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Turnaround leadership core tensions during the company turnaround process

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DOI: 10.1016/j.emj.2014.04.004

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 European Management Journal 32 (2014) 963–980

Contents lists available at ScienceDirect

European Management Journal

j o u r n a l h o m e p a g e : w w w. e l s e v i e r. c o m / l o c a t e / e m j

Turnaround leadership core tensions during the company

turnaround process
Conor O’Kane a,*, James Cunningham b
a Department of Management, University of Otago, Dunedin, New Zealand
b Whitaker Institute, National University of Ireland, Galway, Ireland

A R T I C L E I N F O A B S T R A C T

Article history: How leaders turn around declining performance is a significant issue for companies, their employees,
Received 19 September 2013 their customers, their shareholders and, more generally, society. Leadership influence during times of change
Accepted 18 April 2014 is well recognised in the literature; however, leadership during a turnaround is more complex and less
Available online 13 May 2014
understood. In-depth examinations of the role and activities of turnaround leaders have received insuf-
ficient attention in the literature to date. Specifically, studies have not investigated, in-depth, the ten-
Keywords:
sions that leaders face during a turnaround process. To begin addressing this gap in the literature, we
Turnaround process
utilise case studies of four companies to examine the core tensions leaders experience, when they occur
Leadership
Turnaround strategy during the turnaround process and how they are managed. We frame our focus on leadership tensions
Change management in three prominent domains in the literature, leadership change, leadership assertiveness and strategic
orientation. Our findings identify and detail the management of six core tensions that leaders experi-
ence across a five-stage turnaround process model. We conclude that effective turnaround leadership is
less about particular skill sets or ‘types’ of leaders for different stages of the recovery process, and more
about their ability to purposefully navigate and balance apparently conflicting activities within these ten-
sions. We discuss the implications of these findings for theory and practice.
© 2014 Elsevier Ltd. All rights reserved.

Introduction
The importance of leadership in times of strategic change and
turnaround is well acknowledged in the literature (Abebe, Angriawan,
& Liu, 2011; Dunphy & Stace, 1993; Hermann & Nadkarni, 2013; Jas
& Skelcher, 2005; Slatter, 1984). Unlike temporary periods of decline,
turnaround situations are characterised by significant time pres-
sures, scarcity of resources and imminent threats to survival
(Arogyaswamy, Barker, & Yasai-Ardekani, 1995), and are recognised
as complex and heterogeneous phenomena (Chowdhury, 2002;
Walshe, Harvey, Hyde, & Pandit, 2004). These conditions compli-
cate the task of leaders charged with directing a company turn-
around, and of scholars interested in investigating how they do it.
In particular, the leadership tensions and dynamics that occur during
the turnaround process have received little if any empirical atten-
tion. Using multiple case studies that capture, in a holistic and in-
depth way, what (and when) leadership tensions arise during the
turnaround process, we begin to address this gap in the literature
and, in so doing, reconceptualise the role of the turnaround leader.
* Corresponding author. Tel.: 0064 34798121.
E-mail address: conor.okane@otago.ac.nz (C. O’Kane).
A rich line of empirical and theoretical inquiry over the past four
decades has significantly enhanced our understanding of turn-
around, predominantly in relation to the different types of strate-
gies available to leaders and how these are linked to the causation
of decline (Beixin, Lee, & Gibbs, 2008; Hofer, 1980; Ndofor,
Vanevenhoven, & Barker, 2013; Schendel & Patton, 1976). However,
less research attention has been directed at the process of company
turnaround (Boyne & Meier, 2009; Chowdhury, 2002; Pajunen, 2006).
In particular, aside from a number of notable contributions (Bibeault,
1982; Petran, 2008; Slatter, 1984), in-depth examinations of the role
of leaders during the turnaround process have not been reported
in the literature. Indeed, the failure to develop a suitable frame-
work to guide leaders with regard to the ‘how to do it’ aspects of
company turnaround has been an ever-present concern for turn-
around scholars (Harker & Sharma, 2000; Hoffman, 1989; O’Neill,
1986; Winn, 1993). A review of the field by Lohrke, Bedeian, and
Palmer (2004) uncovered that little, if any, empirical attention has
been afforded to the importance of top management in turn-
around situations, or the means by which they formulate and im-
plement their strategies. More recently, Board (2010) argued that
despite the significant lesson-learning emerging following the global
financial crisis, there has been insufficient discussion, outside of re-
muneration and incentive structures, about how executive leader-
ship is carried out. This is surprising, both from a theoretical and a

http://dx.doi.org/10.1016/j.emj.2014.04.004
0263-2373/© 2014 Elsevier Ltd. All rights reserved.
964 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980
practical perspective, given the critical role these leaders have when
dealing with the challenges of company decline and possible failure.
To begin addressing this gap in the literature, we examine the
types of tensions turnaround leaders experience, when they occur
during the turnaround process and how they are managed. Within
the scope of this research, leadership tensions can be understood
as decisional dilemmas in which there is a trade-off in prioritising
one course of action over another. Potential tensions can be ex-
trapolated from three recurrent themes in the literature that ac-
knowledge the role of leaders during company turnaround. First,
leadership change discusses the benefits and drawbacks of replac-
ing or prolonging the existing CEO (e.g., Balgobin & Pandit, 2001;
Clapham, Schwenk, & Caldwell, 2005; Wiersema & Bantel, 1993).
Second, leadership assertiveness compares ‘hard’ and/or ‘soft’ forms
of leadership in terms of behaviours, styles and decision-making (e.g.,
Ames & Flynn, 2007; Kanter, 2003; Petran, 2008). Third, strategic ori-
entation considers the prioritisation of operating and/or strategic
changes in response to performance decline (e.g., Barker & Duhaime,
1997; Hambrick & Schecter, 1983; Robbins & Pearce, 1992;
Sudarsanam & Lai, 2001).
Our findings lend conceptual clarity to the core tensions turn-
around leaders experience during the turnaround process and how
they manage these tensions. Specifically, we find that there are six
leadership tensions in the turnaround process: one relating to lead-
ership change (i.e., stability/change), three focusing on leadership
assertiveness (i.e., ownership, disposition and control) and two re-
lating to strategic orientation (focus and horizon). We position these
tensions in a five-stage turnaround-process leadership model de-
veloped during the course of our analysis. We argue that turn-
around leadership should never be one-dimensional. More
specifically, we illustrate that effective turnaround leadership is less
about particular skill sets or ‘types’ of leaders for different stages
of the recovery process, and more about their ability to purpose-
fully navigate and balance apparently conflicting activities within
these tensions.
The paper proceeds as follows. We begin by outlining our the-
oretical framing which is based on the three aforementioned lead-
ership tensions – leadership change, leadership assertiveness and
strategic orientation. We then describe our research design, a case
study approach that draws on four Irish companies undergoing turn-
around. Next, we present details of our findings and discuss the im-
plications of these for theory and practice. The paper closes with
some concluding comments and suggestions for future research.
The turnaround process
Strategy process research looks at how individuals and groups
formulate and implement strategies (Pettigrew, 1992). It encapsu-
lates the sequence of events and actions that describes how things
change over time (Hutzschenreuter & Kleindienst, 2006; Van de Ven,
1992). Turnaround represents a specific type of strategy process. The
need for a company turnaround is initiated by external forces, in-
ternal deficiencies or a combination of both (Dess & Beard, 1984;
Sheppard & Chowdhury, 2005). A turnaround process, as utilised
in the current study, occurs when ‘a firm undergoes a survival threat-
ening performance decline over a period of years but is able to
reverse the performance decline, end the threat to firm survival and
achieve sustained profitability’ (Barker & Duhaime, 1997, p. 18). The
turnaround process, thus, broadly contains three key phases: decline,
decline stemming and recovery/failure. Operating and strategic
changes (explained below) are implemented within and across these
three turnaround stages, and as such, are heavily intertwined. In
stemming decline, for instance, leaders need to carefully align both
efficiency and growth-oriented objectives. Extant process-based
studies in the turnaround literature have produced a number of over-
lapping stage models that provide insights into the sequencing and
level of integration of these turnaround responses for declining com-
panies (different models are presented by Arogyaswamy et al., 1995;
Balgobin & Pandit, 2001; Bibeault, 1982; Chowdhury, 2002;
Fredenberger & Bonnici, 1994; Grinyer, Mayes, & McKiernan, 1990;
Harker & Sharma, 2000; Igor & Steve, 2006; McKiernan, 2003; Pearce
& Robbins, 1993; Robbins & Pearce, 1992; Slatter, 1984; Zammuto
& Cameron, 1985). In terms of our understanding of turnaround lead-
ership, however, they do little to elucidate what leaders do and when
they do it. In examining the tensions leaders must manage when
implementing a turnaround, we begin to address this gap in the
literature.
Leadership tensions in the turnaround process
Leadership has been conceptualised as the activities and deci-
sions (of multiple actors across an organisation) that target the suc-
cessful delivery of results (Grint, 2010; Leslie & Canwell, 2010). In
the context of our study, we specifically focus on the role of CEOs
and their direct executives in their efforts to stabilise performance
decline and to direct the company towards recovery. Much empir-
ical attention has been afforded to the importance of leadership in
turnaround. This literature has focused on attribution patterns
(Barker & Barr, 2002; Barker & Patterson, 1996); board composi-
tion (Mueller & Barker, 1997); the impact of governance and stake-
holders (Igor & Steve, 2006); CEO power (Abebe et al., 2011); and
public sector turnaround leadership (Jas & Skelcher, 2005; Murphy,
2008). It is also widely reported how poor leadership contributes
to the initial performance declines, either through a leader’s direct
actions or from their failure to identify and respond to significant
problems (Arogyaswamy et al., 1995; Balgobin & Pandit, 2001;
Bibeault, 1982). Notwithstanding this breadth of inquiry, Lohrke,
Ahlstrom, and Bruton (2011) emphasised that further research at-
tention on turnaround leadership is required.
Although increasing levels of ambiguity and complexity have
made the management of tensions an essential aspect of the lead-
ership role more generally (Chambers, Drysdale, & Hughes, 2010),
little, if any, research has focused explicitly on the tensions that
leaders experience during the turnaround process. Extant litera-
ture does acknowledge, however, that turnaround leaders are con-
sistently challenged to remain dynamic and must ensure their
activities are sufficiently balanced and fit for purpose during im-
plementation of the recovery strategy. Pajunen (2006), for in-
stance, emphasises how leaders need to carefully manage the
changing influence of key stakeholders during the turnaround
process. Unless leaders can establish and maintain legitimacy and
support for their actions they risk losing control of the turn-
around (Gopinath, 1991; Maheshwari & Ahlstrom, 2004). Petran
(2008) provided some empirical evidence on the importance of dia-
lectical thinking and balanced decision-making by turnaround
leaders when integrating a range of contradictory information and
competing interests across the organisation. Furthermore, Schmitt
and Raisch (2013) presented evidence supporting an integrative ap-
proach to turnaround management. Specifically, in portraying re-
trenchment and strategic change as a critical duality in the recovery
process, the authors argued that these two turnaround responses
are interrelated as well as contradictory, and that they can be mu-
tually enabling or complementary if managed effectively. Never-
theless, our understanding of what exact tensions or dualities
turnaround leaders encounter, when they are most pronounced and
how they are managed remains underdeveloped. We extrapolate po-
tential leadership tensions from three of the most recurrent themes
in the turnaround literature: leadership change, leadership asser-
tiveness and strategic orientation. These tensions arise from the con-
flicting guidance documented in this literature. We next turn our
attention to discussing these potential tensions in more depth.
 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980
Leadership change
Leadership change refers to whether or not a leadership replace-
ment is required as part of the turnaround. Replacing leaders can
have a positive effect on turnaround (Abebe, 2009; Mueller & Barker,
1997) with some scholars regarding it as a precondition for recov-
ery (Bibeault, 1982; Hofer, 1980; Schendel, Patton, & Riggs, 1976).
New leaders are unlikely to ignore inadequacies identified with out-
dated strategies, structures and/or processes just because alterna-
tives do not fit with the organisation’s existing beliefs, norms and
mental maps (Barr, Stimpert, & Huff, 1992; Hambrick & Fukutomi,
1991; Probst & Raisch, 2005). Leadership changes are important when
existing leaders are complacent, incompetent or suffer from other
frailties (Altman, 1983; Balgobin & Pandit, 2001; Finkelstein, 2003).
Furthermore, leadership changes are deemed appropriate as a signal
of intent to gain key stakeholder support (Arthaud-Day, Certo, &
Dalton, 2006) and where a significant strategic or structural change
is required as part of the turnaround (Barker & Mone, 1998).
Support for leadership changes in turnaround situations, however,
is by no means unanimous (Barker, Patterson, & Mueller, 2001;
Bruton, Ahlstrom, & Wan, 2003; Clapham et al., 2005; Sudarsanam
& Lai, 2001; Wiersema & Bantel, 1993). Replacing a leader can cause
confusion and fear (Friedman & Saul, 1991; Sull, 1999), and outside
appointments, in particular, may cause greater disruption and lack
the requisite knowledge of the company’s people, technology, com-
petitiveness, industry and culture that are critical for success (Bower,
2007; Zhang & Rajagopalan, 2010). Leadeship changes during turn-
around can, thus, bring both benefits and risks. An understanding
of when this tension is most pronounced and how it is managed
during the turnaround process requires further study.
Leadership assertiveness
Leadership assertiveness encapsulates the behaviours, styles and
decision-making of turnaround leaders during the recovery process.
Crisis situations and the need for large-scale change understand-
ably result in disquiet and fear among the organisation’s work-
force (Huy, 2002). This represents a significant challenge for
turnaround leaders as the commitment and effectiveness of these
personnel is fundamental to achieving recovery (Wooldridge,
Schmidt, & Floyd, 2008). In addressing this issue, there is a clear
tension between the need for a ‘hard’ and a ‘soft’ leadership during
company turnaround.
‘Hard’ leadership is important during turnaround to centralise
command, reduce participation and instil close supervision and
control. Bibeault (1999), for example, detailed how turnaround
leaders are decisive, risk-taking and utilise strict authority, perfor-
mance evaluations and reward systems. Muczyk and Steel (1998)
argued that organisations in ‘life threatening’ straits are most apt
to be saved by a directive autocrat. Such autocratic turnaround lead-
ership can improve task accomplishment and efficiency of re-
source utilisation, instil confidence among firms’ stakeholders that
the company is not directionless, and ensure that there is greater
control over cash, capital expenditures, inventory and credit at a crit-
ical time (Bibeault, 1982; Miller, 1977). To maintain credibility during
implementation, turnaround leaders also need to demonstrate
courage and resilience (Austin, 1998; Silver, 1992).
In contrast a ‘soft’ leadership incorporates a more interperson-
al, open and cooperative form of leadership to emphasise shared
ownership of the turnaround challenge (Ashmos & Duchon, 1998;
Beer & Walton, 1987; Higgs & Rowland, 2005). Trust and honesty
can reduce anxiety and resistance, help leaders understand em-
ployee concerns and improve levels of commitment during the re-
covery process (Dutton & Duncan, 1987; Gopinath & Becker, 2000;
Graebner, 2004; Miller, Johnson, & Grau, 1994). Petran’s (2008) study
of turnaround executives uncovered evidence of eight characteris-
965
tics across three constructs; transformational leadership, wisdom
and emotional intelligence. These included (1) acting in ways that
build others’ respect for them; (2) addressing crucial values and
beliefs; (3) understanding the differing needs, strengths and am-
bitions of individuals (i.e., transformational leadership); (4) balanc-
ing decisions against a set of higher moral and ethical standards;
(5) acknowledging the domino effect of changes across the
organisation; (6) capacity to make pragmatic decisions (i.e., wisdom);
(7) (dis)engaging with their own emotions; and (8) managing their
own emotions and those of others (i.e., emotional intelligence). These
findings are consistent with other contributions in the literature on
change leadership. Bibeault (1999), for example, detailed how turn-
around leaders can motivate, enthuse and instil confidence in the
workforce through charisma. The management of one’s emotions
in order to stay calm and self-confident is also acknowledged as par-
ticularly important in crisis situations such as turnarounds (McCrae
& Costa, 1997). Furthermore, it is reported how turnaround leaders
will at times evoke optimism, positivity and self-confidence that the
challenges can be met and recovery achieved (Bratton & Knobler,
1998; Goldstein, 1988). They also role model desired behaviours
(Bennis & Nanus, 1985; Kramer, 1987), and acknowledge the achieve-
ments of the workforce, as well as set priorities and occasionally
establish a deliberate sense of urgency (Kanter, 2003).
The tension for turnaround leaders, therefore, involves knowing
when and to what degree to be assertive. How can workforce anxi-
eties be appropriately acknowledged and managed in a way that does
not escalate them further and heighten resistance to the turn-
around? Ames and Flynn (2007) argued that being overly assert-
ive can be good for short-term goal achievement but it may
jeopardise good relationships, while low levels of assertiveness may
engender social benefits at the expense of goal attainment. Greater
research attention is needed to understand how this leadership as-
sertiveness tension is managed during the turnaround process.
Strategic orientation
Leaders must balance to what degree and for how long they will
implement operating oriented moves at the expense of strategic
changes. We refer to this balance as the leader’s strategic orienta-
tion. An operating or retrenchment oriented focus involves disin-
vestment and cost, asset and employee reductions. This response
by leaders can, particularly in the near term, deliver efficiencies
and a more streamlined business, release cash flows to fund other
strategies, and win over key stakeholders (Arogyaswamy &
Yasai-Ardekani, 1997; Bruton & Rubanik, 1997). Numerous schol-
ars have detailed the importance of retrenchment in turnaround
(Hambrick & Schecter, 1983; Morrow, Johnson, & Busenitz, 2004;
Robbins & Pearce, 1992).
Strategic changes in turnaround entail new product and/or market
combinations and recalibrating resources and capabilities to compete
differently, either in-house or through acquisitions and strategic al-
liances (Morrow, Sirmon, Hitt, & Holcomb, 2007; Ndofor et al., 2013).
The importance of strategic change relative to retrenchment in turn-
around is argued on two fronts. First, the effectiveness of retrench-
ment as a response has been questioned. Scholars have re-analysed
and challenged Robbins and Pearce’s seminal findings (i.e., Barker
& Mone, 1994), found insignificant retrenchment effects on the per-
formance of struggling firms following acquisitions (Castrogiovanni
& Bruton, 2000) and reported positive effects from more entrepre-
neurial responses to decline (Sudarsanam & Lai, 2001). Second, re-
trenchment can have potentially damaging consequences (Bruton
et al., 2003). Too much emphasis on resource reduction or struc-
tural changes by leaders can reduce innovation, creativity, learn-
ing and the ability of the company to adopt domain expansion
courses of action (Barker & Mone, 1998; Dougherty & Bowman, 1995;
Johne & Davies, 1999). Furthermore, excessive downsizing in
966 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980
Decline Decline stemming
Leadership
change
Fig. 1. Research framework.
response to decline can reduce organisational commitment among
survivors, which can in turn compromise future performance im-
provements and turnaround (Cascio & Wynn, 2004; Datta, Guthrie,
Basuil, & Pandey, 2010; Guthrie & Datta, 2008).
Thus, the question of when and to what extent operational or
strategic oriented moves are utilised, represents a challenging tension
for turnaround leaders. Pearce and Robbins (1993) argued that a
phase of retrenchment is a prerequisite for recovery, and it is only
after they have ‘stopped the bleeding’ and stabilised the company
that leaders can consider whether they should continue with an op-
erational focus for recovery or switch to more strategic or entre-
preneurial initiatives for growth. Operating moves are, therefore,
more likely to be evident at the outset of turnaround but can on oc-
casion remain the dominant focus throughout the recovery process.
Other scholars have offered an alternative view. They have argued
that strategic changes are essential when the company is strategi-
cally weak (i.e., firm-induced decline) and in need of differentia-
tion (Amburgey, Kelly, & Barnett, 1993; Hofer, 1980; Schendel et al.,
1976; Zimmerman, 1989; Zúñiga-Vicente & Vicente-Lorente, 2006).
Retrenchment in such instances will not attend to the actual causes
of decline and instead should be confined to dealing with external
causes such as industry contraction when the need for strategic
change is less pronounced (Barker & Duhaime, 1997). Elaborating
on this point, Ndofor et al. (2013) reported how firms in munifi-
cent industries, where the decline is more likely to be firm induced,
cannot retrench their way back to prosperity. Though some atten-
tion has been directed at the type of strategic orientation firms adopt
during turnaround, how leaders actually manage this tension during
the turnaround process requires greater empirical attention.
In sum, extant literature offers some conflicting options on
what turnarounds leaders can and should do with respect to lead-
ership change, leadership assertiveness and strategic orientation.
These can translate into potential tensions that complicate the role
of leaders during the turnaround process. To date, these tensions
have not been the subject of explicit empirical attention. Our re-
search looks to understand more clearly the core tensions that leaders
experience in these three areas, when they occur during the turn-
around process and how they manage these tensions. Fig. 1 frames
our research focus. We next turn our attention to the study’s re-
search design.
Turnaround
Process
Recovery/failure
Leadership
tensions
Leadership Strategic
assertiveness orientation
Research design
We utilised qualitative research, specifically multiple case studies,
to gather rich contextual data (Cepeda & Martin, 2006;
Easterby-Smith, Thorpe, & Lowe, 1991). The rationale for such an
approach is well founded. First, the use of case studies to examine
complex change processes has proved effective (Ferlie, Hartley, &
Martin, 2003; Morris & Westbrook, 1996; Romme, Georges,
Antonacopoulou, Mulders, & Taylor, 2012). Moreover, Schmitt and
Raisch (2013) specifically recommended the use of case studies and
archival data to examine the nature of the tensions that can occur
at multiple points during the turnaround process. Second, where
theory is nascent or immature and where the subject is poorly un-
derstood (both characteristics associated with turnaround), rich, de-
tailed and evocative data are needed to shed light on the
phenomenon (Edmondson & McManus, 2007). Third, we wanted to
avoid investigating leaders and the meaning of their role separate
from their social contexts (Hoepfl, 1997; Hussey & Hussey, 1997).
We concur that, despite their predominance, quantitative studies
‘are not very insightful in terms of management dynamics by which
turnarounds of complex organisations are affected’ (Khandwalla,
1983, p. 12).
Research approach
Turnaround research has been criticised for ‘survival bias’, where
researchers solely concentrate on those businesses that have re-
covered (Shook, 1998). We purposefully included one company that
was in the early stages of stemming its decline, two companies that
were midway through their turnaround (we regard mid-turnaround
as being after the decline-stemming stage but before recovery/
failure), and a fourth company that had completed a successful turn-
around (recovery) and was now trying to sustain its growth. Our case
studies, therefore, spanned the full turnaround process and com-
bined retrospective and real-time accounts of turnaround leader-
ship at each stage of the process. Focusing on four companies ‘in
the midst’ of their turnaround in this manner ensured we would
not be solely reliant on the capacity of respondent’s memories to
accurately recall the past, and less susceptible to informants trying
to portray desirable images of themselves (Golden, 1992; Huber &
 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980 967

C4
Decline

C1 C2
Decline stemming C3
Recovery:
Turnaround &
Growth

T*
Possible Failure Mid-Turnaround Failure

T* Arrival at a turnaround situation – requires turnaround action

C1 Company 1 - will have recently (within 24 months) initiated its turnaround effort.
C2 Company 2 - will be in the midst of its turnaround and will have recently achieved growth
C3 Company 3 - will have set about its growth path and will be working towards full recovery.
C4 Company 4 – will have achieved a complete turnaround, with sustained levels of growth.

Fig. 2. Positioning of selected case studies1. T*, Arrival at a turnaround situation – requires turnaround action. C1, Company 1 – will have recently (within 24 months) ini-
tiated its turnaround effort. C2, Company 2 – will be in the midst of its turnaround and will have recently achieved growth. C3, Company 3 – will have set about its growth
path and will be working towards full recovery. C4, Company 4 – will have achieved a complete turnaround, with sustained levels of growth.

Power, 1985; Miller, Cardinal, & Glick, 1997). Studies that capture
both retrospective and real-time accounts benefit from an ability
to identify patterns courtesy of the former, and an ability to take a
close-up view of such patterns as they evolve over time, courtesy
of the latter (Leonard-Barton, 1990). Fig. 2 illustrates the deliber-
ate positioning of our cases C1-C4, each at different points in the
turnaround process. Each participating company experienced an
operationalised low performance point or turnaround situation (T*).
The wayward arrows reflect how performance levels can continue
to decline, instantaneously pick up or fluctuate in both directions
before arriving at a definitive turnaround outcome (recovery/
failure). We next provide details of how we operationalised T* and
each case’s position in the turnaround process.
Turnaround criteria
There has been some variance in the terminology, criteria and
timelines employed in the turnaround literature (see Chakravarthy,
1986; Schendel & Patton, 1976). For our study, the turnaround process
spanned between two and seven years, and return on investment
(ROI) was used as the key performance measure (Ramanujam, 1984;
Robbins & Pearce, 1992; Thietart, 1988).
To experience the performance point T*, all companies had to
demonstrate two consecutive years declining or negative return on
investment (ROI) (pre-tax net income/total invested capital, namely,
shareholder equity + long term debt + noncurrent capital leases)
(Winn, 1993). A common step employed in the turnaround litera-
ture is that this declining ROI is measured relative to an objective
financial benchmark (Bruton et al., 2003). As such, at least one of
these years was also to be below that which could be earned by a
risk-free rate of return or investment (RFRR) in that same year (for
this measure compound averages for Bloomberg’s weekly ten-
year yields were calculated). Furthermore, at least one year of neg-
ative net income was required during the period of decline (Francis
1 In adopting this approach, C1 will provide real-time insights into what goes on
in the decline stemming stage of the turnaround process. Similarly, yet to attain a
definitive turnaround outcome, and in conjunction with retrospective accounts of
their decline stemming response, both C2 and C3 will provide valuable insights into
turnaround leadership during the turnaround process before recovery/failure. Finally
leaders within C4, which will have successfully recovered will provide both valu-
able retrospective accounts of how they recently led the turnaround, as well as real-
time insights into how they are presently sustaining their growth.
& Desai, 2005). Companies which met these criteria were said to
have experienced T* and were in need of turnaround action.
To justify each case’s positioning as illustrated in Fig. 1, the fol-
lowing criteria were additionally set. C1, positioned in the decline-
stemming stage, would conform to T* within two years of the study’s
data collection cut-off date. C4, positioned in the recovery stage,
would also demonstrate three consecutive years of ROI above the
risk-free rate of return and three consecutive years of positive and
increasing operating and pre-tax profits. C2 and C3 (positioned mid-
turnaround, i.e., after decline stemming stage but before recovery/
failure) would have two or more consecutive years of positive ROI;
an ROI in this period above the corresponding year’s RFRR; and
two or more consecutive years of operating profit and pre-tax profit.
The criteria for each position are adapted from existing
operationalisations in the literature (e.g., Barker & Duhaime, 1997;
Bruton et al., 2003; Robbins & Pearce, 1992), as a direct precedent
for this novel approach was not uncovered. Table 1 summarises
how this turnaround criteria would need to apply to case studies
C1-C4.
Guided by strict adherence to these criteria, searches using the
Lexus Nexus database over the course of a year produced a dataset
of eighteen potential companies. Letters were sent out to these com-
panies, however, with no response forthcoming the sensitivity and
complexity of the research context was clearly apparent. A follow-
up letter, this time accompanied by a phone call, proved more ef-
fective with a positive response received from ten companies and
six companies declining the offer to participate in the study. No re-
sponse was received from two companies. Closer inspection of the
ten companies who expressed an interest in the study revealed that
– according to our criteria – two could potentially be categorised
as C1 (decline-stemming stage), four as C2 or C3 (i.e., mid-
turnaround) and four as C4 (successfully turned around). At this
point, to limit biases in our final selection of four case studies, we
incorporated background research on the ten companies and their
respective industries as well as provisional discussions (four in person
and six phone calls) with the ten CEOs to better understand the
context of their respective declines and turnaround activities. Fol-
lowing this process, four companies which best fitted the desired
case positioning (Fig. 1), and which offered exciting potential to un-
derstand the role of turnaround leaders, were selected for in-
depth analysis: C1-Falco; C2-Martcol; C3-STY-B; C4-Komex. Table 2
introduces these four companies and summarises their original strat-
egy, causes of decline, turnaround trigger, and current strategy and
968 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980
Table 1
Case conformance to study criteria.
Conform to Met T* in the 2 or more 1-year ROI
criteria of last 24 months consecutive within this
turnaround years of period above
situation positive ROI the RFRR
C1 ✓ ✓
C2 ✓ ✓ ✓ ✓
C3 ✓ ✓ ✓ ✓
C4 ✓ ✓
T* Decline stemming Mid-turnaround
performance. It also indicates what type of turnaround each company
was undertaking. As detailed in the literature, an operating turn-
around primarily relies on disinvestment and/or improved cost, asset
and employee efficiencies to achieve recovery. A strategic turn-
around incorporates new product and/or market combinations, re-
calibrating resources and capabilities and/or acquisitions and strategic
alliances to achieve recovery.
Case study method and data collection
Case study researchers should not emphasise external validity
at the expense of other validity (internal and construct) and relia-
bility measures (Gibbert, Ruigrok, & Wicki, 2008). We used semi-
structured interviews as they allowed questions and discussions to
adapt in line with the evolving turnaround context. Though semi-
structured in format, all questions and discussions broadly focused
on leadership change, leadership focus and strategic orientation. We
met with each company’s CEO, as well as those top level manag-
ers involved in strategic decision-making as identified by that CEO
(Carpenter, Geletkanycz, & Sanders, 2004; Thomas & McDaniel, 1990).
Garnering the insights of multiple leaders in a company as opposed
to individual leaders provides better insights than those of the CEO
alone (Hambrick & Mason, 1984; Tushman & Romanelli, 1985). This
process resulted in thirty 1- to 2-hour-long, interviews that amounted
to over 400 pages in transcripts. Interview data were supported and
influenced by a rich source of secondary material including company
documentation (e.g., strategy documentation, Emergency General
Meeting reviews, generic press releases and annual reports) and ex-
tensive archival records spanning periods of up to nine years. Over
a thousand pages of records in total contributed to the formation
of separate ‘company files’. Taken together, the deliberate position-
ing of our four case studies across different stages of the turn-
around process, spreading our interviews in each company over six
to twelve months and collecting secondary data for each company
spanning a maximum of nine years enabled us to undertake a pro-
cessual analysis of turnaround leadership.
Combining interview and secondary data enhanced the rigour
of our case study analysis. For instance, researcher evaluations of
the information published by industry and business press writers
provided some subjective views but also invaluable expert com-
mentary and outside perspectives (Bruton et al., 2003; Fisher, Lee,
& Johns, 2004). Furthermore, annual reports provide rich and ac-
curate data on key aspects during company turnaround given that
the CEO approves and signs off on their publication (Clapham &
Schwenk, 1991; Lant, Milliken, & Batra, 1992). It should also be noted
that interviews with participants were preceded by a discussion re-
lating to their own perception of their company’s position in the turn-
around process. These consultations proved consistent with the
researchers’ own interpretations, thus offering further verification
for the operationalisations utilised in Fig. 2 and Table 1. Together,
these approaches addressed a notable concern in the literature re-
garding an over-reliance on financial measures in turnaround in-
2 or more Over 3 Over 3 Surpass 3
consecutive consecutive consecutive consecutive
years of years of ROI years of years of
operating profit above the RFRR positive and positive and
and pre-tax increasing increasing
profit operating profit pre-tax profits
✓ ✓
Recovered
vestigations (Chowdhury & Lang, 1996; Davis, 1993; Pandit, 2000).
Table 3 presents summary details on the rigour of the case study
analysis.
Data analysis
Processual analysis compares the patterns of different cases and
emphasises the underlying mechanisms driving the processes
(Pettigrew, 1997). We adopted a ‘temporal bracketing’ sense-
making strategy (Langley, 1999). This facilitates the arrangement of
shapeless non-linear process data into insightful descriptions of
events within which there are stable or linearly evolving patterns.
Our cross industry selection of four companies is consistent with
the case study method’s ability to generate theory through analyt-
ical generalisation (Gerring, 2004). Initial analysis overlapped with
data collection, with preliminary patterns recorded in the form of
shorthand notes (Miles & Huberman, 1994). Once data collection
was complete, primary and secondary data were chronologically ar-
ranged. This process, and specifically the writing up of four in-
depth case studies in line with the three phases of the turnaround
process – decline, decline-stemming and recovery/failure, permit-
ted the determination of causal events over time for each comp-
any’s turnaround process (Yin, 1989).
The next stage involved the case studies being analysed through
a multi-coding process using NVivo software. The first round of
coding was deductive with the codes derived by the authors and a
research assistant from existing turnaround process models and em-
pirical studies in the literature. The purpose of this round of coding
was to develop an understanding of the nature and timing of lead-
ership activities during the turnaround process. Three team meet-
ings were held to reach agreement on the number, title and meaning
of these codes. In all eighteen codes were used to analyse the content
of these case studies – decline (6), decline stemming (8) and
recovery/failure (4). Research team members then independently
read and coded the four case studies. Again meetings were held
during and after the coding to reach agreement on the coded data.
Cross-case pattern analysis (Eisenhardt, 1989) then ensued in which
patterns, consistencies and differences in the coded data were iden-
tified. This process led to the development of ten thematic con-
cepts relevant to all four case studies. These thematic concepts
essentially broke the turnaround process stages – decline; decline
stemming; and recovery/failure – into more refined leadership
themes. Commonalities among these ten thematic concepts facili-
tated the development of a theoretically informed five-stage
turnaround-process leadership model. This model was sent back to
respondents for confirmation and feedback. The model detailed how,
broadly, during realisation leaders acknowledge the severity of the
decline and try to understand the causation. During resuscitation
leaders immediately look to how they can keep the company alive.
During reparation leaders concentrate on the ongoing implemen-
tation of their stabilisation plan but also how they can position
the company for recovery and growth. During recuperation leaders
Table 2
Overview of four company cases.a
Falco (C1)
Business ICT service provider
Original strategy – Challenge state owned industry
incumbent’s monopoly ownership of
the fixed-line network
– Shake up stagnant market
Key contributions – Lack of strategic autonomy; heavy
to decline reliance on cooperation and support
from the state regulator and the
industry incumbent
– Unfocused strategy, poor execution
– Aggressive/ambitious leadership
– Lack of resources/finances
Causation Primarily internal
Turnaround situation/ – Resignation of founder CEO
trigger pointb – €40–50 m in losses and a burn rate of
€3–5 m per month by mid 2006
– Disconnection of 50,000 Falco phone
users by state incumbent
– Falco and its liabilities purchased for
€1 at the end of 2006
Current strategy – Targeting revenues of €100 m within
five years
– Narrowed focus to Next Generation
Network (NGN) and the data,
broadband, and Voice over Internet
Protocol across SME, corporate and
residential sectors
Current performance – Stabilised following rescue; €90 m
refinancing in June 2007, currently
seeking growth
Turnaround type Operating turnaround
a Castrogiovanni and Bruton (2000) have emphasised that turnaround strategies can be heavily influenced by the strategic and operational domain of the company. Each of these four companies were single business units
and not units of a larger corporate who they could depend upon for support, injections of capital and other resource support.
b
Figures have been placed in bands to protect the anonymity of the companies.
Martcol (C2)
Agriculture/food
– Focused on core processing and agri-
trading businesses
– Challenging dairy environment
– Management complacency and
inactivity
– Embedded union and farmer owner
powered culture
– Concentration on low-growth late-
cycle businesses
Internal and external
– Increasing stakeholder unrest
– Drop in operating profits from €23–
27 m to €3–6 m in 2002
– Pre-tax losses rising to almost €40–
50m in 2003
– Appointment of new CEO in 2003
– Created/spun-off non-core businesses
(consumer foods, hardware and
property) into a separate entity. The
value from this subsidiary would be
used to grow the core business (milk
processing and agri-trading)
– Stabilised with moderate levels of
growth.
Strategic turnaround
STY-B (C3)
Financial services
– Develop core of specialist financial
services activities with recurring
income through acquisition drive in
UK/Ireland
– Misguided/uncoordinated acquisition
strategy with inadequate strategic
analysis/fit
– Regulatory changes – scrapping of
restrictions on the ownership of
independent financial advisers
Primarily internal
– Burgeoning debt of €120–140 m and a
grossly inflated share price which later
collapsed to approximately 30–50p
– Pre-tax loss of €31–36 m on revenues
of €85.2 m for 2002
– Concentrated on four core areas
international trustee and corporate
services, pensions and financial
advisory services, and finally, mortgage
and title insurance services
– Organic growth and acquisitions
– Stabilised with sustained levels of
growth – on the verge of a successful
turnaround
Strategic turnaround
Komex (C4)
IT service provider
– Leading player in Customer
C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980
Relationship Management (CRM)
marketplace
– Unfavourable environmental shifts (i.e.,
dot-com implosion)
– Complacent and overly ambitious
leadership
Primarily external
– Bursting of dot-com bubble
– Pulling flotation within two weeks of
scheduled arrival
– Pre-tax losses of €8.4 m on revenues of
€6.2 m in 2002
– Given a weekend to develop
alternative business plan
– Repositioned to provide financial crime
and compliance solutions to the
financial services industry
– Pursuing a merger and acquisition
strategy
– Successful turnaround with sustained
levels of growth
Strategic turnaround
969
970 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980

Table 3
Rigour of case study analysis.a

Design test Case study rigour

Construct validity – Triangulation of data sources and collection from semi-structured interviews, archival records and company documentation –
incorporated different perspectives.
– The chain of evidence was enhanced by interview transcripts being verified by respondents and peers, and details being
provided on the processes involved in accessing, collecting and analysing the data.
Internal validity – The research approach facilitated greater tracking of cause and effect.
– Perspectives from the literature on turnaround and leadership (theory triangulation) informed the causal logic of the
turnaround process research framework, and were used to interpret the research findings.
– The study incorporated pattern matching, i.e., matching empirical observed patterns to those predicted or to those of other
authors and studies.
External validity – Details on the turnaround context of each case study were provided – industry, causes and severity of decline, position in
recovery etc.
– Explicit turnaround criteria were used to rationalise the selection of suitable case studies
– The selection of four in-depth cases of study was consistent with the case study method’s ability to generate theory through
analytical generalisation
Reliability – Maintained a case study database that stored four separate company files containing interview transcripts, shorthand notes,
company documentation and archival records.
a
This table outlining our case study analysis is informed by the work of Cook and Campbell (1979); Eisenhardt (1989); Yin (1989); Eisenhardt and Graebner (2007) and
Gibbert et al. (2008).

consolidate and bolster their growth in order to complete the
recovery. In the final stage of rejuvenation leaders are challenged by
how they can sustain the momentum of their growth. This initial
development of a turnaround process model from a leadership
perspective was critical in attending to our primary research
objective.
Following this process, a second stage of coding – focusing on
the benefits, challenges and timing of specific issues related to lead-
ership change, leadership assertiveness and strategic orientation –
was undertaken. This coding was primarily inductive and concen-
trated on the refined case data, as it was positioned in the five-
stage turnaround-process leadership model. Again, a number of
meetings were held between research team members to discuss over-
lapping or problematic codes and to reach agreement on a final set.
This resulted in 18 codes related to the realisation stage emerging,
sixteen codes related to resuscitation, five codes for reparation and
eight codes for recuperation and rejuvenation combined. Closer in-
spection and cross comparison and grouping of this coded data un-
covered six distinctive leadership tensions. Together these tensions
represent our findings with respect to what (and when) leadership
tensions arise during the turnaround process. Of the six tensions
uncovered, one related to leadership change (titled ‘stability/
change’); three related to leadership assertiveness (titled ‘owner-
ship’, ‘disposition’ and ‘control’); and two related to strategic
orientation (titled ‘focus’ and ‘horizon’). An illustration of our data
analysis is presented in Fig. 3 and a detailed breakdown of the two-
stage deductive and inductive coding process is provided in Table 4.
Fig. 4 presents a summary of these findings. Specifically, it il-
lustrates our five-stage turnaround-process leadership model and
the six leadership tensions positioned within it. We accompany each
of the six tension titles with questions leaders should ask them-
selves to clarify the exact nature of the tension or dilemma. To-
gether, these findings represent our ‘creative leap’ or ‘un-codified
step’ in which we draw on our insights, data and a priori theory to
break away from the expected towards something new (Langley,
1999; Mintzberg, 1979; Weick, 1989). The next section provides
further details on these tensions and how they are managed by turn-
around leaders.

Selection of
company cases

Data Collection and Analysis Case Studies 1st order coding and comparison of Cross-case thematic concepts
leadership data along turnaround process emerge and amalgamated
Nine-year Company
archival data documentation Falco Case
Falco Case Martcol Case
Five-stage turnaround-
Martcol Case process leadership model
Informed

Interviews STY-B Case

2nd order coding of refined ‘within

Komex Case STY-B Case Komex Case
stage’ case study data

Chronologically
ordered to form Informed
Maintain

Shorthand notes Six turnaround leadership

tensions

Fig. 3. Overview of data analysis.

Table 4
Overview of two-stage coding process.

Case study Theoretical grounding of stages 1st order Thematic Process model 2nd order codes from refined ‘within Tension Relevant higher-
stages coding of cases concepts ‘stages’ stage’ case study data identified level theme

• knowledge • causation (a)

C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980

• culture • decision speed (a)
Causation of Stability/ Leadership
• diagnosis • competencies • stakeholder support
• Decline severity (Arogyaswamy et al., 1995) decline change change
• severity of decline • timing • stability vs. inertia
• Crisis (Balgobin & Pandit, 2001) • credibility • integrity
Decline • acceptance Realisation
• Situation severity (Robbins & Pearce, 1992)
• control • humility • causation (b)
• Hidden crisis and crisis denial (Slatter, 1984)
• performance Severity • honesty • perceived ability
Ownership
awareness • change lever • perceived
• barriers • commitment
• composure • courage
Company • urgency • trust Leadership
• Decline stemming and recovery strategies Disposition
survival • emotions • expectations (a) assertiveness
(Arogyaswamy et al., 1995)
• response trigger • morale • role modelling
• Evaluation, emergency, stabilisation Resuscitation
• existence threatening
(Bibeault, 1982) • buy-in • reporting structures
• cutbacks
• Triggers for change, recovery formulation Decline • feedback • decision speed (b)
Decline • growth Control
and stabilisation (Balgobin & Pandit, 2001) stabilisation • inclusivity • autocratic style
stemming • priorities
• Response initiation (Chowdhury, 2002) • visibility • transparency
• implementation
• Triggers and actions (Grinyer et al., 1990)
• restructure • core competencies
• Retrenchment and efficiency and entrepreneurial Learning
• refocus • (re)positioning
moves (Robbins & Pearce, 1992)
Reparation • transition challenges Focus
• Organisation disintegration (Slatter, 1984) Positioning
• continuous improvement
for recovery
• diversification
• Extent of turnaround (Arogyaswamy et al., 1995) Growth • vision Strategic
• Return to growth (Balgobin & Pandit, 2001) • capability development orientation
Recuperation
• Re-posture and return to growth (Bibeault, 1982) • improved performance • growth barriers
Momentum
• Success and failure (Chowdhury, 2002); • success • autocratic style
Recovery/failure Horizon
• Sustained performance (Grinyer et al., 1990) • momentum • operational efficiency
Recovery
• Recovery and level of success (Robbins & Pearce, • emerging challenges • performance management
Rejuvenation
1992) • expectations (b)
• Collapse and recovery (Slatter, 1984) Reenergised • leadership dependency

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Turnaround Process

Decline Decline-stemming Recovery/failure

Stages of turnaround leadership

Realisation Resuscitation Reparation Recuperation Rejuvenation

Causation and Initiation of Implementation and Consolidating Sustaining

Recognition Response for Positioning for Progress Growth
Survival Recovery

T*

Leadership tensions

Leadership Change: Stability/Change

Strategic Orientation (B): Horizon
1. Should we have a change in leadership?
6. Should we shift horizons?
Leadership Assertiveness (A): Ownership

2. Should we separate ourselves from the decline?

Leadership Assertiveness (B): Disposition

3. How should we portray the situation?

Leadership Assertiveness (C): Control

4. Should we take sole control of the recovery?

Strategic Orientation (A): Focus

5. Should we retrench or reposition?

Fig. 4. Turnaround-process leadership model and tensions.

Findings
Our findings indicate that there are six tensions leaders expe-
rience during the turnaround process. We find that, in managing these
tensions, turnaround leaders are dynamic actors who seek a pur-
poseful balance. That is, the tensions should not be managed in a
one-dimensional manner. These six tensions are now presented with
the ordering reflecting their sequential occurrence. More specifi-
cally and as outlined in Fig. 4, during realisation tensions regarding
(1) leadership stability/change and (2) ownership of the decline are
to the fore. When efforts are concerned with stabilising the company
(i.e., resuscitation) leaders must balance their (3) disposition re-
garding the severity of the situation and their (4) centralisation of
control. During both resuscitation and reparation (i.e., positioning
for recovery) leaders must decide to what extent they will (5) focus
on retrenchment at the expense of strategic change. Finally, when
leaders look to consolidate recovery and sustain growth (i.e., recu-
peration and rejuvenation) they must decide (6) how they will secure
incremental and continuous improvement without sacrificing the
company’s scalability and longer-term strategy across horizons.
Tension 1: Stability/change – Should we have a change in leadership?
This is not a straightforward decision. Our evidence suggests that
there are merits to not only changing or prolonging the incum-
bent CEO as part of the turnaround, but also to deliberately delay-
ing the leadership change until a more appropriate time in the
turnaround process.
In two of our case studies, changes of leadership triggered the
turnaround initiative. The rationale was a loss of credibility in
the incumbent leader and the need for fresh perspectives. In Falco
the CEO explained “it is very difficult for two or three years to per-
suade financers, shareholders and your board members that you are
on the right strategy and then all of a sudden say ‘no, drop every-
thing I said and start again’.” Likewise in Martcol, management re-
called how buy-in was contingent on someone championing the
change: “you had a new chief executive arriving with no baggage,
no agendas and just immediately realizing that things were not going
to continue as they were ... he brought new insights and a clear
realisation of how bad things had gone” (Senior Executive).
The evidence from STY-B indicates that an immediate change is
not always appropriate: “it is very hard to remove senior people who
are very close to clients or important things linked to the recov-
ery. You need to have a strategic view of where you want to go longer
term” (CEO, International Division). At the beginning of 2006, STY-
B’s CEO resigned (almost four years into their turnaround process).
A Senior Executive explained, “STY-B is a perfect example of where
a senior management team managed the turnaround process ... four
executive directors came together and agreed a strategy, without
the CEO.”
 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980
The case for a change in leadership, immediate or delayed, is not
conclusive however. Komex’s Director of Finance revealed, “the same
management team, board investors and clients are here, usually at
least one of these will jump ship, but in the midst of our chaos there
was surprisingly quite a bit of stability.” We find that leadership sta-
bility and knowledge is conducive to prompt decision-making as il-
lustrated by the Director of Product Technology comments: “first,
(we) knew the market and company extremely well and were able
to separate those things that were un-saveable, and second it was
the management who went to the board and got the backing which
facilitated the turnaround.” We also find that stability can be a driver
throughout the turnaround: “the pressure and need to satisfy these
stakeholders is present everyday of the turnaround. We have
managed to keep that integrity in place beforehand, during it and
after” (Chief Commercial Officer).
Thus, in terms of managing this tension, we find that compa-
nies and their boards need to undertake a type of cost–benefit anal-
ysis to identify whether a reliance on the incumbent leader’s
expertise and existing knowledge of the company’s culture, strat-
egy and industry outweighs the need for a fresh start and change
of direction. Where the potential disruption brought about by a lead-
ership change does not immediately outweigh the incumbent lea-
dership’s knowledge and networks, but the credibility of the
leadership has been undermined significantly in the decline, the
tension can also be managed through a delaying tactic whereby a
leadership change is deliberately postponed until later in the turn-
around process.
Tension 2: Ownership – Should we separate ourselves from
the decline?
At the crisis or trigger point, leaders in each of our four compa-
nies made efforts to distance themselves from the decline by
emphasising those contributory elements that were beyond their
control. However, leaders were also conscious that they needed to
demonstrate a commitment and capability for the upcoming chal-
lenge. Our findings indicate that while neither approach can be
adopted in isolation, the management of this tension differed sig-
nificantly for newly appointed and incumbent leaders.
Martcol’s new leadership team pointed to a number of exter-
nalities as the primary contributory factors, such as rising infla-
tion and wages; a downturn in the international dairy industry,
tightly regulated market; falling prices; and consolidation in retail
markets. Falco and STY-B emphasised the ambitions and poor ex-
ecution of the previous leadership. Falco’s CEO commented, “their
plan wasn’t sufficiently focused ... they did not copper fasten the
financials underpinning it, and they certainly didn’t have the man-
agement team to execute a business plan based on their strategy.”
STY-B’s leadership referred to the incompetence of the previous CEO
who directed an unfocused strategic expansion that included 30 ac-
quisitions over five years: “STY-B was run by a guy who was an un-
reconstructed optimist ... he always took the view that it will be better
next month” (CEO, STY-B UK Division). However, these same leaders
also communicated their willingness and ability to take owner-
ship of the decline and turnaround. Martcol’s leaders, for example,
explained that they would be targeting for change a union powered
culture and management structure that catered for inactivity and
complacent decision-making; how they were “operating in too many
late cycle businesses with high cost bases”; and how they would
be attending to the failure to give consumers and brands the at-
tention or spends that they required. Likewise, STY-B’s leaders agreed
that they needed to “cease from being the material destroyer of value
through the making of lousy acquisitions and the poor manage-
ment of the businesses that it did buy.”
Contrasting this approach, Komex’s leadership, who remained
in position, were less explicit in distancing themselves from the
973
decline. Although they did acknowledge that the dot-com implo-
sion largely evaporated their market, this point was more centred
on illustrating their understanding of the decline than on absolv-
ing themselves. In fact Komex’s leadership were far more forth-
coming in accepting responsibility for their part in the decline: “do
you simply say it was external, or was it internal because you didn’t
see the crash coming, you didn’t react in time, you were compla-
cent or arrogant?” (Chief Commercial Officer). Again, however, this
was balanced with a firm belief in their own ability to also drive the
turnaround: “It knocked us but we knew exactly what happened
and what we needed to do to get back up” (CEO). Thus, our find-
ings indicate that the ownership tension is most pronounced at the
decline or realisation stage. The management of this tension is largely
contingent on whether or not there has been a change in leader-
ship. Newly appointed leaders are primarily focused on distancing
themselves from the decline and incumbent leaders are more con-
cerned with taking responsibility for their contribution to the decline.
Both, however, are careful not to undermine their credibility to lead
the turnaround.
Tension 3: Disposition – How should we portray the situation?
To secure buy-in and commitment for the complex changes that
were necessary, leaders in each of our four cases straddled between
promoting urgency regarding the magnitude of the situation and
conveying composure to evoke confidence. Again, for the manage-
ment of this particular tension, our findings indicate that neither
approach is adopted in isolation and that a key contingency is
whether or not there has been a change in leadership.
In companies where there was no change in leadership, this
tension was managed by leaders primarily focusing on communi-
cating the severity of the turnaround situation. Martcol’s CEO, for
example, described the company as “a sinking liner taking water
that had now reached the tipping point.” Survival was contingent
on immediate cutbacks and a staff bulletin issued shortly after his
arrival explained that losses would rise to over €26m unless 1,500
jobs were shed. As explained by the Chief Operating Officer: “we
had evolved nicely, sleepy hollow type stuff but then the new chief
said if we don’t make a move soon we won’t be here in five years
time.” A similar approach was adopted in STY-B: “the initial stages
of turnaround often see the triumph of the pessimists over the op-
timists ... no matter how pessimistic I am it will often turn out to
be that bad or even worse” (UK Divisional CEO); “it is in my inter-
est to make it out to be as bad as possible because if six months later
you have to say it is worse, then you become part of the problem
and not the solution. You need to rebase expectations and grow from
there” (Group CEO). To avoid excessive panic and low morale,
however, the focus on this side of the tension by incumbent leaders
was moderately balanced by conscious efforts to build confidence
in the leadership team. A number of comments from our respon-
dents illustrate this point: “a cool head is required in terms of elu-
cidating what it is you are trying to do . . . you must demonstrate
an air of confidence because people are frightened” (Falco CEO); “you
must stay calm for the sake of your own mental process, and for
your troops you have to be perceived as calm” (Martcol, Senior Ex-
ecutive); “you need to be in control and understand what you are
doing, though that may not always be the whole truth” (STY-B In-
ternational CEO).
In contrast to this approach, while a sense of urgency was also
communicated in Komex – “quite simply, there would be no future
for us and it was important that we all knew that and shared that”
(Director Product Technology) – our findings indicate that the man-
agement of this tension by incumbent leaders involved far greater
emphasis being placed on conveying composure. This is illus-
trated in the following comments: “you must be seen to be confi-
dent. People start to look at your body language, look into your eyes,
974 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980
and look at how you carry yourself” (Chief Operating Officer); “when
you are facing adversity you cannot be frightened, it becomes in-
fectious so I am like a duck, I appear calm and in control but my
feet would be flapping furiously” (Chief Technical Officer). The ef-
fectiveness of this approach was apparent in the following com-
ments by the Chief Commercial Officer: “the CEO reacted with a
‘right, this is the way it is going to happen’ mind-set, it didn’t even
enter his mind that it was not solvable (so) a couple of us then
straight away fell into a ‘how do we make this happen’ mind-set.”
Thus again, the management of the disposition tension is most pro-
nounced at the resuscitation stage of the turnaround process and
largely contingent on whether or not there has been a change in lead-
ership. Newly appointed leaders are primarily focused on promot-
ing urgency and highlighting the severity of the decline while
incumbent leaders are more concerned with conveying compo-
sure to evoke confidence in their turnaround capabilities. In both
instances, however, leaders are careful not to manage the tension
in a one-dimensional manner.
Tension 4: Control – Should we take sole control of the recovery?
Another key dilemma for turnaround leaders centres on the
degree to which they centralise control and decision-making, and
the degree to which they are inclusive so as not to alienate or de-
motivate the workforce. This tension is most pronounced at the re-
suscitation stage. While both approaches have important benefits
for leading a turnaround, our findings indicate that turnaround
leaders unanimously prioritise centralising control and decision-
making in their management of this tension.
Illustrating this point, Falco’s CEO spoke of a “crystal clear man-
agement structure involving five or six key people” and how “it is
very difficult to see it (control) widening in the near future because
realistically the people who execute the strategy are not necessar-
ily the best people at shaping it.” Martcol’s Chief Operating Officer
explained “when you look at the previous day, if it is 90% consen-
sus you haven’t done your job properly because things won’t have
moved fast enough.” Another Senior Executive commented “the more
voices, the greater possibility of mixed messages.” A Senior Exec-
utive in STY-B argued “turnaround situations require clinical fixing,
with the initial phase being very much centralised.” Likewise Komex’s
CEO explained “I had to become the most detail oriented CEO, more
operational and more pedantic, what the company needed for two
years was granular micro management.” Thus, the primary driver
for managing the tension in this manner was the need for decisive
decision-making, tight resource control, close performance evalu-
ation and limited discretion at the crisis point in the turnaround
process.
Once again, however, the management of this tension was not
one-dimensional. More specifically, this emphasis on centralised
control was simultaneously moderated by an element of inclusive-
ness and delegation aimed at fostering cooperation and trust in the
workplace, and to secure employee buy-in for the complex change
program being undertaken. For example, in Falco we found that
leaders purposefully arranged staff consultations to gauge feed-
back and to encourage people to step up to the challenge. In Martcol,
the CEO emphasised the importance of “getting my managers in-
volved and thinking, and let them get the knives out and fight for
every inch.” The Chief Operating Officer also revealed how the CEO
initiated “bi weekly 7.30am meetings where middle management
became visible early on ... [he was] asking these fellas directly for
their opinion, it nearly became a war cabinet for a period.” In STY-
B, one Senior Executive explained “you have to let people see you
and poke you and tell you where you have gone wrong.” Similarly,
the Head of Marketing commented “the trick is to broaden or un-
centralise the leadership, once you get them believing the changes
have come from them, you are more likely to get success.” Finally
in Komex, a Senior Executive acknowledged “relationships are very
important early on as people get an opportunity to share their con-
cerns and frustrations and they look to you for assurance and guid-
ance.” Nevertheless, despite the merits of simultaneously managing
the tension in this manner, our findings indicate that it was sec-
ondary to reigning in control and centralising decisional pro-
cesses. The skewed nature by which this tension was managed was
best captured by Komex’s Chief Technical Officer who explained “I
lead the thought process and provide direction ... I often know what
the end answer is, but if I make that decision myself it will have a
different result if I have discussed it with people.”
Tension 5: Focus – Should we retrench or reposition?
The fifth tension we uncovered pertained to the extent to which
leaders focused on cutbacks and efficiencies improvements, and the
extent to which they concentrated on strategically positioning the
company for growth. Our findings indicate that during both resus-
citation and reparation, turnaround leaders carefully balance re-
trenchment and strategic growth initiatives simultaneously.
Illustrating the focus on retrenchment, Falco immediately exited
marketing deals, low margin, non-core activities and reduced their
workforce from over 300 to 100. As explained by the CEO “you cannot
hold your punches . . . if people can’t buy into the plan, then you
need to change those people.” Martcol staff numbers had reduced
by 1200 within the first two years and restructuring was being guided
by the CEO’s mantra “fix it, outsource it, shut it or sell it . . . we must
fix the business (units), if there are any areas which we cannot fix,
the options are stark.” The Chief Operating Officer explained “some
blockers were sitting in the way. . .as in a standard deviation curve,
95% [staff] are average to good, two and a half per cent are bril-
liant and two and a half per cent are poor, you got to get rid of them.
The minute they are gone another two and a half per cent move into
that category.” STY-B exited the pension release business, sold non-
core assets, reduced staff numbers and closed twelve offices. The
CEO of the UK Division noted, “you are taking a number of deci-
sions in relatively short order and that cannot happen without it
being driven through at pace.” STY-B also undertook a joint venture
with SY-Capital with the Group CEO explaining “it was painful. But
when you have borrowings of over €130m and annual income of
€12m, the options are pretty limited. By selling half, we raised €20m
to clean up our balance sheet.” Deep cuts were also undertaken in
Komex with the CEO recalling how he intervened after manage-
ment procrastination cost the company €4m: “for 16 weeks they
stalled so eventually I went down the corridor, grabbed the spread-
sheet, got a highlighter, and said ‘right him, him, her’ etc. They said
I couldn’t do it like that so I said ‘I will be back in two hours, have
the 110 names for me’, and they did.”
Contrasting this short-term focus, leaders across all four cases
were simultaneously formulating their future strategic directions
at this point. Falco’s leaders explained that they were now concen-
trating on “controlled growth” through their Next Generation
Network for corporate, SME and residential markets: “we are now
moving towards a growth story . . . winning market share and
launching new products” (CEO). In Martcol a Senior Executive noted,
“it is easy to take a thousand people out; the bigger issue is where
you go from there?” In their efforts to transition from a manufac-
turing to a consumer facing company Martcol created a separate
entity (Recoll Holdings Ltd) to house three non-core parts of the busi-
ness – consumer foods, home hardware and a property division –
while the core milk processing and agri-trading business would con-
tinue to operate as Martcol. According to Martcol’s CEO, Recoll would
provide “better access to funds to grow the non-core parts of the
business.” STY-B’s leadership faced a similar challenge: “anyone can
get efficiencies, the real trick is return on investment ... where is my
next idea? What markets do we want to be in? How do we attract
 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980
new business?” (STY-B International, CEO). Consistent with this focus
STY-B’s group CEO commented, “we’ve got the ability to start growing
our core divisions again through a combination of organic growth
and bolt-on acquisitions where price and fit combine to make a com-
pelling case.” Komex also started to ask themselves hard ques-
tions: “Were our skills flawed? Was the product wrong? Was the
market wrong?” (Director of Finance). They identified their core ex-
pertise in analysing data to detect and predict behaviour and their
ability to win and hold big clients. Consequently, they reposi-
tioned to the financial crime and compliance market, focusing on
fraud detection and transaction monitoring. This was a challeng-
ing step: “we had to manage existing clients to end of life and si-
multaneously learn about the new industry and regulation, achieve
profitability, and ramp up a new market” (Senior Executive). Illus-
trating the complexity of this tension for turnaround leaders, Komex’s
CEO commented: “we were repositioning for new markets at a time
when we least had resources to do it. A lot of oxygen was being spent
on retracting, not adding business.”
Thus, in managing the focus tension we found that leaders unani-
mously balance retrenchment and strategic growth initiatives si-
multaneously during the turnaround process. One contingency that
may alter the nature of this balance is whether the company is pur-
suing an operating or a strategic turnaround. We found that Falco’s
leaders, who were pursuing an operating turnaround, were more
concerned with fine-tuning their core focus as a platform for future
growth than in repositioning their future direction as part of the re-
structuring, as was done across the other three companies who were
pursuing a strategic turnaround. Nevertheless, outside of this po-
tential contingency, we found that leaders unanimously balance re-
trenchment and strategic growth initiatives during company
turnaround with neither side of the tension explicitly prioritised.
Tension 6: Horizon – Should we shift horizons?
Efforts to sustain the recovery brought new challenges for leaders
(e.g., new competition and markets, capital funding requirements,
acquisitions etc.). We found that, once stabilised, leaders con-
sciously balanced the degree to which they concentrated on con-
tinued implementation of the recovery strategy in the near-term,
with longer-term issues of capability development, strategy and
vision. We refer to these as horizons one and two respectively.
With horizon one issues, leaders focused on continuous im-
provement and were quite hands-on and autocratic. Martcol’s CEO
expressed their intention to “remain dedicated to best operational
practices, strong financial discipline, and sharpening our focus.” Fur-
thermore, their strategic direction was now firmly set: “the routes
might be negotiable but not the overarching goals. Every so often
you twist the dials but we have picked the station and we are going
to listen to it until this journey is over” (Chief Operating Officer).
STY-B’s International CEO explained, “there is an absolute focus on
key performance indicators and detailed metrics, which show how
everyone is performing with regard to the implementation of our
core strategy.” Expanding on this he commented, “I still fully expect
them to run their businesses, take responsibility and perform. If they
don’t I get rid of them.” Likewise Komex’s CEO argued, “I have a
serious intolerance of bullsh*t, negativity and positioning. My view
or strategy would still only get altered about 15% of the time.” To
sustain momentum and keep people “mobile and motivated” the
Chief Technical Officer commented, “turnaround is not like Star Trek,
it is not a case of just make it so. You have to continue do it and
role model every day.” This focus was captured by the CEO who ex-
plained, “do we have a tired management team? No. Have we run
out of ideas? No. Do we have a conflict where investors want to now
realise their exit? No. Why would you train for the marathon and
not run it?”
975
Simultaneously, however, we found that leaders focused on
horizon two issues concerning scalability, strategy and vision. Martcol
were now “strategically assessing candidates and whether they had
the competences that the new direction and business model re-
quires” (Head of Human Resources). Likewise STY-B Head of Mar-
keting noted: “we are now committed to developing talented people
who are critical to our future success.” STY-B’s International CEO
explained this focus: “if you can walk away from a once struggling
company and there are no key dependencies you have delivered as
leaders because you have grown the necessary competencies.”
Komex’s Chief Operating Officer pointed out that they were now fo-
cusing on “reducing the extent to which they were on the critical
path for all deals.” As explained by the Finance Director: “as the
company grows the original leaders become more like mentors, you
don’t have the bandwidth ... we want to get to 100% mentorship.”
In terms of strategy, Komex wanted to become the number one pro-
vider of financial crime software in the world and build 30% market
share over five years: “I want to meet the investors of similar com-
panies and say ‘merge with us because I can guarantee you faster
growth’” (CEO). Furthermore, the CEO revealed “I have a process
every twelve months to take a few days out and think through what
kind of CEO Komex needs. I recalibrate what are the things needed
from a CEO and whether I can meet those targets.”
In sum, we found that this tension was most pronounced during
the latter stages of the turnaround process when companies were
experiencing growth and/or fully recovered. Similar to the focus
tension we found that the horizon tension was most effectively
managed by simultaneously balancing the continued implementa-
tion of the recovery strategy, with longer-term issues of capability
development, strategy and vision. Thus, neither side of this tension
should be explicitly prioritised. Again, our findings indicate that one
potential contingency that may alter the nature of this balance is
whether the company is fully recovered as opposed to in an early
growth mode. For example, Komex, who had successfully turned
around, could be regarded as being slightly more advanced than the
other companies in their succession planning and longer-term stra-
tegic planning. Nevertheless, there was insufficient evidence in our
data to suggest that the management of this tension by Komex’s
leaders was significantly different in terms of their emphasis.
Discussion
Our study focused on identifying the core tensions leaders ex-
perience during the turnaround process and how they manage these
tensions. To do so, we examined leaders in four companies at dif-
ferent stages of the turnaround process. We found that there are six
tensions. One relates to leadership change (i.e., leadership stability/
change), three focus on leadership assertiveness (i.e., ownership,
disposition and control) and two concern strategic orientation (focus
and horizon). We next discuss how these six tensions are managed
and how these findings interact with existing literature in the
areas of leadership change, leadership assertiveness and strategic
orientation.
Leadership change
The highly contingent nature of turnaround leadership is
emphasised by the fact that leadership stability, leadership changes
and deliberately delayed changes are each supported in our find-
ings. Thus, we do not regard leadership change as a precondition
(Hofer, 1980) for successful turnaround. This finding has some
support in the literature (Chen & Hambrick, 2012; Sudarsanam &
Lai, 2001). At the beginning of the turnaround process (realisation),
companies and their boards therefore need to prioritise what is most
important in terms of leadership stability/change for their turn-
around situation and act accordingly. Our findings indicate that
976 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980
leadership replacement is most appropriate if the leadership has been
discredited through outdated and failing strategies (Barr et al., 1992),
a level of seriousness regarding the change intent needs to be sig-
nalled to stakeholders (Arthaud-Day et al., 2006) and/or leader-
ship frailties and incompetence have largely contributed to the
performance decline (Balgobin & Pandit, 2001). In contrast, it was
found that key networks and business and industry knowledge held
by the incumbent leadership is conducive to prompt decision-
making and can be of critical importance to the effective reposi-
tioning of the company’s strategic direction. A cost–benefit type of
analysis therefore has to be undertaken at the beginning of the turn-
around to ascertain whether a reliance on existing expertise for de-
cisive and informed corrective action outweighs the fresh insights
that accompany a leadership change. Where the potential disrup-
tion brought about by a leadership change does not outweigh the
incumbent leadership’s knowledge and networks, but a change is
still necessary, the tension can be managed through a delaying tactic
whereby a leadership change is deliberately postponed until a more
appropriate time in the turnaround process.
Interestingly, we found that this tension of leadership stability/
change influences how two other tensions, namely those relating
to ownership for the decline and how the situation severity is por-
trayed (disposition), are managed. Specifically, we find that trust
(Hakimi, van Knippenberg, & Giessner, 2010; Mayer, Davis, &
Schoorman, 1995) and humility (Morris, Brotheridge, & Urbanski,
2005; Tangney, 2002) are particularly important when there is no
change in leadership. These points are expanded upon in the next
section.
Leadership assertiveness
The rationale for ‘hard’ (e.g., Bibeault, 1982; Muczyk & Steel, 1998)
and ‘soft’ (e.g., Gopinath & Becker, 2000; Graebner, 2004; Petran,
2008) forms of leadership during turnaround are acknowledged in
the literature. Our findings extend this understanding in two key
ways. First, through the identification of three tensions – owner-
ship, disposition and control – we illustrate how, regardless of the
cause (internal/external) or type (operating/strategic) of turn-
around, leaders simultaneously adopt ‘hard’ and ‘soft’ leadership ap-
proaches. Second, we explain how these three leadership
assertiveness tensions are most pronounced in the decline and
decline-stemming stage of the turnaround process, or according to
our model, during realisation and resuscitation.
More specifically, in managing the ownership tension, we find that
turnaround leaders should distance themselves from the decline but
not to the extent that their commitment and capabilities for the turn-
around challenge are questioned by stakeholders (Longenecker,
Mitchell, & Fink, 2007). Our findings indicate that humility and de-
veloping trust and shared ownership (Ashmos & Duchon, 1998; Beer
& Walton, 1987; Higgs & Rowland, 2005) of the change programme
by leaders is more important when there has been no leadership
replacement. Newly appointed leaders on the other hand are better
served primarily emphasising their ‘newness’ and fresh insights.
In managing the disposition tension, leaders deliberately em-
phasise the enormity of the challenge, but not to the extent that they
escalate fears (Huy, 2002) and erode confidence in the workforce.
Our findings indicate that conveying composure to evoke confi-
dence in the leaders’ turnaround capabilities should be prioritised
when there has been no change in leadership. This finding sup-
ports previous studies in the area which have highlighted the im-
portance of leaders remaining calm and having self-belief in times
of crisis by managing their own emotions and those of others (Bono
& Judge, 2004; McCrae & Costa, 1997; Petran, 2008). Moreover, it
reinforces the importance of fostering optimism and positivity that
the challenges can be met (Bratton & Knobler, 1998; Goldstein, 1988).
On the other hand, newly appointed leaders managing this tension
place greater emphasis on promoting urgency (Kanter, 2003) and
rebasing expectations to secure the required buy-in at this early stage
of the turnaround.
Finally, we found that turnaround leaders purposefully cen-
tralise control and decision-making when managing the control
tension. Doing so allows leaders to have tighter control of re-
sources (Hoffman, 1989), speed up decision-making (Bibeault, 1999),
monitor performance closely (Muczyk & Steel, 1998), and limit dis-
cretion and misinformation (Barker & Mone, 1998) at a critical time
in the turnaround process. While we also found that this focus on
tight control is moderately counter-balanced by an element of in-
clusiveness and decentralisation aimed at fostering cooperation and
trust, the management of this tension was very much skewed
towards the centralisation of control. Unlike the preceding ten-
sions where leadership replacement was a key contingency that
offered a possible explanation for how the tensions were managed,
prioritising the centralisation of control was unanimous for incum-
bent and newly appointed leaders. We believe this finding sup-
ports Schmitt and Raisch’s (2013) argument that under conditions
of particular severity, managerial stress and resource scarcity, leaders
will struggle to manage issues simultaneously and will instead
become more focused in their attention. We therefore encourage
turnaround leaders to become more balanced in their manage-
ment of the control tension. Failing to do so may prove costly. Pre-
vious studies have found that improving delegation and consultation
during turnaround and change can engender flexibility (Barker &
Mone, 1998), encourage buy-in (Arogyaswamy et al., 1995), height-
en levels of commitment and involvement (Dutton & Duncan, 1987;
Wooldridge et al., 2008), help define expectations (Lamberg &
Pajunen, 2005), reduce levels of anxiety and resistance (Gopinath
& Becker, 2000; Graebner, 2004) and as our findings show, provide
critical feedback and learning opportunities for the leadership team.
Strategic orientation
Our findings suggest that company leaders manage two core ten-
sions related to strategic orientation. First, with a focus tension leaders
simultaneously implement cutbacks and undertake strategic ad-
justments targeting longer-term growth and recovery. We found that
retrenchment-oriented changes were essential to ensure efficient
use of resources and to provide immediate performance results
(Bibeault, 1982; Bruton & Rubanik, 1997; Hambrick & Schecter, 1983),
as well as to instil confidence among stakeholders in the overall turn-
around effort (Khandwalla, 1983). Equally we found that strategic
changes were important to facilitate the repositioning of strategi-
cally weak companies (Barker & Duhaime, 1997; Hofer, 1980; Ndofor
et al., 2013; Schendel et al., 1976). Rather than regarding these as
sequential steps in the turnaround process (Robbins & Pearce, 1992),
however, we found them to be interrelated (Arogyaswamy et al.,
1995) during the decline-stemming stage of the turnaround process
(i.e., during resuscitation and reparation). More specifically, we found
them to be complementary and their overall effectiveness mutu-
ally dependent (Schmitt & Raisch, 2013). The focus tension is there-
fore carefully balanced by leaders, with neither side of the tension
being explicitly prioritised. For example, key resources accumu-
lated during retrenchment facilitate later strategic changes (Morrow
et al., 2004) while excessive downsizing reduces employee com-
mitment to the overall turnaround effort (Cascio & Wynn, 2004;
Datta et al., 2010). The only caveat we uncovered in the manage-
ment of this tension was that leaders implementing an operating
turnaround may place slightly greater emphasis on the cutbacks
and incremental adjustments than those implementing a strategic
turnaround.
Second, with the horizon tension leaders simultaneously manage
the degree to which they concentrate on continued implementa-
tion of the recovery strategy in the near-term, with longer-term issues
 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980 977

of capability development, strategy and vision. This tension is most
pronounced in later stages of the turnaround process (i.e., during
recuperation and reparation). Again, we find that both compo-
nents of this tension are very much interrelated and therefore a bal-
anced medium is most appropriate with neither side being explicitly
prioritised. For example, key stakeholders still wish to observe
continuous and incremental improvements in performance even
during later stages of the turnaround (Pajunen, 2006). Moreover,
as our findings illustrate, leaders are keenly aware that the effec-
tiveness of strategic changes for both performance improvements
and sustained future growth are largely dependent on
decentralisation, strategic planning and capability development, as
much as they are on continued supervision and tight control. We
did note one minor contingency in the management of this tension.
Leaders of successfully turned around companies were slightly more
focused on succession planning and longer-term strategic plan-
ning; however, there was insufficient evidence in our data to suggest
that their management of this tension was significantly different.
Table 5 summarises how we addressed our research focus.
Concluding comments
Our findings contribute to the theoretical understanding of turn-
around leadership. We find that turnaround leadership is much more
about managing complex tensions rather than the utilisation of spe-
cific skills or types of leaders during different stages of the turn-
around process. This is an important development, as in consolidating
conflicting prescriptions in the literature into complex tensions, we
are reconceptualising our understanding of turnaround leader-
ship. It is our belief that it is the ability of leaders to dynamically
manage and appropriately balance these tensions within and across
different stages of the turnaround process that matters most in their
role.
Our core argument therefore is that, regardless of the stage or
circumstances of the recovery process, turnaround leadership should
never be one-dimensional. Leaders need to accept that apparently
conflicting activities need to be incorporated into their decision-
making and management of key tensions. Choosing to overlook con-
tradictory priorities may seem preferable and produce short-term
benefits that initially rationalise the one-dimensional or skewed ap-
proach; however, this can destabilise the overall turnaround strat-
egy. For example, choosing to relax the focus on operational
improvements in favour of market expansion and new product de-
velopment in later stages of the turnaround process may come as
a relief to employees and boost morale in the short term, but could
hamper resource availability and external stakeholder support in
the longer term. Turnaround leaders also need to recognise that there
is no optimum prescription or balance in managing these tensions
as they are fluid in nature and can reach across multiple stages of
the turnaround process. Based on our own findings, however, what
we can prescribe is that leaders clearly identify the potential trade-
offs involved given the circumstances of their own turnaround (e.g.,
newly appointed or incumbent leader; stage in the process; stake-
holder priorities; operating or strategic turnaround etc.) and then
balance the tension(s) accordingly.
Our findings also indicate that, from a leadership perspective, the
turnaround process incorporates five stages: realisation, resuscita-
tion, reparation, recuperation and rejuvenation. In both identify-
ing and positioning specific leadership tensions throughout the
turnaround process, this model extends existing process models

Table 5
Core turnaround leadership tensions and how they are managed.

Tension Stage Rationale and how they are managed

Stability/change Realisation Yes: If lost credibility and confidence demands an immediate need for fresh perspectives, new
Should we have a Severity of decline acknowledged skills, someone to champion the change and/or a signal of intent about the change intent.
change in leadership? Delayed: If the incumbent leader’s network, reputation and/or skills are required during the initial
stages of the recovery.
No: If intimate knowledge of the market and business facilitate prompt corrective moves and if
enhanced relations/integrity/trust can serve as a key driver for change.
Ownership Yes: Become disassociated with the decline. Create distance from the causes by blaming
Should we separate externalities and/or the previous leadership – but not to the extent that their own commitment is
ourselves from the questioned. This approach is more likely when a new leader has been appointed.
decline? No: Communicate an informed understanding of what went wrong and why, and how the
leadership now have the ability to take things under control. Demonstrate humility and build
trust. This approach is more likely when there is no change in leadership.
Disposition Resuscitation Yes: Emphasise the enormity of the decline to secure buy-in for restructuring, create ‘space’ for
How should we portray Decline-stemming and stabilisation further performance decline, and become positioned for the plaudits arising from early
the situation? i.e., performance improvement. Be careful not to escalate fears or erode confidence. This approach is
should we exaggerate more likely when a new leader has been appointed.
decline severity? No: Remain composed, manage emotions and build confidence in the leader’s ability. Avoid panic,
loss of control or demoralisation. This approach is more likely when there is no change in
leadership.
Control Yes: A hands-on and autocratic approach facilitates prompt and clear decision-making, tight
Should we take sole control of resources and close performance evaluation. This tends to be the dominant focus of
control of the leaders when managing this tension.
recovery? No: Greater consultation facilitates visibility, access to broader expertise, buy-in and a forum to
gather critical feedback, to release frustrations and to resolve disputes. This side of the tension
tends to be neglected by leaders in the early stages of turnaround.
Focus Resuscitation and reparation Retrench: continue to ruthlessly cut costs, improve cash flows and efficiencies, promote urgency
Should we retrench or Stabilisation and positioning for recovery and stakeholder buy-in, and focus on core strategic strengths. This is more pronounced in
reposition? operating turnarounds.
Reposition: undertake strategic introspection and longer-term planning to develop growth and
expansion initiatives, e.g., redirect the company with new markets, new products, acquisitions etc.
This is more pronounced in strategic turnarounds.
Horizon Recuperation and rejuvenation No: Prioritise continuous improvement and incremental change through ongoing implementation
Should we shift Consolidate recovery and sustain growth of the recovery plan. Remain hands-on and role model desired behaviours.
horizons? Yes: Focus on the longer-term strategy and vision. Identify and fill skills gaps, and reduce key
leadership dependencies through decentralisation, mentoring and succession planning. This is
more pronounced for successfully turned around companies.
978 C. O’Kane, J. Cunningham/European Management Journal 32 (2014) 963–980
which have tended to predominantly focus on the different types
of strategies companies adopt. Furthermore, providing some indi-
cation of what leaders do in the turnaround process following
stabilisation and growth is important given the dearth of atten-
tion in the literature to the adjustments undertaken after securing
financial stability (Pearce & Robbins, 2008).
From a practice perspective, we first encourage boards and leaders
involved in company turnaround to be cognisant of the existence
of these tensions. This involves understanding the extent of inter-
relatedness within the tensions and when in the turnaround process
the different tensions are most pronounced. Because our findings
indicate the optimal turnaround leader is one who continuously bal-
ances his/her approach and focus at all times to ensure the ben-
efits accrued from one set of decisions or activities is not undermined
by their inattention to another, we encourage boards and manage-
ment teams to carefully justify and monitor the management of these
tensions. We also strongly encourage practitioners to understand
that, while a change in leadership is often a necessary move, lead-
ership stability can be equally effective but this requires that the
incumbent leaders navigate the tensions accordingly. Further-
more, boards and leadership teams should note that delaying a lead-
ership change can sometimes be the most appropriate option,
particularly when the incumbent’s knowledge, influence and con-
nections are fundamental to the broader recovery effort.
Future research and limitations
We encourage future research on this subject to substantiate or
challenge our findings. While our model and the tensions identi-
fied are informative, we hope that they will be modified. For example,
further study is required to identify what other leadership ten-
sions exist in the turnaround process. How do leaders manage these
tensions and what impact do different approaches have on turn-
around performance? Also, we agree with Schmitt and Raisch (2013)
that there is a pressing need to better understand the interrela-
tions between the different tensions. Additionally, we specifically
encourage future researchers to pay closer attention to the leader-
ship dynamics at the crisis point nearing potential failure and at the
latter stages where leaders are challenged to sustain growth after
recovery. Also, while our purposeful selection of companies at dif-
ferent points in the turnaround process largely addresses the issue
of survival bias, we feel it would be valuable to extend the study
to include companies that did not survive the turnaround process.
Future research should also factor in a number of potential limi-
tations with our investigation. The study of four companies utilising
data gathered in a single jurisdiction, for example, should be noted.
While this research approach facilitated greater depth of study and
helped eliminate confounding factors, we do acknowledge that
greater generalisability of the findings will require similar studies
to be carried out in different geographic locations and/or include
larger sample sizes. It is highly probable that Ireland’s regulatory
and cultural context influenced the activities and approaches of the
turnaround leaders we studied. Research studies undertaken in ju-
risdictions with more lenient bankruptcy systems (e.g., the United
States and the United Kingdom), for example, may present differ-
ent tensions or different management of the tensions. It is also im-
portant to note that the data in this study were largely collected in
the years directly preceding and following the arrival of the global
financial crisis. We suspect that the broader economic climate has
an influence on the role of turnaround leaders and could provide a
valuable contextual extension to our study. Leaders who oversee a
significant performance decline during a sustained economic boom
period, for example, are likely to come in for more criticism from
interested stakeholders than those leaders whose companies are
struggling as part of a wider industry, national or even global down-
turn. Future researchers could examine the types of tensions turn-
around leaders operating within the latter climate encounter and
how they are managed. Though we do not believe it had a signifi-
cant impact on our findings, given that our focus was on company
leadership, we also recommend that future researchers undertake
an industry-specific study to add even greater depth to our own find-
ings. The four companies we examined came from different indus-
tries, each with differing norms, modes of practice and industry
dynamics which will influence the nature of the turnaround task
for leaders. For example, a study of a number of construction-
related companies in Ireland’s current property development en-
vironment would uncover turnaround challenges and leadership
activities and tensions that would differ significantly from those en-
countered by company leaders in the same country’s pharmaceu-
tical and software industries which have continued to perform well
during the same period. Finally, we believe that company owner-
ship structure represents an important contingency in the study of
turnaround leadership. Levels of autonomy around decision-
making and the availability of resources, for example, are likely to
be influenced by the type of ownership structure. Consequen-
tially, future research could benefit from an examination of the extent
to which the management of key activities and tensions by turn-
around leaders differ for family-run, publicly listed and state-
owned entities.
To conclude, we regard turnaround leadership as a particularly
important subject of study in the present business climate. Al-
though our research is timely in lending conceptual clarity to the
core tensions leaders experience during the turnaround process and
how they manage these tensions, it also raises many questions that
emphasise the need for research development in this area. More rig-
orous process-based studies of company decline and recovery are
therefore essential to advance both our theoretical understanding
of the turnaround phenomenon and business leaders’ understand-
ing of how to guide their organisations towards sustained recov-
ery and growth.
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