Chief Executive Cognition, Turnaround Strategy and Turnaround Attempts of Declining Firms

This paper develops an interpretative model of turnaround management that describes how both the attention and attribution patterns of CEOs in declining firms influence the odds of successful turnaround attempts. This model is then tested on a sample of US-based, publicly traded single business firms that experienced significant performance declines between 1987 and 2005. The results show the odds of turnaround attempt success increased when firm CEOs paid more attention to issues external to the organizations and when the causes of decline were attributed to factors perceived as more controllable by the firm. In addition, while the amount of strategic change launched by declining firms during turnaround attempts had a positive association with the chances of successful turnaround, the effect of increased strategic change increased when CEOs attributed the causes of decline to stable sources.