, and previous experience and grounded knowledge
were severely missing. As Cornforth & Paton (2004) pointed out, “little is known about whether,
how often and why ‘normal’ cycles of decline, and recovery may be arrested”. Managers in the
public sector suffer from a lack of appropriate tools for predicting a failure, preventing it, and
dealing with a crisis after it occurred (Mellahi, J ackson, & Sparks, 2002; Melahi & Wilkinson,
10
2004; Paton, 2003). Therefore, a full and coherent understanding of the failure and recovery
dynamic in local authorities is still needed.
According to Walshe et al., (2004) data and theoretical knowledge in the public sector
context is missing. Detailed case studies that describe failing public organizations are infrequent.
The existing study cases are mostly focused on the causes of failure, their symptoms, and the
triggers for change. They are not focused on Turnaround Management Strategies and the way they
contribute to recovery (see for example, Turner et al., 2004; J as and Skelcher, 2005; Paton &
Mordounnt, 2004; J oyce, 2004; Mordaunt & Cornforth, 2004). The theoretical papers do not
develop explanations for a successful recovery process as well (see for example, Walshe et al.,
2004; Boyne, 2004; Willmott, 1999). Above all, empirical quantitative study that analyzes
Turnaround Management Strategies and tests their impact on recovery is completely missing
(Boyne, 2003).
In the field, the lack of experience and grounded knowledge created a gap between the
needed and the actual available tools. The vacuum created by this gap was probably filled by the
implementation of known and common improvement strategies. As we demonstrated, the
improvement strategies are not fully appropriate and effective for persistent failing local
authorities. Therefore, it is not surprising that the English efforts resulted in partial success. Which
Turnaround Management Strategies, if any, have been implemented, to what extent and, what has
been their contribution to successful recoveries is still unclear.
This unclearness has not arisen incidentally. J as & Skelcher (2005) and Cornforth & Paton
(2004) explained that this lack is rooted in the governments’ policy and the predominant ethos that
focuses on excellence. As a result of this policy, most research dismisses poorly performing cases
and strategies engaged in consistent failures.
11
This tendency can be recognized in the Audit Commission measurement policy, which is
focused on outcomes, and does not deal with the strategies behind successful/unsuccessful
recoveries. Given that, and taking into account the lack of research on this topic, the ability of the
Audit Commission to give valuable guidance to failing local authorities is limited.
From here, it becomes clearer that further research is needed. In order to achieve the most
effective recoveries, governments and local authorities should base their policy on grounded
evidences. As Boyne (2004) argued: Turnaround Management Strategies in local authorities “have
received scant attention by public management researchers”, although this is a topic of “huge
practical significance”. The existing theory of Turnaround Management is currently either
inadequate (Barker & Duhaime, 1997) or not existing (Pearce & Robbins, 1993). Thus, we
conclude that further research to point out which Turnaround Management Strategies are
effectively implemented should be carried out.
Conclusion
Along with the positive changes under the umbrella of the New Public Management, some
local authorities have stayed in the back. Decision makers have figured out that failing local
authorities’ leadership needs adjusted supervision for recovering. At this point, a partial success
has been achieved and bringing failing local authorities up to the highest standards is still a
challenge. Through this paper we examined the reasons behind this partial success and concluded
that unique and more effective strategies are required. Thus, a better understanding and tracking of
Turnaround Management Strategies is required in order to reach full recoveries.
12
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