An exploration of stakeholders’ cognition of an organisation’s decline, and subsequent turnaround actions

Abstract

Organisations do not exist in a vacuum, as the interrelationship between such organisations and stakeholders has grown significantly over the years. Due to organisational cycles, organisations are also subject to facing a decline and/or turnaround situation. The intersection between the organisation, stakeholders and the decline and/or turnaround situation presents a challenge for organisations, as the perceptions and interpretation of such decline/turnaround situations differ between management and stakeholders. Previous researchers have studied the two-stage model of the turnaround strategy, highlighting the importance of stakeholders without delving deep into such stakeholders. Other scholars studied how stakeholders cognise the organisation generally, without contextualising such cognition in a decline and/or turnaround situation. The research study aimed at closing this gap by studying stakeholders’ cognition in a decline and/or turnaround situation. The research questions were developed to explore the factors that influence stakeholders’ cognition of an organisation’s decline and/or turnaround situation, the implications of such cognition of an organisation’s decline and/or turnaround situation, and management’s characteristics that fosters stakeholders to cognise the decline/turnaround situation. The theoretical anchor of this research study drew from the constructs of organisational decline, turnaround strategy, stakeholder power, stakeholder influence, stakeholder and firm performance, and cognition. Although there was a theoretical anchor, the research study was exploratory in nature; thus, qualitative methods were used in which 15 participants were interviewed in a semi-structured format to share their experiences. The participants interviewed were predominantly from SA’s mining industry, with one participant being in both the mining and construction industry, and the other participant being in the manufacturing industry. The participants were from the management team, spread across the TMT, SMT, and MMT. There were themes and associated constructs found, and such constructs were captured in a conceptual framework. The research outcomes also potentially add to the existing body of work in turnaround strategy through the lens of stakeholders’ cognition, with one potential refinement to the body of knowledge. Recommendations were given to managers and other stakeholders, and avenues for future research were also suggested.