| Abstract: | Past researchers have observed that decliningorganizations often experience mechanistic structuralchanges that centralize authority, increase reliance onformalized procedures, and reduce the amount of information flowing to top managers. Many haveproposed that this “mechanistic shift” indeclining organizations reduces their adaptivecapability by making innovative organizational change in response to decline less likely. However,despite much research on declining firms and theirturnaround attempts, many questions about mechanisticshifts remain, such as: (1) To what extent do declining firms become systematically mechanistic whentrying to recover from decline? (2) What aspects ofdeclining firms' situations make mechanistic shifts morelikely? (3) Do mechanistic shifts reduce the likelihood of large-scale strategic reorientation asdeclining firms attempt to recover? We sought answers tothese questions through an analysis of data fromin-depth interviews with top managers (mostly CEOs) at 29 U.S. firms attempting turnarounds fromdecline. Our primary finding was that mechanisticstructure shifts did restrict firms' abilities to changetheir strategic orientations in response to decline. Highlighting the important role of the contextof turnaround attempts, we further found the averagedeclining firm attempting a turnaround did not becomemore mechanistic, but that turnaround attempts launched from financial crises were significantly morelikely to lead to mechanistic shifts. Also, we foundthat the common practice of replacing the firm's CEOduring turnaround attempts had conflicting andparadoxical effects on firms' abilities to enact strategicreorientations. |
