This article was downloaded by: [Durham University Library]On: 08 January 2015, At: 03:59Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registered office: MortimerHouse, 37-41 Mortimer Street, London W1T 3JH, UK

Public Money & ManagementPublication details, including instructions for authors and subscription information:http://www.tandfonline.com/loi/rpmm20

Organizational Failure and Turnaround: Lessons forPublic Services from the For-Profit SectorKieran Walshe a , Gill Harvey b , Paula Hyde c & Naresh Pandit da Professor of Health Policy and Management, Manchester Centre for HealthcareManagement , University of Manchesterb Senior Lecturer in the Manchester Centre for Healthcare Management , University ofManchesterc Fellow in the Manchester Centre for Healthcare Management , University of Manchesterd Senior Lecturer in Economics , Manchester Business SchoolPublished online: 15 Mar 2010.

To cite this article: Kieran Walshe , Gill Harvey , Paula Hyde & Naresh Pandit (2004) Organizational Failure andTurnaround: Lessons for Public Services from the For-Profit Sector, Public Money & Management, 24:4, 201-208

To link to this article: http://dx.doi.org/10.1111/j.1467-9302.2004.00421.x

PLEASE SCROLL DOWN FOR ARTICLE

Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) containedin the publications on our platform. However, Taylor & Francis, our agents, and our licensors make norepresentations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose ofthe Content. Any opinions and views expressed in this publication are the opinions and views of the authors,and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be reliedupon and should be independently verified with primary sources of information. Taylor and Francis shallnot be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and otherliabilities whatsoever or howsoever caused arising directly or indirectly in connection with, in relation to orarising out of the use of the Content.

This article may be used for research, teaching, and private study purposes. Any substantial or systematicreproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in anyform to anyone is expressly forbidden. Terms & Conditions of access and use can be found at http://www.tandfonline.com/page/terms-and-conditions

PUBLIC MONEY & MANAGEMENT AUGUST 2004

201

© CIPFA, 2004

In recent years, the performance of publicorganizations and services has been increasinglyscrutinized and subject to public debate. It hasbecome commonplace for politicians,government departments and others to labelsome organizations, like schools, hospitals, orlocal authorities, as ‘failing’ and to embark onmeasures aimed at bringing about a turnaroundin their performance. Those involved aredrawing, perhaps unconsciously, on the well-established vocabulary and ideology of failureand turnaround in for profit organizations—inwhich high-profile examples like IBM, Marks& Spencer, or Chrysler Motors often figure.This article reviews the existing literature onfailure and turnaround in the for-profit sector.It identifies some of the models and typologieswhich have been developed and proven usefulin exploring failure and turnaround in for-profit organizations, and discusses the extentto which theoretical and empirical findingsfrom other sectors can be helpful in informingresearch, policy or practice in public and not-for-profit organizations.

Defining and Researching OrganizationalFailure and TurnaroundThere are no generally accepted definitions ofwhat constitutes ‘organizational failure’: it is asubjective and often contested term. Whilethere are some established quantitativemeasures which for-profit organizations mayuse to track performance, such as return oninvestment/assets or trends in profitability, thepoint at which poor performance becomesfailure is difficult to define.

Organizational failure has been definedas an ‘existence-threatening decline’ inperformance (Pandit, 2000) but that declinemay be sudden or gradual, and can beprecipitated by internal actions or inactionsor by external circumstances andenvironmental factors. It rapidly becomesevident that organizational failure is asymptomatic rather than a diagnostic term,in other words it describes a situation facingan organization but does little to help usunderstand how that situation was caused orcame about, or what could or should happennext.

Organizational turnaround can be simplydefined as the actions taken to bring about arecovery in performance in a failingorganization (Pandit, 2000). In practice, itusually consists of a collection of concertedor co-ordinated activities which may includethe replacement of key individuals in theorganization’s management and leadership,immediate attention to major operationalproblems seeking short-term solutions, andthe longer term, but often radical, redesignor re-profiling of the organization and itsbusiness.

There is an extensive, though rathervariable quality, literature on organizationalfailure and turnaround in for-profitorganizations (with useful overviews orreviews in Hoffman, 1989; Pearce andRobbins, 1993; Ketchen, 1998; Anheier,1999; Slatter and Lovett, 1999; Pandit, 2000;Chowdhury, 2002; and McKiernan, 2002).The literature falls into three main areas:

Kieran Walshe isProfessor of HealthPolicy andManagement,Manchester Centrefor HealthcareManagement,University ofManchester.

Gill Harvey is aSenior Lecturer inthe ManchesterCentre forHealthcareManagement,University ofManchester.

Paula Hyde is aFellow in theManchester Centrefor HealthcareManagement,University ofManchester.

Naresh Pandit isSenior Lecturer inEconomics inManchester BusinessSchool.

Organizational Failure andTurnaround: Lessons for PublicServices from the For-Profit SectorKieran Walshe, Gill Harvey, Paula Hyde and Naresh Pandit

As the performance of public services is increasingly scrutinized, it is nowcommonplace for some schools, hospitals, local authorities and other publicorganizations to be deemed ‘failing’ and for attempts to be made at creating aturnaround in their performance. This article explores the literature on failure andturnaround in for-profit organizations, presents a number of models or frameworksfor describing and categorizing failure and turnaround, and examines the relevanceand transferability of theoretical and empirical studies in the for-profit sector to theemerging field of failure and turnaround in public services.

Dow

nloa

ded

by [

Dur

ham

Uni

vers

ity L

ibra

ry]

at 0

3:59

08

Janu

ary

2015

PUBLIC MONEY & MANAGEMENT AUGUST 2004

202

© CIPFA, 2004

•Empirical quantitative research, which usesdata often on a large number of firms ororganizations across a sector to analyseperformance cross-sectionally orlongitudinally. This approach is often usedto try to discern patterns in or test theoriesabout either the causes of failure or the useand impact of intervention strategies.

•Empirical qualitative research, which tends touse small numbers of case study organizationsand to draw mainly on data from interviews,documents, observation and other sourcesto provide a ‘rich description’ of individualinstances of failure and turnaround andsometimes to use them to develop theoriesor models which might then be tested inother settings.

•Theoretical papers, which attempt to develop‘middle range’ theories (Pawson and Tilley,1997) to describe and explain empiricalfindings and to locate the discourse of failureand turnaround in a wider theoreticalcontext.

There are also many anecdotal accounts offailure and turnaround, provided by bothacademics and practitioners. These reports areoften highly readable, but they tend toaccentuate the more dramatic and visiblecharacteristics of such situations; to focusparticularly on the individuals involved inleadership and to ascribe changes to theiractions; to provide a somewhat uncriticalaccount which accepts things at face value; andto focus solely on examples of successfulturnarounds.

There is a further literature onorganizational mergers, acquisitions, take-overs, buy-outs and similar changes which arebrought about by a range of circumstances butwhich are sometimes seen in situations oforganizational failure. Such reorganizationstrategies are not reviewed directly in this article,but often feature some of the mechanisms andbehaviours to be found in failure andturnaround situations (Paton, 1989; Cartwrightand Cooper, 1995; Krieger, 1994).

Symptoms, Causes or Characteristics ofOrganizational FailureOrganizational failure has many possiblesymptoms and causes. These two terms areoften used almost interchangeably in theliterature, signifying a lack of certainty aboutcausal relationships, and so we refer to‘characteristics’ of organizational failure instead.It can be helpful to categorize thesecharacteristics of failure, in one or more ways:

•Chronic and acute characteristics of failure. Thereare often both chronic causes of failure,which are present over an extended periodof time and contribute to a gradual declinein performance; and acute causes which aresometimes also called ‘triggers’ and whichmay force or precipitate a crisis and therecognition or explicit acknowledgement offailure.

•Types or categories of failure. McKiernan (2002)suggests four groupings or categoriesincluding physical, managerial, behaviouraland financial symptoms of decline. Forexample, a lack of leadership and poordecision-making is a managerialcharacteristic of decline, while productfailures or supply problems are physicalcharacteristics. The behavioural problemsconcern culture, attitudes, language andinsight into the situation, while the financialcharacteristics include falling profits andmarket shares, increasing debt burdens,failed attempts to raise finance and increasingfinancial competition.

•Internal and external characteristics of failure.Some of the often-cited symptoms or causesof failure are primarily internal to theorganization, such as poor leadership, whileothers are primarily external and concernedwith its environment, such as increasedcompetition, product or service innovation,or changes in customer expectations (Slatterand Lovett, 1999; Balgobin and Pandit,2001).

McKiernan (2002) argues that the basic causeof most of these symptoms or secondary causesof organizational failure is dysfunction inorganizational learning and describes a rangeof ways in which organizations fail to learnabout themselves and their environment andthrough that enter a performance decline whichmay result in organizational failure.

Perhaps one of the most useful features ofempirical work on the causes or characteristicsof decline is that it emphasises the multi-dimensional and interactive nature of thephenomenon. Each of the circumstancesoutlined above rarely exists in isolation, andthey develop together or even co-evolve, as oneproblem leads to another. For example, it canbe tempting to see all declines and failures asstemming from poor management (and henceto see replacing the management as the primaryor even the sole strategy for turnaround). Whilemany studies concur that poor managementand leadership are important characteristics oforganizational failure (Hoffman, 1989), they

Dow

nloa

ded

by [

Dur

ham

Uni

vers

ity L

ibra

ry]

at 0

3:59

08

Janu

ary

2015

PUBLIC MONEY & MANAGEMENT AUGUST 2004

203

© CIPFA, 2004

are rarely present alone and may be as much asymptom of failure as a cause. Organizationaldecline can lead high-performing managers toleave for careers elsewhere—a flight of talentwhich may speed up failure but may notnecessarily have caused it.

It is also clear that the heterogeneous natureof the characteristics of organizational failuremeans that turnaround strategies orinterventions need to take proper account ofand be focused on the known characteristics oforganizational failure if they are to succeed. Inother words, turnaround strategies orinterventions need to be tailored and matchedto the individual causes of organizational failurerather than seen and used as ‘one-size-fits-all’approaches which are useful in most or allcircumstances.

Diagnosing and Predicting FailureThe diagnosis or labelling of organizationalfailure is usually preceded by an often extendedperiod of declining performance. Indeed, it iscommonplace for the actual diagnosis to bedelayed by both internal and externalstakeholders failing to perceive the problem,ignoring it, or even covering it up. For example,quantitative measures of performance oftengive a misleadingly positive assessment ofperformance before failure because managersand others have concealed or mitigated knownproblems (Griffiths, 1992). Organizations mayhave a history of slow progressive decline, or ofa series of cycles of decline and partial recoverystretching back some years, before—for a varietyof reasons—they become formally labelled as‘failing’ (Slatter, 1984; Meyer and Zucker, 1989).

On the whole, the formal diagnosis oforganizational failure rarely comes as a surpriseto most stakeholders in the organization,particularly to those within the organization,who know formally, or more usually informally,about the seriousness of the problems at hand.For some, the diagnosis of failure may even bea relief and a source of encouragement becauseit forces acknowledgement of long-standingproblems and demands action, which though itmay be unpleasant at least may lead to betterlonger term prospects. In a sense, the diagnosisof organizational failure may simply confirmand acknowledge publicly what is alreadyknown quite widely.

The diagnosis of organizational failure maybe triggered or precipitated in three mainways. First, there may be a severe or acceleratingperformance decline which stakeholdersincreasingly recognize is unsustainable. In otherwords, the status quo becomes less and less

tenable and it is no longer possible to disguiseor ignore the performance decline. However,for this to happen can require things to becomevery bad indeed, which then makes theprospects for turnaround less good than theywould have been if action were taken earlier(Balgobin and Pandit, 2001). The second triggerfor diagnosis and change can be a change ofownership or leadership—the arrival of a newchief executive or other stakeholders who bringa fresh perspective and, because they are notassociated with past decision-making, are moreable to be honest about the situation (Grinyeret al., 1990). A third trigger may be what hasbeen called the ‘egregious event’ (Rosenthal,1995): a significant failure in organizationalperformance, such as a major incident oraccident, which simply cannot be ignored andwhich may draw attention to widerorganizational failings (Walshe, 2003; Walsheand Shortell, 2004).

The prediction of organizational failure ismade more difficult by the tendency forquantitative measures of performance to bedistorted in the period leading up to failure.However, a number of studies have shown thatfailure can be predicted, particularly in theshort to medium term (up to two years) usingwidely available quantitative data (Altman,1971; Yates and Davidge, 1984; Trussel et al.,2002). At the least, it would seem feasible to usesuch data to identify a subset of ‘at risk’organizations for more detailed scrutiny oroversight in the interests of preventing someorganizational failures.

Stage Theories of Failure and TurnaroundMany ‘stage’ theories or models have beenproposed which describe the process of failureand turnaround as taking place in a number ofphases or stages (for example Arogyaswamy etal., 1995; Balgobin and Pandit, 2001;Chowdhury, 2002; McKiernan, 2002). Whilethe definitions and terminology used vary,they all describe the process in terms of four orfive basic phases:

•Decline and crisis—an often long and gradualperiod of performance decline, which maybe characterized by a progressive loss ofbusiness, market position, resources,reputation and external support.

•Triggers for change—the events orcircumstances which mean that the extentand seriousness of decline is eventuallyrecognized and explicitly acknowledged byinternal and external stakeholders in theorganization, which may be a particular

Dow

nloa

ded

by [

Dur

ham

Uni

vers

ity L

ibra

ry]

at 0

3:59

08

Janu

ary

2015

PUBLIC MONEY & MANAGEMENT AUGUST 2004

204

© CIPFA, 2004

financial, operational or leadership crisis.•Recovery strategy formulation—the production

of a plan to deal with the organizationalfailure which explicitly acknowledges thescale and nature of the problems and sets outstrategies or methods for dealing with them.

•Retrenchment and stabilization—the shorter termactions aimed at turnaround which are oftenconcerned with dealing with operationalmanagement problems, sorting out thefinances, preventing any further decline ordeterioration, and securing ‘quick wins’ inperformance which will aid survival.

•Return to growth—the longer term and ongoingactions aimed at turnaround which tend tobe concerned with setting out the new visionfor the purpose and objectives of theorganization, establishing a longer-termstrategy for investment and development,and securing its long-term success.

Stage theories like this are useful normativelybecause they help us to conceptualize the linkedprocesses of failure and turnaround and tomap, or track, the progress of organizationsthrough them. However, they may encourageus to be ‘over sequential’ in our thinking abouthow failure and turnaround work(Arogyaswamy et al., 1995). In practice,organizations do not necessarily progressthrough all the stages in the same order, canmove backwards as well as forwards, and mayget grounded or stuck in one part of the process.Stage theories implicitly suggest thatturnarounds are successful and that the naturalend point of the process is a final stage of returnto growth, but there is empirical evidence thatorganizational failure can be a long term oreven permanent state for some organizations(Meyer and Zucker, 1989; Meyer, 1999).

Turnaround InterventionsMost turnarounds have some form of externalor exogenous leadership or sponsorship. Itmay be that external stakeholders such asshareholders, major customers/users, auditors,regulators or government have forced therecognition of organizational failure andimposed or encouraged a change of leadership,or the organization’s board may have broughtin external advice or a new leader itself. Froma combination of this external input and theorganization itself, a diagnosis of the problemsand causes of failure emerges and a turnaroundstrategy is established (Boyne, 2004).

A functional analysis of the content ofturnaround programmes or strategies in casesof organizational failure generally identifies

three main groups or types of intervention:

•Replacement involves the removal of keymembers of the leadership and managementof the organization, and their replacementeither with others from within theorganization or with others drawn externally.Replacement can focus solely on the chiefexecutive and one or two other seniordirectors, or it can involve the wholesalereplacement of the board and managementteam (Slatter, 1984; Mueller and Barker,1997).

•Retrenchment is a term used to describe a widerange of largely short-term actions taken tostabilize the organization, to stem its lossesand to deal with the immediate problemswhich have precipitated its crisis.Retrenchment may involve immediate stepsto control finances and reduce costs (likecutting inventory, changing prices, reducingoverheads, or reducing staffing) or toimprove operational management (forexample restructuring work processes,reducing waiting or idle times, or increasingthroughput) (Robbins and Pearce, 1992).

•Renewal involves longer-term actions aimedat re-establishing the strategic direction,vision and overall purpose of the organizationand placing it on a longer-term pathway tosuccessful performance. It may involve afundamental review of the activities of theorganization and their long-term prospects,which can lead to the closure of some areas,expansion in others, and the opening of newmarkets or ventures. It may also involve adetailed analysis of the culture and leadershipof the organization and a concerted effort tochange the way that it works (Slatter andLovett, 1999).

Replacement forms a part of the great majorityof turnaround strategies, for reasons which canbe as much political and symbolic as purelyfunctional. Replacing the chief executive andother senior leaders may be a necessary step inattributing responsibility for the organization’spredicament and providing a scapegoat. Itmay be necessary in order to secure theconfidence and support of external stakeholders(like major customers, shareholders, orregulators) in the feasibility and likely successof turnaround efforts. It may be importantinternally too, in sending a message to theorganization about a fundamental change ofdirection (‘under new management’) and newexpectations of performance on individuals, aswell as the organization as a whole. However,

Dow

nloa

ded

by [

Dur

ham

Uni

vers

ity L

ibra

ry]

at 0

3:59

08

Janu

ary

2015

PUBLIC MONEY & MANAGEMENT AUGUST 2004

205

© CIPFA, 2004

replacement also often serves a simple,functional purpose: removing managers whosimply lack the necessary leadership skills andcompetencies, or whose managerialperformance has declined over time, and whoare not suited or not able to take on thechallenges of turnaround. Of course,replacement carries with it significant risks aswell, in that it can mean the loss of key expertiseand business understanding and knowledge.

The timescale for turnaround strategiescan be long, but activity is often concentratedtowards the start. The diagnostic phase ofturnaround is often very short—majorreplacement and retrenchment actions may betaken within days or a few weeks, in partbecause timing may be critical to stemmingfurther losses or problems. An early focus onimplementing and delivering turnaroundactions may also serve a purpose in establishingcredibility: demonstrating, internally andexternally, that those leading turnaround areserious about their intentions and are willing totackle the problems which have led toorganizational failure head-on. Early actions(and particularly early wins) may be importantto creating a momentum for change andbreaking down resistance. The timescale forrenewal activities may be rather longer—stretching to months or even years—but, again,the process of renewal often commences earlyin turnaround, alongside the immediate actionsbeing taken to stabilize and save the business.

It is important to see these interventions—replacement, retrenchment and renewal—ascomplementary, parallel and interactingapproaches, rather than as consecutive stagesin turnaround (Arogaswamy et al., 1995). Theresults of turnaround, and any assessment ofits success, take some time to emerge. Immediateimprovements resulting from replacement andretrenchment interventions can often bediscerned within a matter of weeks or months,but the longer-term success of renewal is likelyto take a matter of years to materialize(Chowdhury, 2002). It is important to recognizethat there is a difference between the timetaken to establish and initiate a turnaroundand the time needed to complete it and see areturn to growth and longer term successfulperformance.

This brief review of turnaroundinterventions has been largely focused on theirfunctional content—what is actually done.However, research suggests that the success ofturnaround may be equally dependent on thecontext for these interventions (and particularlyhow well the interventions are matched to the

specific circumstances or characteristics oforganizational decline and failure) and on theprocess of intervention (in other words, howthey are used and by whom). This means thatuniversal prescriptions about the effectivenessof different turnaround interventions arealmost certainly misleading and that ourunderstanding of effective turnarounds needsto address content, context and process issues(Pandit, 2000).

One final point should be borne in mind.While it can be difficult to define what we meanby ‘success’ in turnaround, there is little researchor data available on the rates of success orfailure in turnaround efforts. However, it isevident from a number of studies that someturnarounds do ‘fail’, and as a consequencethere are either repeated attempts atturnaround (with, for example, yet anotherround of management and leadership changes),a period of continuing decline, or some otherform of structural change (such as merger withor more likely acquisition by anotherorganization).

Failure and Turnaround in Not-for-Profitand Public ServicesMost of the literature on organizational failureand turnaround is wholly or primarily focusedon the for-profit sector, though there are paperson failure and turnaround in schools (Willmott,1999), health care providers (Edwards et al.,2003; Walshe, 2003), local authorities (Skelcher,2003) and other not-for-profit organizations(Mordaunt, 2002). While it seems likely thatmany of the ideas, concepts and modelsdeveloped there have at least some applicationto public, not-for-profit services andorganizations like the National Health Service(NHS), a number of important differences canbe identified and highlighted.

First, organizational failure was earlierdefined as ‘existence-threatening decline’ inperformance, but for many public serviceorganizations a performance decline poses onlya limited or nominal threat to organizationalexistence or to individuals’ careers.Fundamentally, failing schools, hospitals orother public organizations are very rarely closeddown because their provision is a social necessityand this means that the cost of failure may oftenbe quite low for some stakeholders. In otherwords, the concept of organizational failureand the ideas on which much theory andpractice in turnaround management are basedmay be challenged, and turnaround mayactually be more difficult to achieve (Meyer,1999).

Dow

nloa

ded

by [

Dur

ham

Uni

vers

ity L

ibra

ry]

at 0

3:59

08

Janu

ary

2015

PUBLIC MONEY & MANAGEMENT AUGUST 2004

206

© CIPFA, 2004

Second, defining decline and failure inpublic services may be more complex andsubjective. Without the established metrics offor-profit organizations (such as return oninvestment and profit on sales) and largelywithout the competitive pressures of an openmarket-place, the performance of public serviceorganizations like health care providers is morelikely to be managed through mechanismssuch as bureaucratic direction, regulation, andthe use of performance indicators or leaguetables. Public service organizations also have adifferent and arguably more complex set ofstakeholders in their performance—noshareholders, but users, customers, the widerpublic, professions, employees, funders,regulators and government all taking alegitimate interest. The net result of this maybe that defining failure is more complex,subjective and open to challenge. In somecircumstances, performance failure may be apolitical as much as a managerial issue.

Third, the symptoms and causes oforganizational failure in public services arealso likely to be somewhat different, in partbecause of the limited extent to which theyoperate in a market-place. Mostly obviously,decline in demand is the most commonly citedcause of for-profit failures, while public servicefailures are more likely to involve an inability tomeet or satisfy demand. More generally, failuresresulting from high levels of price competition,new market entrants, or poor producttechnology and a lack of innovation are lesslikely, while failures concerned with stringentcost constraints and uncontrolled workloadmay be more likely.

Fourth, most turnarounds in the for-profitsector are part exogenous, part endogenous.They are often started or precipitated byexternal interests (such as concerns raised bymajor shareholders, or a newly-appointed chairor chief executive), but the process ofturnaround is essentially led by the organizationitself and its (often newly-appointed) leadership.In contrast, failure and turnaround in publicservice organizations seems to be a moreexternally initiated and managed process.Government departments, agencies andregulators often play a substantial role, not justin precipitating the diagnosis of failure andinitiation of turnaround, but in managing anddirecting the subsequent turnaround processand monitoring progress until the organizationis deemed to have succeeded.

Fifth, the process of turnaround in publicservices, and particularly the use of turnaroundinterventions like replacement, retrenchment

and renewal, may be quite different in manypublic services where both the practicalchallenges and the political environment,governance and accountability arrangementsare different. Commercial turnarounds areoften characterized as involving rapid andradical change, especially in the early stages ofretrenchment but also in the more strategicphase of renewal. A company may, through itsturnaround, be transformed to focus on newand different markets, products or services. Incontrast, both the pace and scope for change inpublic organizations may be more constrainedby a range of factors related both to the natureof the organizations themselves and the servicesthey provide. For example, a public hospitalwith major problems in a service area likeaccident and emergency cannot simply chooseto withdraw from that market. Public servicerationalizations in the name of efficiency suchas merging duplicate services or reducing multi-site operations have to be achieved throughpainstaking negotiation with professionals,service users, and other stakeholders.

Sixth, aspects of turnaround which mayseem analogous in the for-profit and not-for-profit sectors may actually be rather differentin practice. For example, replacement strategiesin both sectors tend to involve changes at boardlevel and in the senior executive team. But inmany public and not-for-profit organizations,with complex professional or politicalhierarchies, organizational leadership mayreside elsewhere—among senior doctors inhospitals, for example, or among electedmembers in local authorities. In general terms,for-profit organizations may exhibit greatersingularity of leadership, and less reliance onconsensus and negotiated decision-makingamong stakeholder interests, and thesedifferences mean that apparently similarreplacement strategies are likely to havedifferent effects.

ConclusionsThe existing research on organizational failureand turnaround in for-profit organizations hassome drawbacks. It tends to treat ashomogeneous ‘black boxes’ situations andcircumstances of organizational failure andstrategies for turnaround which are clearlyheterogeneous and quite complicatedphenomena. It is also largely relativelyatheoretical, with little attempt to move beyondempirical descriptions of what happens infailure and turnaround towards building,testing or using credible theories and models tohelp explain what is going on. However, it

Dow

nloa

ded

by [

Dur

ham

Uni

vers

ity L

ibra

ry]

at 0

3:59

08

Janu

ary

2015

PUBLIC MONEY & MANAGEMENT AUGUST 2004

207

© CIPFA, 2004

contains a number of ideas, theories andfindings which are almost certainly relevant tothe study of failure and turnaround in publicorganizations. While the empirical experienceof turnaround in public services may be quitedifferent from that in for-profit organizations,there are sufficient similarities for ideas aboutthe causes and characteristics of failure; aboutthe measurement, prediction and diagnosis offailure; about the stages of failure andturnaround; and about the nature and effectsof turnaround interventions to have at leastsome currency, especially when they have ahigh face validity.

However, the fundamental differences inpurpose, mission, culture and environmentbetween for-profit and not-for-profit or publicservice organizations mean that the translationof lessons from one sector to another is probablynot straightforward (Pollitt, 2003). There is arisk that politicians, government officials andothers, newly enamoured of the language offailure and turnaround and inadequatelyinformed of the empirical evidence and practicalexperience in the for-profit sector, will resorttoo readily to deeming schools, local authorities,hospitals and other organizations to be ‘failing’,and will have unrealistic expectations of thetransformative power of the turnaroundprocess. ■

AcknowledgementThis article draws on work undertaken for theNHS Performance Development Team, partof the Modernization Agency at the Departmentof Health. We are grateful for their support.

ReferencesAltman, E. (1971), Corporate Bankruptcy in America

(Lexington Books, Lexington).Anheier, H. K. (Ed) (1999), When Things Go

Wrong: Organizational Failures and Breakdowns(Sage, London).

Arogyaswamy, K., Barker, V. L. and Yasai-Ardekani, M. (1995), Firm turnarounds: Anintegrative two-stage model. Journal ofManagement Studies, 32, 4, pp. 493–525.

Balgobin, R. and Pandit, N. (2001), Stages in theturnaround process: The case of IBM UK.European Management Journal, 19, 3, pp. 301–316.

Boyne, G. A. (2004), A ‘3Rs’ strategy for publicservice turnaround: Retrenchment,repositioning and renewal. Public Money &Management, 24, 2, pp. 97–103.

Cartwright, C. and Cooper, C. L. (1995).Managing Mergers, Acquisitions and StrategicAlliances: Integrating People and Cultures

(Butterworth Heinemann).Chowdhury, S. D. (2002), Turnarounds: A stage

theory perspective. Canadian Journal ofAdministrative Sciences, 19, 3, pp. 249–266.

Edwards, N., Protopsaltis, G., Fulop, N. andMeara, R. (2003), Failure and Turnaround:Dealing with Failing Hospitals (NHSConfederation, London).

Griffiths, I. (1992), Creative Accounting (Routledge,London).

Grinyer, P. H., Mayes, D. G. and McKiernan, P.(1990), The sharpbenders: Achieving asustained improvement in performance. LongRange Planning, 23, pp. 116–125

Hoffman, R. C. (1989), Strategies for corporateturnarounds: What do we know about them?Journal of General Management, 14, 3, pp. 47–66.

Ketchen, D. (Ed) (1998), Turnaround Research:Past Accomplishments and Future Challenges (JAIPress, London).

Krieger, I. (1994), Management Buyouts(Butterworths).

McKiernan, P. (2002), Turnarounds. InFaulkner, D. O. and Campbell, A. (Eds), OxfordHandbook of Strategic Management (OxfordUniversity Press, Oxford).

Meyer, M. W. and Zucker, L. G. (1989),Permanently Failing Organizations (Sage,London).

Meyer, M. W. (1999). Permanent failure and thefailure of organizational performance. InAnheier H. K. (Ed), When Things Go Wrong:Organizational Failures and Breakdowns (Sage,London).

Mordaunt, J. (2002), Half Empty or Half Full? DoBoards Recognize Failing Non-profit Organizations?(NCVO, London).

Mueller, G. and Barker, V. (1997), Upperechelons and board characteristics of turnaroundand non-turnaround declining firms. Journal ofBusiness Research, 39, pp. 119–134.

Pandit, N. R. (2000), Some recommendations forimproved research on corporate turnaround.Management, 3, 2, pp. 31–56.

Paton, R. (1989), Reluctant Entrepreneurs: TheExtent, Achievements and Significance of WorkerTakeovers in Europe (Open University Press,Buckingham).

Pawson, R. and Tilley, N. (1997), RealisticEvaluation (Sage, London).

Pearce, J. A. and Robbins, K. (1993), Towardsimproved theory and research on businessturnaround. Journal of Management, 19, 3, pp.613–636.

Pollitt, C. (2003), The Essential Public Manager(Open University Press, Buckingham).

Robbins, K. and Pearce, J. (1992), Turnaround:

Dow

nloa

ded

by [

Dur

ham

Uni

vers

ity L

ibra

ry]

at 0

3:59

08

Janu

ary

2015

PUBLIC MONEY & MANAGEMENT AUGUST 2004

208

© CIPFA, 2004

Retrenchment and recovery. StrategicManagement Journal, 13, pp. 287–309.

Rosenthal, M. (1995), The Incompetent Doctor:Behind Closed Doors (Open University Press,Buckingham).

Skelcher, C. (2003), Learning From the Experienceof Recovery: A Theoretical Framework forUnderstanding Poor Performance and Recovery inLocal Government (Institute of LocalGovernment Studies, University ofBirmingham).

Slatter, S. (1984), Corporate Recovery (Penguin,London).

Slatter, S. and Lovett, D. (1999), Corporate

Turnaround: Managing Companies in Distress(Penguin, London).

Trussel, J., Greenlee, J. S. and Brady, T. (2002),Predicting financial vulnerability in charitableorganizations. The CPA Journal (June).

Walshe, K. (2003), Inquiries: Learning from Failurein the NHS? (Nuffield Trust, London).

Walshe, K. and Shortell, S. M. (2004), Whathappens when things go wrong: How healthcare organizations deal with major failures incare. Health Affairs, 23, 3, pp. 103–111.

Yates, J. M. and Davidge, M. G. (1984), Can youmeasure performance? British Medical Journal,288, pp. 1935–1936.

International Workshop for MPA and MBA Public SectorProgrammes

The International Consortium for Mid-Career MPA/PBA-Public Sector Education organizesan annual workshop and this year’s title is Linking Study and Work-Practice. The aim is toprovide an opportunity for an exchange of educational approaches to key aspects of mid-career education and development for public managers, such as:

•Leadership.•Governance.•Strategy.•Change management.•Performance improvement.

The workshop will be held at Erasmus University Rotterdam, the Netherlands from 17 to 19 November2004. Enquiries should be sent to Sonja Balsem: s.balsem@fsw.eur.nl

MPA-UK Group

The first meeting of what is provisionally being called the ‘MPA-UK Group’ was held inLondon in April 2004. Sixteen UK universities were represented and there were alsoobservers from EAPAA and the British Council. The discussion covered topics such as:

•The range of courses represented. Not all were MPAs: some institutions offered otherrelevant courses alongside MPAs or proposed MPAs. The academic ‘homes’ of thevarious programmes varied considerably.

•Marketing the UK as venue for studying public administration (and public policy andmanagement).

•Accrediting UK courses.

For information about joining the MPA-UK Group, contact Professor Colin Talbot, NottinghamPolicy Centre, School of Sociology and Social Policy, University of Nottingham NG7 2RD.Tel.: +44 115 84 67439. Email: colin.talbot@nottingham.ac.uk

Dow

nloa

ded

by [

Dur

ham

Uni

vers

ity L

ibra

ry]

at 0

3:59

08

Janu

ary

2015