FIRM TURNAROUNDS - AN INTEGRATIVE 2-STAGE MODEL

This paper presents a model proposing that turnaround firms exhibit tw o classes of response to decline: (a) decline-stemming strategies that reverse the dysfunctional consequences of decline, and (b) recovery s trategies that position the firm to better compete in its industry. We further propose that effective top management actions supporting both of these strategies are vital to recovering from decline. Our model o f the turnaround process questions some existing assumptions about tur narounds and extends theory in several key areas. First, we argue that success in initially stemming decline requires managers to go beyond retrenchment or focusing on financial issues to include effective mana gement of a firm's external stakeholders and internal climate and deci sion processes. Second, we outline important contingencies impacting e ach class or stage of response to decline and discuss the interaction between stages. Finally, we demonstrate how our model provides explana tions for several unresolved issues regarding turnarounds and has impl ications for management practice.