7. RECURSOS
8.5 Desarrollo de la intervención
8.5.1 Normas fundamentales del Escape-club:
In organisations facing a crisis, tight monitoring and control, as prescribed under agency theoretical principles, can be invoked, although, according to Daily, Dalton and Cannella, they "may actually be harmful to firm survival and shareholder interests"
(2003 :378). Citing the work of Hambrick and D'Aveni ( 1 988; 1 992) these scholars suggest that failure can often set off a downward spiral because as corporate failures become apparent senior management is replaced with the loss of intellectual capital impacting on the strategic direction. Less research has been carried out to understand effective management during corporate crises, financial or otherwise (Daily & Dalton, 1 994a, 1 994b), or how decision-making under such situations may take a different form from that of strategic setting or monitoring performance under less stressful conditions. As a result this lack of attention provides an opportunity to augment the amount of understanding of the effectiveness of the process of decision-making under such conditions.
However, a crisis is not always aligned with corporate failure. The term 'jolts' has been used to distinguish external events from their disparate interpretations within organisations such as 'opportunities, threats, crises, or catastrophes' (Billings, Milbum,
& Schaalman, 1 980). Hostile environmental jolts are defined as "transient perturbations
whose occurrences are difficult to foresee and whose impacts on organisations are disruptive and potentially inimical" Meyer ( 1 982: 5 1 5). Venkataraman and Van de Ven ( 1 998:234) expanded this definition by saying "environmental jolts are low probability high consequence events that can adversely affect the economic opportunities for the population of furns within an economic niche". Such jolts "infuse organisations with energy, legitimise unorthodox acts, and destablise power structures" (Meyer, 1 982:533). Jolts, as unplanned events, bring with them unforeseen risks to a business. Although jolts invariably surprise organisations in one form or another, it is equally true that individual corporations may deal with these jolts in different ways (Meyer, 1 982). The three cases studied as part of Meyer's research ( 1 982:534) support the notion that adaptations to j olts occur over three phases: anticipatory phase: when the portents may be perceptible; responsive phase: while the primary impacts are being absorbed, and readjustment phase: after the shocks have subsided. These three phases are shown in Figure 1 4 below.
Figure 14. Antecedents, Dynamics, and Consequences of Organisational Adaptations to Environmental Jolts
Anticipatory Responsive Readjustment
Broad Ideological and Slack Entrepreneurial Rigid Decentralised
Phases of
AcI .. ntion: Entrepreneurial Strategy and
Adaptive
Environm Structural Resources Strategy and Structure Structure
Organizational Antecedents: Adaptive Processes: ental Constraints Niches
Environmental -+ Forewarning -+ Severity -+ Organizational Responses Surveillance and of Environmental Conditions: Preparation Impact Adaptive Ideology -+ Resiliency -+ Consequenc� -+ -+ Learning Dramaturgy Unrelated chanl!:es Afterrnat
Meyer. A.D. (1982) Adapting to Environmental
Jolts:
Administrative Science Quarterly,2, 534.
Megginson, Bryd and Megginson ( 1 994) acknowledge four main ways to cope with risk: risk avoidance; risk transfer; risk prevention; and risk assumption. Literature also suggests that organisational adaptations to environmental pressures and forces are influenced by their size (Stinchcombe, 1 965; Venkatraman & Van de Ven, 1998), the structures they develop and work within (Lippitt, 1 982; March & Simon, 1958), the strategies they adopt (Miles & Snow, 1 984; Porter, 1 99 1 ), and the ideologies they espouse (Bourgeois, 1 98 1 ; Kolb, Rubin, & McIntyre, 1 984; Starbuck, 1 982).
Other writers (e.g. Miles & Snow, 1978; 1 969) have made a contribution to the adaptive behaviour concepts and theories. Meyer's ( 1 982) research shows the influence of strategy, ideology and slack that occur at different stages of adaptive processes. There is also a need to balance the external focus against other determinants of performance, namely, a firm's internal strengths and weaknesses (Bamey, 1 995), especially if a corporation wishes to sustain its position in the market. Such liabilities can render a firm relatively powerless in respect of a bottom-line that shows erosion of net worth
and/or eventual firm failure over time (Venkatraman & Van de Ven, 1 998). Stinchcombe's theory of newness suggested that the abundance of financial and organisational buffers, such as legitimacy and networks could reduce failure. Miner, Amburgey and Stem's ( 1 990), and Baum and Oliver' s ( 199 1 ) research indicates that by gaining legitimacy a shield against unexpected changes and market fluctuations that reduced the risk of failure can be established. Miner et. aI., ( 1 990) also points out that these organisational buffers are relevant during periods of exogenous shocks.
6.6 Chapter Summ ary
As an administrative function, compliance relates to two distinct functions: the provision of expert advice and counsel, and the exercise of oversight and control to ensure the organisation meets its regulatory obligations in a manner that reflects best practice and adherence to social rules and practices. Such conformance, being either rules-based in the US or principles-based in other countries is prescriptive in nature. In this form it encapsulates the institutional theory's intent (Selznick, 1957) as well as a
legalistic perspective (Zabra & Pearce, 1 989). What could be argued is that in reflecting
a more rational and tactical decision-making style it aligns with Laughlin' s ( 1 980) intellective task.
Compliance and best practice related decision-making could be seen as more rationally constructed and intellectively driven. However, current debate strongly suggests boards that adopt only a compliance role may not be supporting the business it is governing.
More importantly it could restrict or impede growth potential (Collins & Porras, 1 994).
Contextually, decisions can also be considered by the situation in which they are made. Besides the regular monitoring aspect of a board, literature suggests that strategic resource acquisition, strategy setting and impact of unforeseen environmental forces seek decisions at board level. Effectively occurring in differing contexts, each adds a further dimension to the model deriving from literature, one that presumably brings judgementally driven responses. Hence a further dimension is applicable to the model
Figure 1 5. Influencers of Decision-making in the Boardroom
(1) Rational-Boundedly Rational Continuum
Individual Decision-making Group Decision-making
Processes and Behaviour Processes and Behaviour
(5) (2) Intellective - Judgemental Continuum
Structural
Considerations
Behavioural Participating in Decision-
... · __ ·· .. ··· .. ·_···_··· .. ····makfii
g
···_···_···_ .. _ . .... _ .•... _ ... - .. _ ...Independence Decisional
----+ Diversity Infonnation
Sources (3) Compliance-Strategy setting Continuum
Compliance Resource Acquirement Strategy setting and Policy support
(4) Contextual Nature of Decision-making
I I
Regular Strategic Resource Strategy Crisis
Acquisition Setting Management
In this way the three roles of a board as defined by Johnson, Daily and Ellstrand's ( 1 996) work can be used to operationalise decisions and meetings types suggesting the type of decision, the form of interaction that takes, the intensity and rigour of the debate could provide a means to gain a greater appreciation of how decision-making is actual ly occurring in a boardroom. Similarly decision types may be aligned with the role a board chooses to operate under.
Chapter Seven: Behavioural Influences
7.1 Chapter Intent
Structure, decision types and context may shape the decision-making arena. However first and foremost, board decision-making is about human cognitive behaviour (Forbes
and Milliken, 1 999) for, as stated in the King Report, "directors possessing the calibre,
credibility and the necessary skills and experience are required to bring judgement to bear, independent of management, on issues of strategy, performance, resources and standards of conduct and evaluation of performance" (King Report, 200 1 :
Recommendations pg. 59). This chapter turns attention to board decision-making arising from the interaction that takes place as beliefs and knowledge are exchanged and judgement is applied. It does this by recognising such inputs affect the group' s decision-making process which in turn, impacts o n the quality o f the group's decisions (Pettigrew, 1 992). It also acknowledges that like other groups a board is open to reduction in independent critical thinking (Steiner, 1 972) and is vulnerable to process loss (Forbes & Milliken, 1 999).
Three constructs have been attributed to sound and cohesive decision-making. A
number of researchers (e.g., Bourgeois, 1 980; Dess & Origer, 1 987) have suggested that
the promotion of consensus is likely to enhance organisations' decision-making
processes. Conversely, cognitive conflict defmed by Jehn ( 1 995:258) as "disagreement
about the content of the tasks being performed, including differences in viewpoints,
ideas and opinions" has been viewed as a moderating variable. Similarly inquiry, "being
the ability to ascertain knowledge so that independent critical thinking process can take place" (Innami, 1 994) involving the use of "critical and investigative interactive processes" (Amason, 1 996: 1 04) has also been attributed to good decision-making. Thus, the relentless striving for decision-making effectiveness at board level can be viewed as pivoting around three behavioural outcomes: consensus, cognitive conflict and inquiry. Each in turn becomes a process intervention and interaction that influences both group cohesiveness and the ability of the individual to participate.
Such process intervention derives from the notion that group decision-making disrupts or encompasses individually held beliefs. Thus they shape the form the decision will take (Forbes & Milliken, 1 999), as well as the way a group operates. Similarly, how a group is led influences the way interventions are managed and behaviour is controlled,
thus aiding the way an outcome is arrived at. Drawing on behavioural literature, and in particular the work of Sundaramurthy and Lewis (2003), Innami ( 1 994) and Forbes and Milliken ( 1 999), interaction is considered from the contribution made by individuals as well as the independencies and interdependencies of collaboration and conflict.