Organizational Causes and Strategic Consequences of the Extent of Top Management Team Replacement During Turnaround Attempts

Vincent L. Barker, Paul W. Patterson and George C. Mueller

Journal of Management Studies, 2001, vol. 38, issue 2, 235-270

Abstract: Researchers have argued that top management team changes are an important force spurring change at declining firms. Yet, studies find that top executives at some firms are able to avoid being replaced even though their firms perform poorly. Also, despite support from numerous case analyses, there is little systematic evidence that replacing top managers leads to substantial organizational change at declining firms. In this study, we examine these issues by looking at levels of top management team replacement at a sample of declining firms attempting turnarounds. We find that top management team replacement levels vary with the presence of inertial or change‐creating forces within firms. In particular, reduced levels of top management team replacement occur during turnaround attempts at large firms and those that have followed the same strategic orientation for a long period of time. Meanwhile, increases in outsider control of the board are associated with increased levels of replacement. We further find that higher levels of top management team replacement are associated with greater changes in firm competitive strategy and firm structure and controls during turnaround attempts. Overall, our findings show that organizational‐level forces play an important role in top management and strategic change processes at declining firms.

Date: 2001
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