Anatomy of Corporate Decline: A Symbolic Interactionism Approach to the Manager's Observations, Understanding and Response

The onset or inception of organizational decline has been largely bypassed in management research over the past two decades, even though understanding this fundamental typology is key to mitigating organizational failure, while also providing important insight regarding how managers respond to phenomena that they may neither expect or understand. Understanding how managers observe, decide, and act in times of uncertainty, and how organizational culture and other factors may shape that environment, are important for scholars and practitioners alike to understand. This dissertation argues that corporate decline has largely been misunderstood from the perspective of onset or initiation; that the manager's decision-making process in times of decline must be considered in relation to the actual causes and factors associated with decline, and that the fundamental definition of organizational decline must be revised in light of advances in our understanding in management over the past three decades. This qualitative empirical descriptive study reviews literature regarding organizational decline with emphasis on the onset of decline, presents an equation for understanding a firm's propensity for decline, provides a revised definition of organizational decline, and examines the decision-making process of management when faced with decline based on symbolic interactionism theory.Running Head: CORPORATE DECLINE Anatomy of Corporate Decline: A Symbolic Interactionism Approach to the Manager's Observations, Understanding and Response A Dissertation Presented in Partial Fulfillment of the Requirements for the Degree of Doctor of Management Ronald J. Buikema University of Maryland University College December, 2012 Doctoral Committee: Dr. Dennis Winters Dr. Sharon Hadary Date Final Version Submitted: 6 December, 2012 2 CORPORATE DECLINE ABSTRACT The onset or inception of organizational decline has been largely bypassed in management research over the past two decades, even though understanding this fundamental typology is key to mitigating organizational failure, while also providing important insight regarding how managers respond to phenomena that they may neither expect or understand. Understanding how managers observe, decide, and act in times of uncertainty, and how organizational culture and other factors may shape that environment, are important for scholars and practitioners alike to understand. This dissertation argues that corporate decline has largely been misunderstood from the perspective of onset or initiation; that the manager's decision-making process in times of decline must be considered in relation to the actual causes and factors associated with decline, and that the fundamental definition of organizational decline must be revised in light of advances in our understanding in management over the past three decades. This qualitative empirical descriptive study reviews literature regarding organizational decline with emphasis on the onset of decline, presents an equation for understanding a firm's propensity for decline, provides a revised definition of organizational decline, and examines the decision-making process of management when faced with decline based on symbolic interactionism theory. Keywords: organizational decline, organizational culture, symbolic interactionism theory 3 CORPORATE DECLINE ACKNOWLEDGMENT I want to thank my wife Kim for her continued love and support throughout the dissertation process. Having now gone through the process myself, I would also like to apologize to her for all of the things that I said to her, well-meaning but misunderstood, as she completed her own dissertation. I just didn't know how truly challenging this process would be. As usual, you were right and I was wrong. I would also like to thank my dissertation committee, both Dr. Dennis Winters and Dr. Sharon Hadary. I can't imagine having two more supportive, dedicated individuals, available at any time, filled with the enthusiasm of teens, complemented with the wisdom of mature souls. I would also like to thank the staff and faculty at the University of Maryland University College (UMUC) Doctor of Management Program. You have been at the forefront of advances in education, are clearly attracting some of the finest scholars in the field, and your approach to education and learning is inspirational, truly setting the standard. I would also like to note the support of the staff at The Johns Hopkins University Applied Physics Laboratory. Your continued support for my continuing education throughout the entire doctoral process is certainly appreciated. I would also like to note the continued support of my mother in-law, Ila Roberts, and my sister in-law, Michele Roberts, providing family support and understanding day in, day out. I would also like to acknowledge my father in-law, Dr. James Roberts, who passed on before this dissertation was completed. You are my role model and inspiration, and I have never known a finer man. Finally, I lost my best friend during this process. Ishy passed with just months left in the final academic year. He brought me encouragement, love, and inspiration; he spent countless hours with me late into the night, sitting on the table next to me, or purring in front of the keyboard. These are hard days without him. 4 CORPORATE DECLINE Image 1, Prince Ishikawa and the author 5 CORPORATE DECLINE DEDICATION I would like to dedicate this dissertation to Mr. Milton Whitmore, my sixth grade teacher. He served as an inspiration for countless hundreds of students throughout the years, and taught me the value of education, respect for your fellow man, and the importance of possessing a thirst for knowledge. He also let us listen to the Detroit Tigers 1968 World Series afternoon games on the radio, and for that, I am also most appreciative (Detroit beat St. Louis, 4-3, bouncing back from a 3-1 deficit). 6 CORPORATE DECLINE Table of Contents Abstract............................................................................................................................2 Acknowledgement.............................................................................................................3 Dedication........................................................................................................................5 Table of Contents..............................................................................................................6 Executive Summary...........................................................................................................9 Chapter 1: Introduction to the Problem..........................................................................11 Problem Statement..............................................................................................14 Statement and Significance of the Problem..........................................................16 Importance of the Study......................................................................................17 Purpose and Objective.........................................................................................19 Research Question...............................................................................................19 Rationale.............................................................................................................21 Summary.............................................................................................................24 Chapter 2: Literature Review............................................................................................26 Corporate Decline, Background and Framework...................................................27 Research Methodologies/Conceptual Development...............................................37 Theoretical Framework...........................................................................................46 Relevant Research in Other Fields..........................................................................50 Research Gaps/Challenges......................................................................................54 Summary of Literature Review...............................................................................58 Chapter 3: Conceptual Framework....................................................................................60 Justification for the Study ......................................................................................61 Areas of Research...................................................................................................62 Foundational Theories............................................................................................65 Incremental Research Approach.............................................................................71 Data Collection.......................................................................................................74 Sources of Data.......................................................................................................75 Data Analysis and Interpretation............................................................................76 Deficiencies in Existing Literature.........................................................................77 Variables..................................................................................................................78 Ethical Issues Associated with the Study and Conceptual Framework..................80 Equation of Organizational Decline, Propensity.....................................................81 Definitions...............................................................................................................82 Definition of Organizational Decline......................................................................82 Tempo......................................................................................................................83 Summary...................................................................................................................86 7 CORPORATE DECLINE Chapter 4: Methodology...................................................................................................87 Evidence Based Review.......................................................................................105 Reference Sources................................................................................................106 Methodology........................................................................................................107 Findings................................................................................................................112 Results by Category..............................................................................................114 Use of the Expert Panel........................................................................................120 Comments from Reviewers...................................................................................122 Additional Dissertation Feedback.........................................................................125 Modifications based on Scholar-Practitioner Feedback.......................................128 Summary...............................................................................................................129 Chapter 5: Analysis and Presentation of Findings.........................................................130 How.......................................................................................................................131 Findings Through the Lens of Symbolic Interactionism Theory..........................132 Findings Through the Lens of Communication Theory........................................141 Revising the Definition of Decline........................................................................143 Independent Variables of Organizational Decline................................................146 Precursors, Observables, Categorization and Significance...................................147 Understanding the Anatomy of Decline...............................................................152 Analysis of Causal Linkages................................................................................159 Findings Associated with Organizational Culture and Cultural Diversity...........160 Understanding Corporate Coping.........................................................................166 Understanding the Propensity of Decline.............................................................166 Understanding the Concept of Tempo and the Time Derivative..........................168 Introduction to the Axioms of Decline.................................................................170 Conclusion............................................................................................................172 Chapter 6: Implications and Conclusions......................................................................175 Overview..............................................................................................................175 Review of the Purpose of the Study.....................................................................181 Review of the Research Question.........................................................................182 Significance of Findings.......................................................................................184 New Understanding Regarding Organizational Decline......................................186 Implications for the Field of Management...........................................................186 Recommendations for Practice of Future Research.............................................187 Limitations of the Study.......................................................................................191 Summary...............................................................................................................193 References......................................................................................................................195 Glossary..........................................................................................................................209 Dissertation Approval....................................................................................................213 8 CORPORATE DECLINE List of Figures and Tables Image 1: Prince Ishy and the author....................................................................................4 Figure 1: Symbolic Interactionism Theory Graphic Description.....................................67 Figure 2: Transactional Model, Communication Theory..................................................70 Figure 3: Threads Applied for Incremental Research Approach.......................................72 Figure 4: The OODA Loop................................................................................................73 Figure 5: Graphic Depiction of the Conceptual Framework.............................................85 Figure 6: Organizing Scheme, Chronological Approach..................................................90 Figure 7: Model of Symbolic Interactionism..................................................................135 Figure 8: Relationship of Categories of Friction to Coping Mechanisms.......................151 Figure 9: Boyd's Theory..................................................................................................152 Figure 10: Practitioner's Approach to Organizational Decline........................................153 Figure 11: Graphic Depiction, Anatomy of Corporate Decline.......................................160 Figure 12: Formula for the Propensity of Decline...........................................................167 Figure 13: Time Derivative, Decision-Making/Organizational Decline..........................169 Figure 14: Novice Linear Perspective of Writing a Dissertation.....................................179 Table 1: Comparative Chart of Thread #1 and Thread #2.................................................74 Table 2: Organizational Decline Evidence Based Review.................................................110 Table 3: Organizational Decline, Summary of Findings..................................................113 Table 4: Categories of Friction.........................................................................................149 9 CORPORATE DECLINE Executive Summary Organizational decline, a condition which more corporations and organizations face over time than not...remains a conundrum, misunderstood on its origins, marginalized for its potential impact, and rarely recognized as significant at its inception. Instead, scholars and practitioners have focused on what works...not what doesn't work. Even in the study of decline, the preponderance of research is focused on how to recover, how to turn around the failing firm. That may help to explain why the understanding of the roots of the problem still remains elusive. Scholars and practitioners simply haven't focused on that area. The topic of organizational decline is somewhat vexing. After all, there may be no one golden nugget, no one key finding that explains or identifies decline in all cases. But that is not really the issue. This qualitative empirical descriptive study is focused on understanding what causes decline, how the causes are observed, how management responds to decline, and how the resources of the firm are applied to mitigate or obviate its occurrence. It addresses key issues or organizational culture, particularly associated with the firm's ability to observe, decide, and act in the face of information and actions that, by nature, are beyond the normal, for normal means that the firm is either stable or steadily improving. Decline is the equivalent of a disease for the corporation. It can kill slowly, or it can kill fast, but the corporation will not survive if it is not addressed. Symbolic interactionism theory, complemented by communication theory serve as the lenses to view organizational decline. They were chosen because they are theories that are based on what individuals understand from what is observed, how managers process that information, and then how they translate what is believed to be understood by others, for further processing and translation. These two theories help scholars combine both understanding challenges with seeing and understanding decline (i.e. we may think that what we see is associated with what we know 10 CORPORATE DECLINE (status quo), not something new, such as decline), as well as how we respond to decline. Communications theory complements our study by associating how we translate our understanding that the firm is in decline with the other managers and employees who must also understand and respond accordingly. Our findings, based on evidence-based research of other studies on the inception of decline, lead us to revise the definition of organizational decline that has been used for over three decades. Then we must develop a formula for the propensity of decline, providing a means for scholars and practitioners to conduct comparative analysis of the manifestation; and the association of decision-making in relation to the time of decline itself via application of the time derivative. This study is guided by three research questions. First, what does the onset of decline look like? Second, what is the general state of the firm that makes it vulnerable to decline in the first place? And third, how does management respond when faced with decline? This study argues that observable factors directly associated with decline are frequently misunderstood or misinterpreted, that the tempo of decline as it pervades the firms is underestimated and that responses to decline are generally too little, too late. 11 CORPORATE DECLINE Chapter 1: Introduction to the Problem ...little empirical research has investigated the individual and organizational factors characteristic of declining organizations. - Cameron, Kim, & Whetten (1987, p. 225) No one sets out in business to fail. Business represents to many opportunity, growth, advancement, and success. The giants of business are lauded and treated almost as rock stars. They visit with heads of state. They write bestselling books on their secrets to success. They lecture at the world's most prestigious schools of business and are sought out for their sage advice. This is what today's MBA student wants to study in many respects: success. This is what the mid-level manager with unlimited potential wants to emulate - success. All firms, however, do not succeed. Luo and Mann (2011), two economists with the U.S. Bureau of Labor Statistics, examined high technology businesses started in the California Silicon Valley since 2000 and found that for firms starting in 2000, less than 20% survived by the ninth year, and only 50% lasted even four years (Luo & Mann, 2011). If we have focused academic research for so many years on how firms succeed, why do so many continue to fail? Clearly, there are many complex reasons that firms fail, but it is surprising that the research on failure or decline is far surpassed by the study of success. We have just as much to learn about managers, organizational culture, and decision-making from the study of firms that have failed as those that succeed. This study is based on the premise that scholars and practitioners have largely avoided asking substantive questions regarding organizational decline either for lack of interest or lack of understanding. Studying and understanding organizational decline is in fact fundamental to understanding organizational success, because firms that r