A Thesis in Decline: Understanding Company Internal Reactions

Sammanfattning: The present thesis aims to further the understanding of company internal reactions to decline. More specifically, the authors make two explorative case studies, looking into three areas that have been described as particularly problematic during decline by previous literature and by practitioners. The areas comprise detection of decline, decision to act, and dysfunctional behaviours that may arise as reactions to decline. Theoretically, in the thesis, decline is looked at as an instance of organizational change and the punctuated equilibrium paradigm is used to understand differences between revolutionary and non-revolutionary responses to decline. Results suggest that detection of decline can be stalled by organizational slack and that departments with customer contact can detect decline long before top management is aware of what is happening, implying that formal metrics and better information flows can enable organizations to tackle decline proactively rather than reactively. Furthermore, findings indicate that top management's reactions to decline might be more influenced by personal inertia than rationality, which is important to be aware of for any executive facing decline. Finally, the dysfunctional behaviours of lacking top management communication as well as increased rumour spreading seem to be exacerbated if management chooses to introduce revolutionary change as a response to decline, whereas neglect of long-term planning seems unlikely if management makes the conscious decision of responding with revolutionary change, although centralization tendencies during decline still compete for management attention.