Organizational decline and turnaround management: a contingency framework

Abstract

This study examines the reasons for organizational decline and suggests context-specific turnaround process. The decline is primarily an outcome of inaction of managers and inappropriate actions of managers in response to environmental reality. The causality variables to explain inaction and inappropriate actions are of two types: a) organization-specific like past experiences, sunk investment, specialized assets, bureaucratic control, internal political and cultural constraints, managerial commitment to status quo and b) environment-specific like legal, political, social, and economic constraints. The turnaround process of declining organizations needs to be tailored to match the contextual reality. This paper develops a contingency framework to explain context-action choice relationship.