Open Collections

UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

A study of executives’ perceptions of corporate crises Smart, Carolyne Faith 1980

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Item Metadata

Download

Media
831-UBC_1980_A1 S56_2.pdf [ 8.1MB ]
Metadata
JSON: 831-1.0076990.json
JSON-LD: 831-1.0076990-ld.json
RDF/XML (Pretty): 831-1.0076990-rdf.xml
RDF/JSON: 831-1.0076990-rdf.json
Turtle: 831-1.0076990-turtle.txt
N-Triples: 831-1.0076990-rdf-ntriples.txt
Original Record: 831-1.0076990-source.json
Full Text
831-1.0076990-fulltext.txt
Citation
831-1.0076990.ris

Full Text

A STUDY OF EXECUTIVES' PERCEPTIONS OF CORPORATE CRISES by CAROLYNE FAITH SMART B.Comm., U n i v e r s i t y of B r i t i s h Columbia, 1966 M.B.A.,  U n i v e r s i t y of B r i t i s h Columbia, 1976  A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY in THE FACULTY OF GRADUATE STUDIES ( I n t e r d i s c i p l i n a r y Studies)  We accept t h i s thesis as conforming to the required standard  THE UNIVERSITY OF BRITISH COLUMBIA A p r i l , 1980 ©  Carolyne F. Smart, 1980  In presenting t h i s thesis in p a r t i a l f u l f i l m e n t of the requirements f o r an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, I agree that the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r reference and study. I further agree that permission for extensive copying of t h i s thesis f o r s c h o l a r l y purposes may be granted by the Head of my Department or by his representatives.  It i s understood that copying or p u b l i c a t i o n  of t h i s thesis f o r f i n a n c i a l gain s h a l l not be allowed without my written permission.  Department of  Clfnumtrcc^  fiu&ia-ess  The U n i v e r s i t y of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5  Adnuiu^h^^  (^^krctix-ipt)  i i ABSTRACT The purpose of this study was to examine c r i s i s management in business enterprises. 1)  The study had four objectives:  to integrate theories of crisis behaviour into a conceptual model of crisis management providing a basis for empirical research;  2) to test specific hypotheses concerning crisis behaviour, susceptibility to crises, and coping a b i l i t i e s ; 3) to develop managerial tools for diagnosing organizational strengths and vulnerabilities in coping with crises; 4) to develop prescriptions for improving a b i l i t i e s to cope with crises and for preventing crises. A conceptual model was developed that provided a framework for studying decision-making and implementation processes during crises.  Data on  environmental, organizational, and managerial characteristics were collected from senior executives in 94 firms in Canada and the U.S. by means of a structured questionnaire.  ..  Thirty hypotheses derived from the crisis model were tested.  Envi-  ronmental predictability and a managerial style reflecting process rather than task orientation were two factors associated with lower than average susceptibility to c r i s i s . identified.  A general dimension of coping a b i l i t i e s was  Firms that have a high a b i l i t y to cope with one type of  c r i s i s tend to have high a b i l i t i e s to cope with other kinds of crises. In addition to the general dimension the study discovered a specialized dimension of coping a b i l i t i e s .  Firms that develop high a b i l i t i e s  to deal with continuous threats tend to have poor a b i l i t i e s to deal with  i i i. discontinuous threats i f the general dimension of coping a b i l i t i e s kept constant.  is  High l e v e l s of organizational slack and a decentralized  decision-making structure were i d e n t i f i e d as two major factors  relating  to the a b i l i t y to cope with market f a i l u r e s . Diagnostic functions were constructed that predicted v u l n e r a b i l i t i e s to c r i s i s on the basis of executive and organizational a t t r i b u t e s .  Discrim-  inant Analysis was used to derive the p r e d i c t i v e functions f o r d i f f e r e n t types of threatening s i t u a t i o n s (discontinuous threats and o p p o r t u n i t i e s , market stagnation, d e c l i n i n g markets, and c y c l i c a l markets).  The powers  of d i s c r i m i n a t i o n f o r these functions generally were high. P r e s c r i p t i o n s were developed f o r improving c r i s i s coping a b i l i t i e s and f o r preventing c r i s e s .  To help reduce c r i s i s s u s c e p t i b i l i t y ,  for  example, improved scanning and monitoring techniques were prescribed to temper the impact of an uncertain environment.  Dual organizational  t u r e s , one f o r routine decision-making and one f o r c r i s i s were prescribed to improve performance in c r i s e s .  struc-  decision-making  Other p r e s c r i p t i o n s  were of a type that generally would improve management c a p a b i l i t i e s , f o r example, expanding the r e p e r t o i r e of standard operating procedures, increasing the motivation of operating departments, and making procedural modifications in decision-making processes. The d i s s e r t a t i o n concludes by reviewing the successes and weaknesses of the empirical study, and proposals are made for future research.  iv TABLE OF CONTENTS Page Table of Contents  iv  List of Tables  vi  List of Figures  vii  Chapter 1:  Introduction  1  1.1  3  Chapter 2:  Chapter 3:  Chapter 4:  Chapter 5:  Defining the Concept of Crisis  Theoretical Concepts  6  2.1  The Environmental Context  6  2.2 2.3 2.4  The Individual Context The Organizational Context A Conceptual Model of Crisis  10 22 33  Research Questions  36  3.1 3.2  What is the Nature of Crisis? What are the Determinants of Crisis Susceptibility?  36 37  3.3 3.4  What are the Determinants of Coping A b i l i t i e s What are Some of the Standard Responses to Crisis?  39 48  Research Methodology  50  4.1  The Sample  50  4.2  The Research Instrument  51  Analysis of Results 5.1  Demographic Attributes  5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9  Managerial Style Corporate Attributes Interactions between Variables The Nature of Crises The Determinants of Susceptibility to Crises The Dimensionality of Coping A b i l i t i e s The Determinants of Organizational Coping A b i l i t i e s Standard Responses Invoked during Crises  , 66 66 68 71 74 75 78 82 87 101  V  Table of Contents (cont'd) Page Chapter 6:  Chapter 7:  Implications for Coping with Crisis  117  6.1  Reducing Susceptibility to Crises  117  6.2  Improving Coping A b i l i t i e s during Crises  123  Methodological Overview and Plans for Continued Research  134  Appendix 1:  Letter of Invitation and Crisis Questionnaire  153  Appendix 2:  Kolmogorov-Smirnov Test for a Normal Distribution  169  Appendix 3:  Smallest Space Analysis  172  Bibliography  vi  LIST OF TABLES Table Number  Title  Page  I  Sample Composition by Industry  52  II  Functional Background of Respondents  67  III  Frequency Distribution by Industry of Respondent Firms  IV  V  VI  72  Smallest Space Coordinates for m = 2: Patterns of Decision-Making  90  Smallest Space Coordinates for m = 2: Programmed Behaviour  105  Summary of Results  118  *  vn  LIST OF FIGURES Figure Number 1  Title  Page  A Conceptual Model of Crisis  35  SSA Geometric Representation: of Decision-Making  Patterns  SSA Geometric Representation: of Programmed Behaviour  Dimensions  Categories of Programmed Behaviour Developed from SSA  91  106  111  - 1 1.  INTRODUCTION The modern organization exists in a turbulent, often hostile world  where there are constant threats to i t s growth and survival.  In the long  term, only some organizations w i l l survive; these are defined in this paper as effective organizations.  Although the concept of organizational effec-  tiveness has been widely studied, there is l i t t l e agreement among investigators as to the important indicators of effectiveness or how to measure effectiveness.  Goal achievement, efficiency, resource acquisition, and  adaptability are some of the dimensions of effectiveness that have been investigated (Bennis, 1966; Etzioni, 1975; Seashore and Yuchtman, 1972; Schein, 1972). In his d i s t i l l a t i o n of the research l i t e r a t u r e , Steers (1977:174) suggests that the most salient dimensions of effectiveness may be adaptability, resource acquisition, productivity, and p r o f i t a b i l i t y .  He notes "the role  of management . . . is to organize and u t i l i z e the available resources in a way that minimizes external threats and pressures and f a c i l i t a t e s the attainment of the ultimate aim of the organization".  For an organization  to maximize long term effectiveness, however, i t must develop the f l e x i b i l i t y to cope not only with day-to-day events, but also with unexpected external threats and pressures of c r i t i c a l importance.  Threats of this  nature are commonly called crises. I f a c r i s i s is defined as an objective state, there must be some universal acceptance of the elements that constitute a c r i s i s .  In addi-  t i o n , researchers need to designate thresholds for these elements, which when exceeded, precipitate a c r i s i s .  Such a universal definition of  " c r i s i s " does not exist, nor would i t be particularly useful.  - 2 A more valuable analytic construct is to view a c r i s i s as a subject i v e l y defined event.  A researcher can then study the particular patterns  of behaviour that emerge and influence effectiveness during situations perceived to be very threatening by the members of an organization.  This study  adopts the second approach: crises are viewed as subjectively-defined states. Although many facets of organizational effectiveness have been examined, few studies have focussed on crises as a separate class of behavioural phenomena.  There is an extensive body of research that examines  crises and c r i s i s decision-making in the fields of foreign policy and international relations (Allison, 1971; de Rivera, 1968; Hermann, 1972; Holsti, 1972; Janis, 1972; Paige, 1968; Wagner, 1974).  Organizational  effectiveness during crises also has been examined in the context of natural hazards and natural disasters (Barton, 1969; Dynes, 1970; Fritz and Marks, 1954; Slovic, Kunreuther, and White, 1974).  There appears to  be an empty research niche, however, with respect to studies of crises in an organizational framework and particularly with a focus on business enterprises. The purpose of this study is to examine the phenomena of corporate crises, and to identify the structural and behavioural attributes that increase or decrease the susceptibility of business enterprises to crises. In the analysis, both the external and internal environments of the firm are considered.  Although crises may originate from external environmental  threats, defects within the organization in the form of biased perceptions and pathological processes can affect i n i t i a l perceptions of threat,and the coping a b i l i t i e s invoked to deal with threats.  Starbuck, Greve, and  Hedberg (1978:114) note that firms encountering crises do not have qualitatively unusual characteristics, nor are they fundamentally abnormal.  - 3 "Probably the great majority of organizations have the potential to work themselves into crises, and the processes which produce crises are subs t a n t i a l l y identical with the processes which produce successes".  This  study seeks to achieve insight into those processes.  1.1  Defining the Concept of Crisis The word ' c r i s i s ' is an often over-used term with a very imprecise  meaning.  All crises are not identical; they vary in kind and degree de-  pending upon the perceptions of individual actors. are unto the beholder.  "In a sense, crises  What is a c r i s i s to one individual or group may  not be to another" (Kupperman, et a l , 1975:404). Hermann (1972:13) developed a definition of a c r i s i s that has achieved wide acceptance, particularly among foreign policy scholars: "[a c r i s i s ] (1) threatens high p r i o r i t y goals of the decision-making unit, (2) restricts the amount of time available for response . . . and (3) surprises the members of the decision-making units by i t s occurrence." Researchers in other disciplines also have attempted to develop workable definitions of a c r i s i s emphasizing different behavioural aspects of the concept.  For example, Fink Beak, and Taddeo (1971:16) focus on the failure  of organizational coping responses: "A human system is assumed to be in a state of c r i s i s when i t s repertoire of coping responses is not adequate to bring about the resolution of a problem." Milburn (1972:262) defines c r i s i s in terms of stressors that affect behaviour:  "Crises may be regarded as a type of stress-producing stimulus . . . involving three simple stressors: (1) threat of value loss, (2) pressure to decide relat i v e l y quickly, and (3) pressure to innovate in problem solving since no programmed decision, or relevant contingency plan, exists." Other researchers emphasize threat to goal achievement and the urgency for action as factors demarcating crises: "[a c r i s i s i s ] a situation in which goals are at stake that are of high importance to the system . . . when the probability that these . . . goals w i l l be achieved is . . . small." (Mulder, van Eck, de Jong, 1971:21) "Crises are generally distinguished . . . by a sense of urgency and a concern that problems w i l l become worse in the absence of action." (Kupperman, Wilcox, Smith, 1975:404) From these definitions i t appears that certain psychological and sociological factors distinguish crises from routine decision situations: a)  the occurrence of an event that is unanticipated.  b)  a perceived threat to high-priority individual or organizational goals.  c)  a sense of urgency to take action brought about by perceived time pressures.  d)  the uncertainty of outcomes concerning the i n i t i a l threat and actions taken to alleviate the threat.  e)  the failure of standard operating procedures to eliminate or reduce the threat.  f)  a high level of psychological stress among decision makers.  Although each crisis may d i f f e r in specific content, in general, they all can be viewed as comprising a class of phenomena with some common characteristics and underlying causes.  However, in perceiving a c r i s i s not  - 5 all decision-makers w i l l place equal importance on the six factors given above.  The importance of a factor w i l l also vary over time for a single  decision-maker given different types of threatening events and different situational factors. While crises may be unique in structure and content, they may be inevitable features of corporate l i f e .  Given the current pace of tech-  nological and social change, one is hard put to identify organizations, public or private, unlikely to experience situations that the members perceive to be crises (Holsti, 1978:50).  One should note, however, that  the effects of a c r i s i s are not always dysfunctional. both a threat and an opportunity to a firm.  Crises can pose  On the positive side, a  crisis often provides the impetus for an organization to make constructive changes. To evaluate the effectiveness of an organization in coping with crises, one must f i r s t understand the major dimensions that contribute to their emergence. lyzing crises:  Three dimensions are of prime importance in ana-'  (a) the environmental context, (b) the individual con-  text, and (c) the organizational context.  The theoretical underpinnings  of this research were derived from a wide variety of studies that deal with various aspects of these dimensions.  - 6 2.  THEORETICAL CONCEPTS  2.1  The Environmental Context An individual corporation does not exist in isolation; i t is only  one part of a larger, more complex socio-economic system.  Organizations  "both respond to and operate upon the contexts in which they are imbedded" (Leavitt, Pi n f i e l d , and Webb, 1974:xii).  This section examines those  dimensions of the external environment that may influence a firm's vulnerability to crises. The external environment of an organization has been conceptualized in various ways.  One major dimension identified is the degree of environ-  mental s t a b i l i t y .  Emery and T r i s t (1965) were early researchers of this  theme. ity.  They suggested the concept of turbulence and i t s opposite, placidTurbulence, broadly defined, is a measure of change that occurs in  the factors or components of an organization's environment.  At one end of  a continuum of change there is a static environmental state (no change); at the other end, a turbulent or dynamic state where all factors are in constant flux.  The amount of environmental turbulence is closely related  to the degree of uncertainty facing a firm.  As the environment becomes  increasingly turbulent, factors become less predictable and more uncertain; the values of important variables and the variables themselves move in an erratic fashion. The absolute amount of environmental turbulence is only one aspect of change important to a firm.  The rate of change is also a c r i t i c a l factor.  Although the meaning of 'rate of change has been defined only vaguely in 1  the l i t e r a t u r e , Jurkovitch (1974) has attempted to add operational c l a r i t y to the term.  He suggests that rate of change can be defined by measuring  the amount of alteration to major goals in a given period.  The higher the  - 7 change rate in the environment, the higher the number of major organizational goals that must be altered and vice versa.  The a b i l i t y to time  organizational changes to keep pace with environmental change rates is an important indicator of an organization's coping a b i l i t i e s . A second major dimension of the external environment is that of simplicity/complexity.  This dimension is concerned with the number of  factors in the environment that must be taken into consideration by the firm in a decision-making situation.  Child (1972) defined complexity as  the heterogeneity and range of a c t i v i t i e s relevant to organizational operations.  Steers (1977:86) noted that "a simple, or placid, environment is  one in which the external factors with which an organization must deal are few in number and are relatively homogeneous".  Simon (1965) suggested that  complex systems were composed of parts that interacted in a non-simple manner.  A simple, non-complex environment frees the organization from the  necessities of sophisticated information systems since there are only a limited number of information categories to be monitored that are c r i t i c a l for organizational decision-making.  Complex environments in contrast, not  only place greater demands on an information system, but also call for a higher quality of decision-making to account for diverse constituencies in the environment. The two dimensions of s t a b i l i t y and complexity were integrated by Duncan (1972) into a four cell matrix of environmental states.  He suggests  that the dimensions of s t a b i l i t y and complexity influence the degree of uncertainty in organizational decision-making.  The more complex and dynamic  the environment, the greater is the perceived uncertainty for the firm.  In  contrast, a static and simple environment has low perceived uncertainty.^ ^ Note that a firm operating in a static and simple environment can by i t s actions unsettle that environment and increase uncertainty.  - 8 --  Duncan suggests that decision units with dynamic environments always experience significantly more uncertainty regardless of whether the environment is simple or complex. I t is important to note the nature of human perception in the assessment of environmental uncertainty.  Weick (1969) suggests that individual  perceptions need not correspond to any objective r e a l i t y .  Managers w i l l  'enact' an environment that is consistent with their psychological set.  An  environment that one organization perceives as simple, s t a t i c , with l i t t l e uncertainty, may be perceived by a second organization as complex, dynamic, with a high degree of uncertainty.  Organizational responses to an identical  environment w i l l be highly variable as w i l l the responses of different parts of the same organization.  Uncertainty, complexity, and other factors are  not constant features of a firm's environment, but are dependent on the prior beliefs of individual members (Starbuck, 1973).  Individual tolerance  for ambiguity and uncertainty thus become c r i t i c a l factors in determining organizational responses to environmental stimuli. The existing coping mechanisms of a firm can influence i t s perceptions of the environment.  An organization's members can perceive the environment  as posing a threat or offering an opportunity (Perrow, 1970).  With flexible  coping strategies and a positive attitude towards uncertainty, a dynamic organization w i l l find even the most turbulent environment a source of opportunity rather than threat. Steers (1972:96) suggests that the predictability of environmental states decreases with greater uncertainty.  "The capacity of an organiza-  tion to successfully adapt to i t s environment is f a c i l i t a t e d to a large extent by i t s a b i l i t y to know what the external environment is going to be l i k e in the future".  I f an organization can predict the extent and  - 9 direction of environmental change with some degree of certainty, there is a much greater probability that appropriate coping responses can be taken. Several writers have elaborated upon the dimension of complexity. Osborn and Hunt (1974) suggest that the concept of dependency can be viewed as a component of environmental complexity.  Dependency refers to the degree  to which an organization relies upon specific elements in i t s environment for growth and survival, and the extent to which these elements interact. The more dependent the organization, the more open to threat i t is,'and the less able i t is to exercise control over environmental variables.  Jurkovitch  (1974) extended the concept of dependency by distinguishing between organized and unorganized sectors of a firm's environment.  An unorganized sector re-  fers to organizations or individuals that use a firm's goods and services but are not bound together by formal or informal rules requiring coordinated interaction to reach a defined goal.  Jurkovitch suggests that unorganized  sectors, with greater sources of uncertainty, are much more d i f f i c u l t for a firm to deal with than organized sectors. Organizations interacting with complex, dynamic, and unpredictable environments face special problems of management and planning. t i a l for c r i s i s is great.  The poten-  Flexible strategies are essential for effectively  coping with environmental discontinuities.  Segal (1974) developed a set of  organizational typologies for responding to various types of environments. Two types are of particular interest:  the chain-structured organization  and the adaptively-structured organization.  The chain-structured organiza-  tion is designed to accomplish a particular task or narrow range of tasks with great efficiency, but i t is without sufficient f l e x i b i l i t y to easily change i t s structure in response to changes in i t s environment.  Organiza-  tions with this structure perceive their environments as static and  - 10 homogeneous.  Management procedures are based on standardization (for ex-  ample, bureaucracies).  When the environment makes impossible demands on  such an organization, (for example, through rapid change) the firm may be unable to do l i t t l e more than repeat standardized and unsatisfactory behaviour, making i t s position even more perilous. In contrast, Segal suggests that an adaptively-structured organization is comprehensively responsive to a turbulent environment.  This type  of organization is prepared to alter both i t s structure and internal roles to adapt to new conditions.  Coping mechanisms are well developed to ensure  the survival of the organization:  Jurkovitch (1974:390) notes that in  highly adaptive organizations existing in turbulent, uncertain environments, "problem solving is replaced by problem coping.  Problems are never com-  pletely solved and people are forced to learn to live with the consequences of the unsolved aspects of problems".  2.2  The Individual Context The effectiveness of an organization as a "problem solving, decision  making, action taking system" (Olmstead, 1974:181) ultimately is dependent upon managerial effectiveness.  This is particularly true during crises  when the need for decision may be immediate and responsibility is concentrated in one or a very few senior individuals (Hermann, 1973; Mulder, et a l , 1971).  Effectiveness "ultimately reduces to the judgments and actions  of key leaders, both individually and collectively.  I t depends upon s k i l l s  in acquiring and interpreting information; choices concerning to whom acquired information is to be communicated, as well as the accuracy and completeness of the communications; decisions concerning ways to cope with unusual or unanticipated situations; and the execution of actions resulting  - 11 from such decisions - all performed at a high level of sensitivity and coordination" (Olmstead, 1974:181). There is a large body of literature directed towards establishing c r i t e r i a of effective managerial behaviour.  Although the subject has been  dealt with extensively, no satisfactory global indices of managerial effectiveness have been developed nor is there any agreement which factors should be incorporated in such indices.  Some research suggest that a  manager's effectiveness is contingent on his situation at any moment in time, reflecting his personal attributes, the special characteristics of his job, and his organization's motivational policies and practices (Campbell, et a l , 1970). Two dimensions are particularly relevant when assessing managerial effectiveness during organizational crises.  These are:  cognitive per-  formance (particularly the effects of stress on information processing and perception) and preferred leadership style. Cognitive Performance: During crises when individuals are under great stress, and important decisions must be made within a short time, cognitive performance may be subject to certain pathologies.  As the size of the decision unit contracts  during crises, the amount of stress on individual decision makers increases since each member feels a greater responsibility for potential failure (Hermann, 1963).  The greater the level of f e l t stress, the greater the  perceived pressure for decisive action.  The intensity of f e l t stress  appears to depend upon the perceived magnitude of losses the decisionmaker anticipates from his chosen actions (Jam's and Mann, 1978:49). Although a moderate level of stress may promote learning in a decision situation (Cangelosi and D i l l , 1965), during a c r i s i s , stress is usually  - 12 of such a magnitude that i t promotes dysfunctional cognitive behaviour. With decreasing levels of cognitive efficiency, behaviour becomes even less adaptive, and the resulting decision is often of poor quality (Levine, 1971; Robinson, 1972).  An "increasingly severe crisis tends to make creative  policy-making both more important and less l i k e l y " (Holsti, 1971:62). Stress-related maladaptive behaviour is manifested in numerous ways. Milburn (1972) suggests, that stress has a curvilinear effect on individual performance.  While a moderate level of stress may be conducive to good  decision-making, high levels of stress lead to a breakdown in perceptual accuracy and reduced a b i l i t y to focus on relevant information from the environment (Easterbrook, 1959; Holsti, 1971).  Decision makers become  increasingly concerned with short-range issues at the expense of long-range outcomes (Paige, 1968; Albers, 1966).  Stress also promotes a r i g i d i t y in  problem solving a b i l i t y , a functional fixedness that reduces the individual 's capacity for abstract reasoning and tolerance for ambiguity (Beier, 1951; Smock, 1955; Loomis, 1960).  The impaired cognitive a b i l i t i e s of the  individual may result in an i n a b i l i t y to predict the consequences of various alternative courses of action (Holsti, 1972).  Postman and Bruner (1948)  note that under stressful conditions, individuals make premature interpretation of s t i m u l i , and the a b i l i t y to distinguish the dangerous from the t r i v i a l is impaired.  Due to the effects of cognitive dissonance, there is  reduced objectivity and increased bias in the way individuals perceive and evaluate alternatives.  Inconsistent cognitions motivate people to change  their ideas or beliefs; this change is usually in the direction of bolstering the decision taken (Festinger, 1964).  "The consensus of most  behavioural research is that men operating under . . . acute stress are scarcely capable of considered judgment.  Strain and fatigue commonly  - 13 produce actions which are caricatures of day-to-day behavior" (Nathan, 1975:259). The onset of a c r i s i s usually results in key decision-makers receiving sharply increased volumes of complex information stimuli.  In many instances  individuals are unable to cope with the cognitive demands of this increased volume.  Decision-makers may attempt to cope with information overload by  narrowing their span of attention to include only essential aspects of the decision task.  Holsti (1978:46) notes that this can be a functional stra-  tegy i f i t allows decision-makers to "eliminate t r i v i a l distractions, f i l t e r out irrelevant information, and develop an agenda of p r i o r i t i e s " . the results of this strategy more often are pathological.  However,  The error rate  on task performance is positively correlated with the increased volumes of information received by decision-makers (Lanzetta and Roby, 1957).  "When  the degree of complexity of an issue exceeds the limits of cognitive abil i t i e s , there is a marked decrease in adequacy of information processing as a direct effect of information overload and ensuing fatigue" (Janis and Mann, 1977:17). Under conditions of information overload, an individual's perceptions act as a screening device, selectively discriminating and interpreting data. The more ambiguous the circumstances, the more l i k e l y an individual w i l l enact an environment consistent with his own personal predispositions i r r e spective of any external ' r e a l i t y ' (Weick, 1969).  Prior beliefs affect not  only the interpretation of informational stimuli, but also whether one i n i t i a l l y takes note of particular stimuli.  Individuals selectively expose  themselves to information compatible with their belief structure and screen out potentially incompatible information.  The biases resulting from selective attention are compounded by errors of judgment and concept formation in interpreting the information at hand.  Decision-makers develop and employ mental models of their environment.  These models play a dual role.  They provide a framework for assessment of  decision consequences as well as a framework for further information collection.  These models are the images of r e a l i t y upon which decision processes  are based. The development of models and the processes by which they are revised when more data becomes, available to decision-makers are affected by several sources of error resulting from faulty techniques of concept generation. Tversky and Kahneman (1974) suggest that decision-makers are prone to cognitive errors as a result of over-reliance on certain i n t u i t i v e heuristics as a means of making judgments under uncertainty.  Although these heuristics  sometimes produce good estimates of subjective probabilities, most often large errors are consistently made.  The stress/information overload  syndrome serves to accentuate these cognitive errors. Paradoxically, during crises, decision-makers suffer not only the effects of information overload, but also the effects of information underload.  The information available to top decision-makers may be of l i t t l e  use; thus, managers may feel deprived of adequate amounts of information 2 necessary to do their job.  I t has been demonstrated that information  deprivation leads individuals to seek out stimuli (Jones et a l , 1961; Suedfeld, 1971).  This psychological state may lead a decision-maker to  seize upon irrelevant or incorrect information without appropriate discrimination. During crises both information overload and information underload reinforce already high levels of stress. 2 Information f i l t e r i n g within the organizational hierarchy may be one cause of information deprivation.  - 15 Cognitive performance during periods of high stress may be further impaired by the i n a b i l i t y of individuals to correctly judge time perspectives.  Under great stress, individuals overestimate how quickly time  passes (Langer et a l , 1961).  A moderate amount of perceived time pressure  stimulates creativity and increases the rate of performance, but beyond moderate levels, perceived time pressure has detrimental effects on cognitive a b i l i t i e s . pressure.  Complex tasks particularly suffer from the effects of time  Individuals display tendencies to retain familiar solutions to  problems even when these solutions prove ineffective, or the problems are substantially different from previously encountered problems (Steinbruner, 1974).  "There is . . . evidence that time pressure increases the propensity  to rely upon stereotypes, disrupts both individual and group problem-solving, narrows the focus of attention, and impedes the use of information . . . high stress tends to result in a shorter time perspective and, as a consequence, a reduced resistance to premature closure" (Holsti, 1978:47). Leadership Style: The success or f a i l u r e ' o f an organization is often dependent upon the s k i l l s of the leader.  There are suggestions in the l i t e r a t u r e that leader-  ship behaviour during crises i s , and should be, qualitatively different than during normal times.  "In crisis situations, some kind of powerful leader-  ship is functionally required, and w i l l occur more often, or w i l l be more often considered necessary by group members, than in non-crisis situations" (Mulder, van Eck, and de Jong, 1971:21).  The need for a different type of  leader during crises is also noted by Blake and Mouton (1964:14).  "Manage-  ment of people in the c r i s i s of an explosion situation is l i k e l y to be different than i t would be under circumstances that are routine".  Hamblin  (1958b) found that during crises, groups tend to replace leaders' with new  - 16 people i f leaders do not have obvious solutions to c r i s i s problems.  House  and Dessler (1975:35) note that people under threat prefer "strong" leaders because " . . . they are perceived as improving the chances of adequately responding to the threat, and because such leaders reduce the dissatisfying effects of the uncertainties of the situation". Although leadership is a much studied phenomena, there is no agreement generally on what contributes to effective leadership either in c r i s i s , or in normal times, nor is there any integrated understanding of the factors important in assessing the quality of leadership.  This situation exists in  spite of an "endless accumulation of empirical data" (Stogdill, 1974:vii). I t is recognized, however, that the leader of an organization can have a great influence on i t s a f f a i r s .  "Since control of information and rewards can  significantly influence the beliefs, attitudes, and behaviors of group members, the formal leader should be in a strong position to affect what a group does and how well i t does i t " (Porter, et a l , 1975:428). Many of the early theories attempted to explain leadership behaviour by identifying universal t r a i t s of successful leaders.  For example Stogdill  (1948) found that intelligence, scholarship, dependability, responsibility, social participation, and socio-economic status differentiated leaders from other individuals.  In a later study, Ghiselli (1963) found that i n t e l l i -  gence, supervisory a b i l i t y , i n i t i a t i v e , self assurance, and individuality were significantly correlated with management performance and organizational level. In the 1950 s a school of research developed that sought to explain 1  leadership in terms of what a leader does, rather than in terms of what a leader i s .  Leadership was studied as a means of developing effective  organizations (Blake and Mouton, 1964; McGregor, 1966).  Many studies  - 17 focused on three styles of leadership:  autocratic (authoritative),  democratic (supportive or participative) ( L i p i t t and White, 1943), and instrumental (Filley and House, 1969). An autocratic leader is defined as one who is arbitrary in decisionmaking and dogmatic in relations with subordinates.  His style is to com-  mand; compliance is achieved through the a b i l i t y to reward and punish. Bass and Valenti (1973:146) found that " . . . a directive leader style was 3 consistently and positively related to effectiveness".  Other researchers  have found that there is no consistent relationship between autocratic style and organizational effectiveness (usually defined in terms of productivity). However, Tannenbaum and Schmidt (1958) suggested that emergency situations called for a unilateral (autocratic) leadership style. In contrast, a democratic or supportive leader attempts to create a climate where subordinates want to perform.  He s o l i c i t s inputs to problem-  solving and relies on general supervision rather than close task supervision. Supportive leadership styles have been found to be correlated with positive attitudes and satisfaction in subordinates (Indik, et a l , 1960; Spector, et a l , 1960).  In some studies, supportive behaviour was found to have  positive effects on productivity (Blau and Scott, 1962; Katz and Kahn, 1953), but no consistent relationship between supportiveness and product i v i t y has been found. While researchers generally have found subordinates are more satisfied with democratic or supportive leaders, there is no agreement 3 A directive style was defined as " t e l l i n g subordinates what was expected of them, seeing that they work to capacity, emphasizing meeting deadlines, setting standards, ruling with an iron hand, encouraging uniformity, scheduling subordinates' tasks, t e l l i n g subordinates to follow rules and regulations, changing subordinates' duties without f i r s t talking i t over with them" (Bass and Valenti, 1973:139).  - 18 which style (democratic or autocratic) promotes greater organizational effectiveness.  In summarizing the various empirical studies on autocratic  and democratic leadership, Stogdill (1974:370) notes " . . . results clearly indicate that neither democratic nor autocratic supervision can be advocated as a method for increasing productivity, but member satisfaction is associated with a democratic style of supervision".  Vroom and Mann (1960)  conclude that the efficacy of autocratic versus supportive leadership style is dependent upon the expectations and needs of subordinates. An instrumental leader is defined as one who exhibits teleological behaviour designed to achieve organizational objectives.  An instrumental  leader often perceives his primary purpose as obtaining and allocating resources effectively and e f f i c i e n t l y .  In one study, task oriented  (instrumental) leaders were found to be more effective than interaction oriented leaders (Bass and Dunteman, 1963).  Simpson and Gulley (1973)  note that organizations with narrowly defined instrumental goals w i l l be thoroughly centralized and undemocratic.  The broader the range of goals,  however, the greater the pressure for member participation as well as task efficiency.  Filley and House (1969) suggest that individuals who  exhibit both instrumental and supportive behaviour w i l l be effective leaders in any situation. Some of the best known work on managerial style (particularly among practising managers) was carried out by Blake and Mouton (1964); they developed the concept of the Managerial Grid.  The authors suggest that  managerial style is not fixed, but is determined by a range of factors: organizational requirements, situation, values, personality, and chance. These factors operate on two dimensions that are significant in determining a manager's style.  The dimensions are concern for production and concern  - 19 for people.  Each of these dimensions was: measured' on a 9 point scale.  Blake and Mouton were able to describe certain profiles of managerial styles by locating a position on a 9 x 9 matrix.  For instance a 9,1 or task mana-  gement style (high concern for production/low concern for people) is similar to an autocratic style. question. form.  Subordinates are expected to obey orders without  Management communication is formal, r i g i d , and usually in written  Decision-making is concentrated at the highest level of the hierarchy.  There is an overriding concern for firm direction and control of operations. A 1,9 or 'country club' management style (low concern for production/ high concern for people) is exactly the opposite.  The manager who adopts  this style believes employees should be shown rather than directed in their jobs, and that people should be aided and supported in their e f f o r t s .  Con-  ditions of work are arranged so that the personal, social, and welfare needs of employees can be met on the job.  A 1,9 manager w i l l try to avoid con-  f l i c t and w i l l seek positive, harmonious relationships with employees. Both the 9,1. and 1,9 styles are of course extreme types.  Blake and  Mouton suggest the ideal managerial style is 9,9 (high concern for production/high concern for people).  A 9,9 manager views the organization as a  vehicle to promote the conditions that integrate c r e a t i v i t y , high product i v i t y , and high morale through concerted team action.  This manager is  orientated towards accepting the best and most effective solution in a given situation not a solution defined by tradition (not unlike an instrumental manager).  Management/employee relations are based on participation,  mutual goal commitment, and open two-way communication. Another trend in leadership research has been the development of contingency or situational theory (Fiedler, 1967).  The contingency  approach posits that leader behaviour can be explained in terms of the  - 20 interaction between a leader and the organizational environment.  Fiedler  suggests that there are no universal characteristics indicative of an effective leader, however, in specific circumstances, one kind of behaviour may be more appropriate than another.  The type of leadership behaviour that  promotes effective performance is a function of three situational or contingent variables:  leader-member relationships, the degree of task structure,  and the formal power or authority of the leader's position.  "[M]anaging,  controlling, directive leaders tend to be most effective in situations which are either very favorable for them or which are relatively unfavorable. Nondirective, permissive, considerate leaders tend to perform best in situations of intermediate d i f f i c u l t y " ^ (Fiedler, 1967:15). Burns and Stalker (1961) conducted a study that related environmental characteristics to managerial practices (including leadership styles). Their analysis concluded that managers employed two distinct styles that were a function of the degree of environmental s t a b i l i t y .  The two styles  of management identified were called mechanistic and organic.  Mechanistic  systems are characterized by specific goals, close performance measurement, many rules, close supervisory enforcement of the rules, high task specialization, and centralization of authority with primarily vertical communication patterns.  Bureaucracies are typically cited as prime examples of  mechanistic systems.  Burns and Stalker found that a mechanistic style  was associated with effective task performance and high levels of i n d i vidual satisfaction when tasks were routine, repetitive, and predictable, and where interdependence is high and only narrow deviation is tolerated.  Situations high on leader authority and task structure and with strong leader/group relations were considered by Fiedler to be favorable.  - 21 Organic systems are characterized by less specification of goals, less measurement, primarily process goals, general supervision, decentralization of authority, and primarily horizontal communication patterns.  Burns  and Stalker found an organic style of management was effective when tasks were changing, uncertain, and unpredictable, and in situations that required independent problem-solving, innovation, and c r e a t i v i t y . Steers (1974) enlarged upon Burns and Stalker's findings relating leadership style to a firm's external environment.  He suggests the role of  management is to understand environmental conditions and to adapt management practices to meet those conditions.  Steers (1974:89) proposes that a mech-  anistic style may be more appropriate in highly predictable and stable environments " . . . where market and technological conditions remain largely unchanged over time".  Task routinization and centralized authority promote  maximum efficiency and effectiveness in this environment.  In unstable, com-  plex environments, however, an organic style may be more appropriate since 5 i t is more flexible allowing a firm to respond to new conditions. and House (1969:98) made much the same suggestion.  Filley  "In a relatively pre-  dictable environment, decisions are more effectively made at the top of the organization . . . In a highly unpredictable type of situation, in which all levels of management need considerable influence to deal with environmental uncertainty, a more participative structure . . . would be advisable". Although the literature suggests that an organization may require a different kind of leader during crises than during normal times, l i t t l e progress has been made in identifying the specific attributes of such 5 Note that the response may take the form of adapting or coping with threatening situations, exploiting newly-identified opportunities, and attempting to exert control over the environment.  - 22 leaders.  There is some evidence that emergency situations (crises) call for  an autocratic, decisive leader (Tannenbaum and Schmidt, 1958).  Conversely,  crises often require creative, innovative behaviour to promote concerted team action to resolve the situation.  A more open, participative style in  this instance may be more effective in securing implementation and resolving the c r i s i s .  At best the evidence is mixed with respect to the most desir-  able leadership style.  The type of leadership that promotes effective  performance in crises is probably contingent on a number of factors such as individual characteristics, the environment, and the type of threat. A later chapter examines changing preferences during normal periods and crises for some of the leadership styles described in this section.  2.3  The Organizational Context In the previous sections two factors were examined that can affect  individual behaviour during crises: management style.  limited cognitive capacities and  However, one must also take into account the behavioural  impact of multiple decision-makers interacting within a complex organization.  In large corporations c r i t i c a l decisions are made not only as a  result of the careful deliberations of individual managers, but also as a result of organizational processes or p o l i t i c a l bargaining (Allison, 1971). The position of the decision unit within the organizational network, thus, becomes an important factor.  Under stress, deficiencies in decision-making  can result from organizational characteristics and group processes, as well as from individual pathologies.  Three dimensions of organization process  can be identified that contribute to deficient decision-making during crises:  communications d i s t o r t i o n , premature decision choice, and  defective judgment.  - 23 Communications Distortion: Key decisions during a crisis usually are made by a relatively small group of senior managers.  The size of the decision-making group relative  to the total organization produces d i f f i c u l t i e s when managers attempt to process large volumes of information during periods of stress.  In a pre-  vious section i t was noted that individuals are prone to information overload during c r i s i s . condition.  In much the same way, groups also can suffer from this  In c r i t i c a l periods, information flows within an organization  become extremely important and subject to malfunction.  Carter (1977:27)  notes "the scarcity in today's environment is not information but capacity g to process information". Under conditions of crisis-induced stress, Hermann (1963) suggests that the number of communication channels used for collection and d i s t r i bution of information between senior decision-makers and the rest of the organization w i l l be reduced.  At the same time, the volume of information  flows over these channels increases.  Heavy frequency of information over  a restricted number of channels results in a communications overload.  The  probability of information distortion increases which in turn leads to deficient decision-making.  Perceptions of shortened time horizons also  increase the probability of decision error since fewer sources of information w i l l be relied upon i f decision-makers perceive a need to act quickly. In most organizations, the level of an operating unit within the hierarchy is an important factor that affects communications distortion. Information must travel through a lengthy screening and f i l t e r i n g process at various levels of the organization before i t reaches senior _ Carter may overstate his position; one also must be cognizant of the costs involved in producing information.  - 24 management.''  Not only is there often a time delay, but the form in which  data are received by senior managers represents the accumulation of impacts of information processing distortions at various intermediary levels. Downs (1967) calculates that with a six level hierarchy, there may be a 98% loss of informational content in communications between the f i r s t and highest level of the organization. Tullock (1965) notes that information is subject to 'hierarchical d i s t o r t i o n ' , both in quantity and quality.  The quantity of information  being received by senior managers is reduced as a result of high costs of communication and by the limited cognitive capacities of individual decision-makers.  Secondly, the quality of information is distorted as i t  moves up the hierarchy as a result of perceptul biases held by managers at each level.  "The greater the channelling of information-processing,  the greater the differentiation of perceptions within the organization" (March and Simon, 1958:128).  Decentralized organizations in particular  are prone to this perceptual distortion. The necessity of specialization in large organizations also causes excessive information f i l t e r i n g that results in further distortion. ° Individuals at lower levels in the firm have a much narrower range of o f f i c i a l interests than senior decision-makers.  Subordinates naturally abstract  parts of information stimuli that are most relevant for their own needs, not the needs of their superiors.  A large portion of potentially relevant  information content is thus discarded at low levels of the organizational hierarchy.  "Those who decide which information their boss shall see rarely  see their bosses' problem" (Allison, 1971:120). 7 This is only one view of information flow (bottom to top) throughout an organizational hierarchy. Managers may also engage in information-seeking behaviour, in some instances by-passing the hierarchy. By doing so, some of the effects of communication distortion are avoided.  - 25 Lower level managers also have different self interests and transmit information of a type and in a manner that suits their own purposes not the needs of senior management.  Downs (1967:136) notes that in any large or-  ganization, a significant portion of a l l the a c t i v i t y being carried out is completely unrelated to the formal goals of the organization or the goals of senior management.  As a result of this f i l t e r i n g , when information  f i n a l l y reaches the decision-makers at the top of the hierarchy, many c r i t i c a l pieces of data may have been lost; what content remains may be of l i t t l e use.  Ackoff (1967) notes that most senior managers suffer from  an 'overabundance of irrelevant information'. Many senior decision-makers are aware of these information distortions and attempt to offset them by counter-biasing strategies.  A superior may  make adjustments to all information received from subordinates in an effort to counteract the distortions.  However, i f the corrections are not made in  the right directions, further distortions take place. While the distortions accruing in the process of f i l t e r i n g information tend to bring about decision errors of the third type, wrong problem d e f i n i t i o n , the time delays involved in the process of information transmission bring about what Raiffa (1968) termed errors of the fourth type, defining and solving the problem correctly, but too late.  The standard operating  procedures (SOPs) of the organization may contribute to this lack of timeliness in communications that can have important ramifications during crises. One function of SOPs is to coordinate complex routines and tasks performed by a large number of people.  SOPs are intended to ensure align-  ment of interpretation between senders and recipients of communications. While ensuring some p r e d i c t a b i l i t y , SOPs also may introduce an element of conservatism and r i g i d i t y into communications that works at odds with the  - 26 needs of senior managers for timely and accurate information.  Crisis s i t -  uations often involve sharp environmental discontinuities that require adjustments in resource allocations, members' roles, and operating procedures.  To obtain the required f l e x i b i l i t y to deal with crises, regular  communications networks and information processing procedures may be interrupted or bypassed.  However, since the process of organizational sociali-  zation usually penalizes deviations from SOPs, i t may be d i f f i c u l t to g  obtain the needed f l e x i b i l i t y to cope with crises. Allison (1971) suggests that SOPs are highly resistant to change because they are usually grounded in the norms of the organization, and the basic attitudes of i t s members.  Novel situations requiring communications  that do not f i t established procedures may be ignored.  I f important infor-  mation is not brought to senior management's attention, the probability of a c r i s i s occurring is greatly increased. SOPs may also contribute significantly to information f i l t e r i n g and distortion.  Since various groups within an organization pursue divergent  patterns of a c t i v i t y , each group develops i t s own specialized procedures over and above corporate SOPs.  Information is interpreted differently  depending upon the particular interests of an operational unit and the procedures developed for pursuing that interest.  Consequently, informa-  tion that reaches senior management may be considerably biased and d i s torted by the procedures employed by contributing units.  0  "The records  that are kept determine in large part what aspects of the environment w i l l be observed and what alternatives of action w i l l be considered by the firm" (Cyert and March, 1963:106). _  Although some organizations have ' c r i s i s ' SOPs, these may be applicable to specific situations only. When threats are unfamiliar, there is a tendency to f a l l back on these procedures, since.they are known, even though they are inappropriate for the new situation.  - 27 The internal politics of the organization also directly contribute to information distortion.  The perceptions of decision-makers are often  influenced by the process of bargaining between levels and individuals in the organizational hierarchy.  Members' perceptions are biased by highly  personalized goal structures of organizational and personal interests. The aphorism "where you stand depends on where you s i t " (Allison, 1971:176),. expresses the premise that the bargaining position of each player reflects his own perceptions of p r i o r i t i e s and issues.  The power (in terms of a b i l -  i t y to acquire resources and influence policy) and the strategic positions of individuals or departments within an organization often determine which issues are brought to the attention of senior management and also which interpretation of events is adopted.  Often times decisions are made not on  the basis of rational choice, but on the basis of p o l i t i c a l gamesmanship. A second dimension of organizational p o l i t i c s affects the efficiency of information diffusion.  Information can be viewed as a resource, subject  to manipulation by groups or individuals in order to achieve a power base within the organization.  In an analysis of information flows, Barth and  Vertinsky (1973:127) observed that information was concentrated at the top of the hierarchy even'..'though decisions were made at a l l levels of the organization.  They conclude that information is often monopolized in an  effort to increase bargaining power.  Etzioni (1968), theorizing about the  principles of dynamic controls, also commented upon the tendency of organizations to distribute information less equally than other organizational resources.  While standard operating procedures prescribe what information  is made available and to whom, delays in diffusing information often occur and are hard to control.  Operating units or staff groups can manipulate  information release times for their own advantage.  The combination of  - 28 information distortion resulting from selectivity and f i l t e r i n g , and the manipulation of information diffusion, explains to a large extent why senior managers often have inadequate information for making c r i t i c a l decisions or they are unaware of situations developing that are potent i a l l y threatening to the organization. Premature Decision Choice: The effects of stress on group processes produce a second dimension 9 of deficient decision making —  premature choice.  During crises, when the  potential losses to an organization are great, one would expect that a wide range of alternatives would be considered and carefully evaluated in an attempt to make the best possible decision.  Paradoxically, fewer alterna-  tives may be considered than during non-crisis periods when the stakes are much lower.  Decision-making by " f l i g h t and oversight" (March and Olsen,  1976:34) may become a major feature of c r i s i s decision-making. During crises, the authority for decision-making shifts to the highest levels of an organization and there is a reduction in the number of persons participating those decisions (Mulder, van Eck, and de Jong, 1971). As the size of the decision group shrinks, there is an accompanying increase in stress levels.  Some examples of non-adaptive behaviour manifested by  individuals under high stress conditions were noted previously; in particular, cognitive a b i l i t i e s are reduced.  Impaired cognitions significantly  effect the a b i l i t i e s of decision-makers to generate and evaluate alternative courses of action. Holsti (1978:41) notes that there is a lack of consensus in the l i t e r a t u r e on the operational measures of stress. Some authors define stress as a stimulus, while others define stress as a perceptual and behavioural response to a stimulus. In this paper, the second view is adopted, that i s , stress is viewed as a response to a stimulus.  - 29 A moderate degree of stress in response to environmental threats "induces a vigilant effort to scrutinize the alternative courses of action carefully and to work out a good solution" (Jam's and Mann, 1977:51 ). However, when decisional conflict is great due to the high risks involved with alternatives, as is the case during crises, the likelihood of patho-  logical decision responses increases.  Janis and Mann note that one form  of decision response may be defensive avoidance of the threat cues.  This  behaviour is manifested by a lack of vigilant search for alternatives, selective inattention, selective forgetting, distortion of meaning of warning messages, and minimization of potential negative consequences of actions.  When stress levels reach extremely high levels and decisional  conflict is severe, there is increased likelihood that the dominant response w i l l be panic —  decision-makers w i l l seize upon the nearest  alternative without properly evaluating the ramifications of their choice. During crises, the decision-making unit of a firm is usually a t i g h t l y - k n i t homogeneous group, limited to a small, number of senior managers (Hermann, 1972).  The members of this group are insulated from the  rest of the organization by their sense of urgency and responsibility. As a result of this isolation, alternative viewpoints and fresh ideas from other members of the organization who may be 'closer to the action' and have different experiences and expertise are severely "restricted. Under stress, decision-makers also may be prone to over-simplification of a problem in order to reduce i t to manageable proportions.  However,  George (1974) notes that the tendency to rely on a simple decision rule may lead to a premature choice that overlooks non-obvious negative consequences. Cyert and March (1963) note a tendency to base decisions on factors of short run acceptability when managers are uncertain about the long run  - 30 consequences of alternatives.  The result, in either case, may be a poor  decision with severe consequences for the organization. Defective Judgment: During crises, under a particular combination of circumstances, pressures within the decision-making group bring about a third type of pathological behaviour that results in defective judgment.  A tendency  towards concurrence-seeking may become so dominant in a cohesive group that i t causes individuals to indulge in a mode of thinking that prevents r e a l i s t i c appraisal of alternative courses of action. the term 'groupthink' to describe this behaviour.  Jam's (1972) used  "Groupthink involves  nondeliberate suppression of c r i t i c a l thoughts as a result of i n t e r n a l i zation of the group's norms . . . the more cohesive the group, the greater the inner compulsion on the part of each member to avoid creating disunity, which inclines him to believe in the soundness of whatever proposals are prompted by the leader or by a majority of the group's members" (Jam's, 1971:44). Groupthink is most l i k e l y to occur when individuals are placed under great stress.  The effects of stress and dominant, directive leadership  promote a high level of cohesiveness that insulates a decisionmaking group from the advice of qualified experts.  The group usually lacks methodical  procedures for search and appraisal of policy alternatives.  When these  antecedent conditions occur, there is an increase in concurrence-seeking tendencies that promotes the following symptoms of groupthink: (see Jam's, 1972) (1)  Group members develop an illusion of invulnerability that promotes excessive optimism and encourages decisions of very high risk.  - 31 (2)  Group members ignore warnings and negative feedback that might force a reassessment of a decision.  Members attempt to ration-  alize the status quo. (3)  Group members display an inviolate belief in their own morality; the ethical and moral consequences of a decision may be ignored entirely.  (4)  Group members hold stereotyped views of their adversaries.  Com-  petitors may be regarded as too immoral and e v i l , or too stupid and weak to take any effective action. (5)  Groups apply direct pressure to any member who expresses doubts about a course of action or questions arguments supporting policies that are favoured by the majority.  The potential negative ramifi-  cations of a decision are never discussed. (6)  Individual members practice self-censorship.  They avoid deviating  from group consensus by keeping silent about their own doubts and misgivings.  This occurs not because of a lack of f a i t h in one's  own ideas, but through a fear of losing approval of fellow group members.  The assumption that silence means consent reinforces  self-censorship. (7)  Group members share an illusion that unanimity of opinion means truth.  (8)  Groups develop "mindguards" —  self-appointed members who t r y to  shield other members from information that may go against shared beliefs. When a management group displays most of these symptoms in a c r i s i s situat i o n , i t s decisions may have disastrous consequences for the organization.  - 32 Implementation Failures: Crisis situations require precise and speedy implementation of decisions.  In large organizations, most problems require the support of others  for implementation of solutions.  Rarely does a decision-making unit have  the a b i l i t y to implement policies d i r e c t l y .  Thus, a decision may be timely,  well thought out, and represent the best action in a c r i s i s , but the organization may s t i l l be susceptible to disaster through faulty implementation techniques.  MacCrimmon (1973) suggests that in organizations with multiple  implementation units, there is considerable room for discretionary action resulting in accidental or purposeful misimplementation. implementation seem rooted in three areas:  D i f f i c u l t i e s in  operating units are not moti-  vated to carry out the decision selected; noisy channels of communication and inflexible procedures affecting coordination may delay receipt of messages and timing of actions; and operating units may not understand their orders. The actions required to cope with crises may disrupt existing organizational patterns.  The uncertainty produced by organizational reshuffling  may strengthen the tendency of operating units to engage in defensive moves for preserving their t e r r i t o r i e s and may heighten the commitment to familiar, parochial goals.  Varying degrees of exposure to crises and therefore  varying degrees of f e l t threat may increase the existing differences in perceived organizational p r i o r i t i e s between units.  While an external threat  may be the best motivator for long-term organizational cohesiveness, in the short run, differentiated exposure to this threat can intensify internal organizational conflicts (Allison, 1971).  Even when operating units are  sufficiently motivated to adopt organizational objectives as their own objectives, implementation may f a i l because operating units do not  - 33 understand what is required of them, or they are incapable of executing the required course of action. In the discussion of standard operating procedures and their effect on communications, i t was suggested that operating units may ignore novel situations or interpret them in l i g h t of existing procedures.  Such resis-  tance to change unintentionally subverts directives from senior management. Control systems providing quick feedback to central decision-making units for corrective actions, also often suffer from r i g i d i t y of programming and therefore f a i l to signal implementation failures.  2.4  A Conceptual Model of Crisis Figure 1 illustrates the components of the conceptual model of c r i s i s .  Three major dimensions provide the theoretical bases of the model:  the  individual context, the organizational context, and the environmental context.  In the figure, solid lines indicate immediate impacts; broken lines  indicate long run or historical impacts. An organization's susceptibility to crises is directly affected by the type of environment in which i t operates. mediated by an organization's coping a b i l i t i e s .  Environmental threats are Over the long term, these  coping a b i l i t i e s evolve in response to environmental pressures. The degree of threat that is perceived to be emanating from the environment and the a b i l i t y to cope with threats directly influence the individual context through the intervening variable of stress.  Changes in  cognitive processes (for instance, the a b i l i t y to process information, time perceptions, and the impacts of biases) are attributed mainly to the effects of stress.  Preferences for leadership style also change, given high or low  levels of stress.  - 34 Individual factors, in turn, have an impact on the organizational context of a firm.  Leadership style directly affects the communications  processes and group processes.  These two factors in conjunction with  individual cognitive processes influence the quality of decision-making. Leadership style and communications processes also have a direct impact on implementation.  The quality of decision-making and the a b i l i t y to  implement decisions determine the overall a b i l i t y of the organization to cope with threat, and, hence, susceptibility to crises. These interactions formed the basis of the empirical study described in the next section.  Figure 1 A Conceptual Model of C r i s i s  Individual Cognitive Processes  Decisionmaking  Coping Abilities  Group ^1 Processes  Environmental Complexity Implementation  Leadership Style  \Y  stress  Communications Processes  K'  threat Environmental Turbulence  Susceptibility to c r i s i s  - 36 3.  RESEARCH QUESTIONS  3.1  What is the Nature of Crisis? This study addresses several questions concerning the nature of  crises and the responses of individuals and organizations to crises.  The  f i r s t question concerns the attributes of a situation that identify i t as a crisis.  The relationship between elements present in situations that  are generally regarded as crises are of particular interest.  These ele-  ments are: 1)  threats to high p r i o r i t y goals and values of an organization  2)  surprise occurrence of threats  3)  restricted time available for decision-making  4)  a high degree of uncertainty in possible outcomes of decisions  5)  the lack of plans or their failure to deal with threats  6)  the experience of stress by decision-makers  From these elements, the following hypotheses were developed concerning the nature of crises: H-j:  Threats to high p r i o r i t y goals, stress, and restricted decision time are universal c r i t e r i a in labelling a situation as a c r i s i s .  H^:  The subjective c r i t e r i a defining a c r i s i s are invariant with the type of environments that individuals face.  - 37 3.2  What are the Determinants of Crisis Susceptibility? A second question that arises is what are the determinants of  organizational susceptibility to crises? industries?  How prone to crises are certain  Do crises occur in patterns?  The following hypotheses were  identified that are derived from theories of the environmental and i n d i vidual context of an organization. Environmental Context H^:  Firms operating in predictable environments w i l l have a low frequency of crises.  Rationale:  When there is l i t t l e environmental uncertainty, a  firm is better able to predict future states.  Steers  (1977:96) notes that the capacity for.an organization to successfully adapt to i t s environment is f a c i l i t a t e d to a large extent  by i t s a b i l i t y to know what the environment  w i l l be like in the future.  The more certain managers are  about future states, the greater opportunity they have to develop adequate coping responses and take preventive measures against crises.  High environmental complexity  or turbulence w i l l not by themselves contribute directly to a high frequency of crises.  Rather, susceptibility may  be more "a function of the extent to which . . .  instability  (and the direction of such changes) can be predicted in advance with some degree of certainty" (Steers, 1977:97)  Alternatively, one could argue that although the frequency of crises is low in predictable environments, a firm's sensitivity to them is high. This results primarily from inexperience in dealing with surprises.  - 38 H^:  Firms with a high degree of control over their environments w i l l have a low susceptibility to c r i s i s .  Rationale:  The more control a firm can exert on various environ-  mental factors, the more simple and predictable that environment becomes.  Firms that control a large portion of their resource  inputs and final markets through vertical integration are not highly dependent on other organizations (Williamson, 1970). Thus, firms do not have as many sources of uncertainty to contend With.  Pfeffer (1972:218) notes that large size also allows  a firm to exercise more environmental control.  Large organiza-  tions are better able to survive mistakes, and through growth they can diversify, further reducing susceptibility to c r i s i s . H^:  Firms that are very dependent on other elements in the environment are prone to c r i s i s .  Rationale:  The more dependent a firm is on other elements in i t s  environment, the less control i t can exert.  Thus,it becomes  susceptible to changes in resource markets, product markets, or labour markets.  Without some control in these markets a  firm is not able to buffer i t s e l f against changes and is part i c u l a r l y open to crises.  Pfeffer (1972) notes that inter-  locking boards of directors are a technique of co-optation sometimes used to reduce the interdependence of firms. Individual Context Hg:  Organizations managed by process oriented managers w i l l have a low frequency of crises.  - 39 Rationale:  Process managers w i l l encourage delegation of responsi-  b i l i t y and decentralized programs that allow for local freedom of actions ( f l e x i b i l i t y ) .  Lower level managers and supervisors  are able to act quickly on threats.  This reduces the potential  for surprise threats to central goals.  Hji  Managers who prefer decision-making strategies associated with groupthink come from organizations that are prone to c r i s i s .  Rationale:  Jam's (1972) noted a number of factors that foster the  development of group norms, bolstering cohesiveness and morale to the detriment of c r i t i c a l analysis. symptoms of groupthink:  He noted eight major  invulnerability, rationale, morality,  stereotypes, pressure, self-censorship and unanimity.^  When  decision-makers display most or all of these symptoms decisions of such poor quality are made that an organization is prone to crisis.  3.3  What are the Determinants of Coping Abilities?. A third question of interest with respect to crises is what are the  correlates and determinants of organizational coping a b i l i t i e s ?  Coping is  defined in this study as the a b i l i t y to reduce threats directly (for example, by eliminating external sources) or to minimize the impact of threats (for example, by making internal changes).  Three areas are of particular  importance:  The reader is referred to page 31 for a complete description of the symptoms of groupthink.  - 40 1)  preferred decision structures during crises and suscept i b i l i t i e s to pathologies  2)  the dimensionality of coping a b i l i t i e s  3)  formal preparedness  The following hypotheses arise from these areas: Preferred Decision Structures Environmental Context Hg:  Managers from firms with complex environments w i l l tend to consider only a limited number of alternatives during crises.  Rationale:  A great deal of cognitive stress is placed upon decision-  makers operating in complex environments.  Janis and Mann (1977)  note that when the degree of complexity of an issue begins to exceed the limits of cognitive a b i l i t i e s , a decision-maker seeks methods to provide closure of the problem.  One of the ways this  is achieved is to l i m i t the number of alternatives being considered to a quantity that is comfortably handled.  A satisficing  strategy may be adopted rather than an optimizing strategy. Hg:  Firms operating in complex environments w i l l develop strong adherence to Standard Operating Procedures.  Rationale:  SOPs t r a d i t i o n a l l y have been developed as an instrument  to deal with complexity (March and Simon, 1958). H^g. -  Managers from firms with more complex environments w i l l seek the aid of many individuals to help evaluate actions and alternatives during crises.  Rationale:  Decision-making in complex environments requires the use  of many computational resources.  Managers may delegate and  - 41 seek input from a variety of sources to aid in decisionmaking . H-|-j r  Managers from firms with more complex environments w i l l concentrate on the short term effects of proposed solutions rather than long term effects during crises.  Rationale:  Complex environments are characterized by the interactions  of many diverse components.  Because of this diversity, managers  in complex environments often find i t d i f f i c u l t to accurately assess or predict changes in components and their impact on the firm.  This is particularly true over the long term.  For this  reason, emphasis is placed on short-run impacts in an effort to simplify the decision process (Cyert and March, 1963). One should note a competing hypothesis found in the l i t e r a t u r e . Experience with complexity may sensitize decision-makers to the need to take into account long term impacts (Forrester, 1969; Holling, 1978). H.|2  :  Firms operating in turbulent environments w i l l not develop strong adherence to Standard Operating Procedures.  Rationale:  I f a firm operates in changing environments, there are no  economies to be gained by developing standard programs to deal with these environments.  Furthermore, learning is limited and  no committment to a particular program of response can develop. Individual Context H-j : 3  Task oriented managers w i l l follow SOPs closely and use only o f f i c i a l information channels during crises.  - 42 Rationale:  Burns and Stalker (1961) identified a mode of managerial  practice called mechanistic management.  In this style, task  routinization is closely associated with specification of performance procedures, close enforcement of procedures, and centralization of authority with primarily vertical communication patterns. H-|^:  Process oriented managers w i l l not perceive information gathering to be an important a c t i v i t y during crises.  Rationale:  Process management is based on the premise of decentral-  ization and local coping.  Information gathering a c t i v i t i e s are  usually aimed at increasing information for a different type of system, that i s , centralized decision-making. H-jg:  During crises, process oriented managers w i l l find i t particul a r l y important for employees to understand the decisions made by management.  Rationale:  Process managers are results oriented.  Their style  favours decentralization and delegation of authority.  To  effectively delegate i t is important that employees understand the reasons for decisions.  Although this process is important  during normal periods, the potential for misimplementation and i t s attendent high costs during crises intensifies the need for employee understanding. H-jg:  Executives who prefer a democratic management style w i l l encourage individuals who are responsible for implementing a decision to be involved in making the decision during crises.  - 43 Rationale:  I f an executive generally subscribes to norms of demo-  cratic management, he would tend to maintain this style during crises.  Increased needs for information and information process-  ing channels during crises are served better by a democratic style of management rather than an autocratic style of management. H-| : 7  Executives who prefer an autocratic style of management w i l l find i t desirable for an organization to have a directive leader during crises.  Rationale:  Autocratic managers feel a need to work in an organization  that reflects their own style: tion and strong leadership.  a desire for order, centraliza-  Although this preference may exist  under normal conditions, during crises, when uncertainty i n creases and there are'perceived pressures for immediate action, these needs are intensified. H-jg:  Managers who think i t is important to maintain organizational harmony during crises w i l l encourage executives who disagree with company policies to keep their reservations to themselves.  Rationale:  Strong concurrence-seeking tendencies have been observed  among very cohesive groups.  Janis (1972) notes that in such  groups direct pressure may be applied to members who express strong arguments against group policies.  Dissent is not  expected of loyal group members. H-jg:  Managers who find i t important to maintain organizational harmony during crises w i l l encourage members of an executive committee to minimize conflict within i t s e l f and to be loyal to the Chief Operating Officer.  - 44 Rationale:  Highly cohesive groups are closely associated with norms  of strong leadership.  These groups tend to minimize conflict  in order to maintain solidarity. (See H-jg). The Dimensionality of Coping A b i l i t i e s Organizational Context H2Q,:  Organizations that are capable of coping successfully with one type of threat are capable of coping with any type of threat.  Rationale:  The s k i l l s required to deal with surprise and the a b i l i -  ties to reduce the impact of stress are not situation specific, but are developed as part of a general dimension of coping abilities. H^i'•  Organizations develop special a b i l i t i e s to cope with one of two types of threats:  those that occur precipitately and without  warning (discontinuous), or those that build up gradually over a period of time (continuous). Rationale:  The mechanisms required to deal with a constantly high  level of threat are different than the mechanisms required to deal with occasional, unpredicted high levels of threat.  In  the f i r s t case, one can invoke strategies and programs specif i c a l l y developed to absorb stress.  There is also some tendency  for organizations to recruit executives who are adapted to high stress situations.  In the second case, the intermittent nature  of threat occurrences does not permit the development of such permanent mechanisms.  Intense, remedial strategies that are  specific to the threat may be required to alleviate stress.  - 45 H : 22  Organizations have less a b i l i t y to cope with threats that have a sudden onset than with threats that build up gradually.  Rationale:  Threats that build up gradually with a small incremental  impact may not be perceived as threats to organizational goals in the short term.  Declining sales or loss of market share,  for example, frequently are rationalized as short term declines that can be managed with normal procedures.  A threat  may not be interpreted as c r i t i c a l until a certain threshold is reached.  An event with a surprise onset and a large i n i t i a l  impact, in contrast, may be perceived as a c r i t i c a l threat since extraordinary measures are required to cope with i t and potent i a l losses are large. H23:  Predictable threats in stable environments w i l l stimulate information gathering a c t i v i t i e s during crises.  Rationale:  Firms with the a b i l i t y to cope with predictable threats  require a long term orientation.  Information gathering, which  is a long term a c t i v i t y , w i l l pay off when focussed towards long term, continuing types of threats rather than non-recurring types of threats. tt^:  Organizations that have a high level of slack can cope better with crises involving threats to market share or sales than they can with crises involving threats to other areas of operations.  Rationale:  High slack organizations can mobilize resources to meet  changing market conditions (Cyert and March, 1963).  They can  switch product emphasis or increase/decrease sales.  These  - 46 actions require a c r i t i c a l mass of resources.  Other types of  crises may not be resource intensive. ^25  :  Organizations that maintain a decentralized decision-making structure under threat can cope better with crises precipitated by a drop in sales than organizations that centralize decisionmaking authority under threat.  Rationale:  Coping with market failures requires a high reliance on  f i e l d managers and personnel for information and market contacts.  Organizations that react to threats by reducing the  authority of managers lose these information sources. Environmental Context H g: 2  Firms operating in complex environments have a greater a b i l i t y to cope with crises than firms operating in simple environments  Rationale:  Successful decision-making in c r i s i s situations requires  effective and economical information processing to evaluate a complex system of interactions.  Such a system w i l l tend to  evolve in firms with complex environments rather than in firms with simple environments. H^j'  Firms operating in turbulent environments have a greater abil i t y to cope with crisis than firms operating in static environments.  Rationale:  A turbulent environment develops the capability to deal  with change.  Firms learn to adapt and they develop a tolerance  for surprise and stress that increases their coping a b i l i t i e s .  - 47 F^g.'  Firms operating in turbulent environments have a greater a b i l i t y to cope with cyclical market conditions than firms operating in static environments.  Rationale:  Firms with experience in dynamic environments w i l l  develop more adaptive procedures to deal with contingencies. Familiarity with change breeds confidence in managerial a b i l i t i e s to cope with turbulence. Individual Context  H^g-.  Firms managed by entrepreneurial executives have a greater a b i l i t y to cope with a major technological breakthrough,than firms not managed by entrepreneurs.  Rationale:  By definition entrepreneurial managers actively seek  opportunities and are most attuned to exploiting an opportunity when i t is presented. H^Q:  Firms managed by executives with an aggressive marketing orientation have a greater a b i l i t y to cope with a sudden drop in sales than firms managed by executives with other orientations.  Rationale:  An aggressive marketing program is an indication of a  firm's preparedness to cope with the contingency of market failure. :  Firms managed by more democratic executives have a greater a b i l i t y to cope with the death of a number of key executives than firms managed by less democratic executives.  Rationale:  Since democratic managers encourage a high level of  employee participation in decision-making, there is a greater  - 48 depth of management talent in departments or organizations headed by these managers.  There is also greater knowledge of  problems, issues, and strengths of the firm when many subordinates participate in the process.  Participatory organizations  may be able to absorb the death of key executives more easily than other organizations that do not have trained people backing up incumbent management.  3.4  What are Some of the Standard Responses to Crises? The fourth major area of interest in the study is to identify some of  the standard responses to crises (programmed behaviour) and to find explanations for them.  The following hypotheses were developed:  Organizational Context W^2  :  Managers from firms with a high degree of f l e x i b i l i t y are l i k e l y to adopt entrepreneurial behaviour as a response to crisis.  Rationale:  Entrepreneurial behaviour requires flexible adjustment  in goals and means. Individual Context ti^y Managers make parochial responses based on their previous business experience during crises. Rationale:  Dearborn and Simon (1958) suggested that a manager's  business specialization influences the manner in which he views business problems.  In responding to crises, managers w i l l in-  voke behaviour or SOPs based on previous training and experience rather than developing new behaviours.  - 49 -  H^:  Process oriented managers prefer programmed behaviour strategies that manipulate the managerial structure of the firm during crises.  Rationale:  I f a manager is process oriented, he would not focus on  individual actions, but on the organizational processes used to obtain the end goals.  - 50 4.  RESEARCH METHODOLOGY Although specific aspects of processes that affect crisis decision-  making have been studied previously (for example, information processing, cognitive a b i l i t i e s , group cohesiveness, etc.) there is a paucity of empirical work that examines in an integrated manner the various dimensions important to understanding business crises.  In this study a structured  questionnaire was administered to a sample of senior executives in major Canadian and American business enterprises.  The data obtained were sub-  jected to a series of s t a t i s t i c a l analyses to test the formulated hypotheses. The study investigated the major areas of organizational susceptibility to crises, and. the determinants of c r i s i s coping a b i l i t i e s .  Methods by which  this susceptibility can be decreased and coping a b i l i t i e s improved are • proposed.  4.1  The Sample A random sample of Canadian and American companies was selected from  a population of approximately 1200.  The population was determined to be  those firms listed in the Fortune 500 Directory (American) and the Canadian Business 400 for 1977.  The sizes of firms in the population ranged from  $48 million to $55 b i l l i o n (General Motors).  The population considered was  restricted to large enterprises since public information was readily available for these firms.  Also i t was f e l t that executives in large corpora-  tions would have had experience with many different kinds of crises and would therefore be able to give richer responses to questions than executives in small companies.  v  All firms in the population were assigned an identification number and a random sample was selected through use of a random number generator  - 51 (UBC RANDOM). The sample size was determined on the basis of a common 'rule of thumb used in multivariate analysis: 1  the ratio of the number of  observations to the number of variables should be between 3:1 to 5 : 1 . The maximum number of variables to be analyzed at any one time was 18, thus, 90 observations were required (using the more conservative 5:1 r a t i o ) . Assuming a 25% return rate on mailed questionnaires, the minimum sample size required was calculated to be 360 cases. Firms selected for the study represented a wide variety of products and services.  The composition of the sample, by industry, is given in  Table I.  4.2  The Research Instrument A 12 page questionnaire with a personalized covering l e t t e r was sent  to the President or Chief Operating Officer of each company selected (Appendix 1).  The questionnaire examines various dimensions of the firm and i t s  environment that theoretically could affect susceptibility to c r i s i s and management capabilities.  Two separate p i l o t studies composed of graduate  and undergraduate students (n = 65, n = 71) were used to pretest the questionnaire.  After each p i l o t study, modifications to the instrument were  made, both in form and content. The questionnaire consists of seven sections that examine the following dimensions: 1)  programmed behaviour styles during crises  2)  quality of decision-making and susceptibility to pathologies during crises  3)  preferred managerial style during c r i s i s and non-crisis situations  - 52 Table I Sample Composition by Industry  Industry Description* Forestry (logging, pulp and paper, sawmills, services) Mines (metals and non-metals) Fuels (petroleum and natural gas) Food and beverage (meat, poultry, f r u i t , dairy, flour) Tobacco products Textiles (cottons, wools, synthetics, ropes, carpets, knitting mills) Clothing mfg. Furniture and fixtures Printing and publishing Metal and metal fabricating (iron, steel, aluminum) Transportation equipment (motor vehicles, a i r c r a f t , r o l l i n g stock, ship building Electrical products (appliances, radio, T.V., computers) Non-metallic mfg. (cement, concrete, glass, etc.) Refineries Rubber and chemicals (plastics, f e r t i l i z e r s , pharmaceuticals, paint, soaps) Construction Transportation ( a i r l i n e s , railways, buses, pipelines, etc.) Communications (radio-T.V. broadcasting, telephones, cables, etc.) U t i l i t i e s (electric, gas, water) Trade (wholesale, r e t a i l ) Finance (banks, insurance, investments) Amusement, recreation (movies, hotels, restaurants) Miscellaneous Total  No. of firms sampled 17 6 16 59 2 ,  8 4 2 6 61 22 22 9 15 45 2 9 4 6 14 29 3 15 376  Categories developed from Standard Industrial Classifications (Statistics Canada) and Industry Codes (Office of Management and Budget).  - 53 4) environment of the organization 5)  coping a b i l i t i e s of the firm with respect to different dimensions of threat  6)  factors defining a c r i s i s  7)  demographic characteristics  Section 1 of the questionnaire investigates two dimensions of managerial posture in terms of preferred strategies in dealing with crises. Decision-makers may choose between two different postures: (reactive) style, or an entrepreneurial (active) style.  a defensive  A defensive  manager is defined as one who favours reactive strategies oriented towards retrenchment or curtailment of organizational programmes when the firm is threatened by c r i s i s . expenses.  In particular, there is a preoccupation with cutting  Defensive managers tend to focus on costs rather than benefits  when evaluating programmes.  During crises, a defensive manager reacts to  a specific problem stimulus and corrective measures are primarily oriented towards returning to or maintaining the status quo.  There is more concern  for survival of the organization than for i t s growth and development. In contrast, a entrepreneurial manager is defined as one who favours active or offensive strategies that enable an organization to exert control over i t s environment.  When threatened by c r i s i s , an entrepreneurial  manager favours flexible strategies aimed towards turning threats into opportunities for organizational growth.  The potential benefits of pro-  grammes are stressed rather than the costs.  Unlike the defensive manager,  who concentrates primarily on financial factors, the entrepreneurial manager is more systems oriented; he attempts to exert control over the environment from various points throughout the organization.  Thus an  entrepreneurial manager's response to a p r o f i t c r i s i s may be to increase  - 54 advertising expenditures and i n s t i t u t e incentives for sales personnel in an effort to achieve greater sales volume.  A defensive manager in con-  t r a s t , may impose across-the-board cuts in all operating budgets as a response to a p r o f i t c r i s i s . Positive responses to questions 1, 4, 7, 8, 11, and 14 are indicative of an entrepreneurial style while positive responses to questions 2, 3, 5, 6, 9, 10, and 12 are indicative of a defensive style. In addition to assessing the two dimensions of managerial posture, the items in Section 1 can be further classified into three categories of strategies:  personnel, operational, and developmental.  Personnel stra-  tegies are defined as those actions concerning human relations, motivation, and incentives.  Questions 4, 5, 10, 12, and 13 f a l l into this category.  Operational strategies describe actions concerning the non-human functions of the f i r m , primarily finance, control, and marketing (questions 1 , 2 , 3, 6, and 9).  Developmental strategies are defined as primarily long term  actions that do not directly affect current operations, but may contribute to the future development of the firm.  Expansion of R&D a c t i v i t i e s and  structural re-organization are examples of developmental strategies (questions 7, 8, 11, and 14). I t was surmised that one of two well-defined response patterns to items in section 1, with regard to the preferred strategies selected to deal with crises, would be found.  The f i r s t premise was that i t would be  possible to classify individual respondents as favouring either predominantly entrepreneurial or defensive strategies.  Managers from certain  industries were expected to favour one mode over the other. On a second level, i t was surmised that certain categories of strategies (personnel, operational or developmental) would be highly correlated  - 55 with the functional backgrounds of managers. Simon  The findings of Dearborn and  (1958) suggest that a manager's business specialization influences  the manner in which he views business problems.  For example, managers with  a strong orientation in finance (comptrollers, financial V.P.s, etc.) may tend to rate the operational strategies as most useful in dealing with crises.  On the other hand, managers with staff backgrounds in R&D or -  corporate planning may rate the developmental strategies as most useful. Section 2 of the questionnaire is concerned with group attitudes and behaviours that may affect the quality of decisions made during a c r i s i s and that may prevent successful implementation of those decisions.  Pre-  viously three sources of deficient decision-making behaviour were identified:  communications d i s t o r t i o n , premature decision choice, and defective  judgment.  A series of questions relate to each of these dimensions.  Three questions are concerned with the characteristics of information processing procedures and communications networks that contribute to communication distortion.  For example, r i g i d adherance to standard operating  procedures and o f f i c i a l communications channels can reduce organizational flexibility.  Managers who insist that SOPs be adhered to during crisis  are faced with the possibility of responses being made that are unsuited to the current conditions, or of time delays in the transmission of v i t a l information (question 6).  Strong biases, through excessive f i l t e r i n g , may  be introduced i f subordinates transmit only information they think is important or appropriate (question 7).  In order to meet needs for un-  biased, timely information, i t may be necessary for senior management to develop their own communications channels that by-pass the formal organizational hierarchy (question 3).  - 56 Five questions relate to aspects of decision-making behaviour that result in premature choice.  When a decision-making group under intense  stress becomes isolated from the rest of the organization, too few alternatives and fresh ideas may be presented.  This is due primarily to  restricted information sources (questions 10 and 17).  During crises, the  tendency for decision-making authority to s h i f t to the top of the organization puts tremendous pressures on the leadership.  Executives may act  hastily and without due consideration in order to give the impression of decisiveness and to maintain confidence in their leadership (question 16). At the same time, decision-makers may become overly concerned with shortrange issues to the neglect of long-range outcomes and they may overlook possible negative ramifications of their decisions (questions 12 and 15). Janis  1  (1972) identification of groupthink phenomena provides the  theoretical basis for six questions that assess tendencies leading to development of defective judgment.  Dominant leadership, high cohesive-  ness, and insulation of the decision-making group from the rest of the organization are conditions that foster the emergence of groupthink (questions 13 and 14). nerability that promote (questions 11 and 18).  A cohesive group may develop illusions of invulover-optimism and encourage  high-risk decisions  Adversaries or competitors may be viewed in a  stereotyped manner and the effectiveness of their actions underestimated (question 4).  Cohesive groups also w i l l attempt to apply pressure to any  member who t r i e s to express a viewpoint different from dominant group beliefs, and there is a tendency for members to suppress their own doubts about a course of action (question 9). Four questions in this section examined the problems of implementation f a i l u r e .  In conditions of c r i s i s , when the organization is under  - 57 stress, there w i l l be increased conflict between the decision-making group and other parts of the organization.  This conflict may be manifested in  the form of intensified factionalism between various divisions or departments.  Some groups may view the actions of senior decision-makers as an  infringement on their powers and therefore resist implementation of decisions even i f the decisions are of high quality (question 8).  Implementa-  tion failures may also occur because of 'noisy' communication channels. Operating units either don't understand directions (question 1), or they have no committment to implement decisions since they are excluded from the decision-making process (question 2).  For successful implementation  to occur, i t is not necessary for operating units to agree with a decision, but i t is necessary for them to understand the process by which the decision was reached and why a particular decision was chosen (question 5). Section 3 of the questionnaire examined different managerial styles and evaluated preferences during normal times and during crises.  One  cluster of variables is composed of items that relate to styles of task performance, either mechanistic or organic (Burns and Stalker, 1961). Managers with preference for a mechanistic style w i l l agree with close employee supervision, well-defined procedures, enforcement of rules, and well-defined performance measures (question 9).  Organic managers, in con-  t r a s t , w i l l prefer process rather than task goals, fewer performance measurements, and general supervision with an emphasis on outcomes (question 3). Mechanistic style may be appropriate in situations where tasks are routine, repetitive, and predictable, for instance, large bureaucracies during non-crisis times.  Managers in organizations with placid, simple  environments may also find this style appropriate.  Burns and Stalker note  that under such conditions, the characteristics of a mechanistic system  - 58 promote effective task performance and high levels of individual satisfaction.  An organic style may be best when the environment is rapidly  changing, and when task accomplishment requires independent problemsolving, innovation, and c r e a t i v i t y .  Such conditions may occur during  crises, for example. Questions 2, 5, and 11 assessed preferences for autocratic or democratic style (Lippett and White, 1943). encourage participation in decisions. dogmatic with employees.  Authoritarian leaders do not They are generally arbitrary and  Democratic leaders, in contrast, are generally  supportive and encourage the contributions of all employees.  Although  neither an autocratic nor a democratic style can be advocated as a means to ensure productivity, Gibb (1969:261) notes that "group decisions which have been arrived at interactively e l i c i t more solid support and issue into action more frequently than do those which are handed down more authoritatively."  I f Gibb's premise is correct, in non-crisis times one would ex-  pect fewer problems of implementation in organizations headed by democratic managers, particularly when acceptability of a decision to subordinates is an important issue (Vroom and Yetton, 1973).  However, Hamblin (1958) notes  that during crises, groups prefer strong leadership.  He found that a group  may replace i t s leaders with a new person i f the leader does not have an obvious solution to a c r i s i s .  Where there are time pressures for a quick  decision, authoritarian leadership may be required.  For these reasons one  would therefore expect that an autocratic, directive style would be preferred during crisis (both by leaders and subordinates). Questions 7 and 10 assessed preferences for an instrumental style of management.  Filley and House (1969) defined an instrumental leader as one  who has the a b i l i t y to exhibit rational, intellectual behaviour in order to  - 59 f a c i l i t a t e group accomplishment of organizational objectives.  Parsons  (1951) further suggested that instrumental behaviour was characterized by a concern for obtaining and allocating resources.  An instrumental style  may be either autocratic or democratic as the situation demands, but the emphasis is always on teleological decision behaviour aimed at task accomplishment in the most e f f i c i e n t manner.  Instrumental behaviour may be  equally appropriate in crises or normal situations, but during crises there may be a need to find new and novel solutions to problems at the expense of organizational traditions. The final cluster of variables in this section assessed concern for people versus concern for production (Blake and Mouton, 1964).  Managers  with a high concern for people believe that employees should be supported and aided in their jobs, and that the attitudes and feelings of employees are important.  People-oriented managers arrange work conditions so that  personal, social, and welfare needs of employees are met before the production needs of the firm.  Questions 1 and 4 assess preferences for this  style. A people-oriented style is the opposite of a production oriented style.  In the extreme, managers who adopt a production orientation dis-  regard t o t a l l y the needs of employees. vehicle for achieving production.  The organization is viewed as a  Decision-making authority is concen-  trated at the highest levels of the organization and communication is formal and r i g i d .  Question 6 assessed preferences for a production-  oriented style. Question 8 assessed preferences for a style balanced between concern for people and concern for production.  Managers adopting this style recog-  nize that an effective organization w i l l attempt to meet both objectives,  - 60 although given a particular set of circumstances, people or production may take p r i o r i t y in the short run.  During crises, when organizational survival  could be at stake, more emphasis may be placed on achieving production or implementation of decisions at the expense of concern for people.  During  normal times, a balanced style, with more emphasis on organization harmony and employee satisfaction may be favoured. Section 4 of the questionnaire is concerned with collecting information on a number of dimensions of environmental phenomena that contribute to organizational uncertainty.  Three dimensions have been included:  turbulence, complexity, and degree of predictability.  Questions on two  dimensions of organizational response to environmental stimuli were also included:  f l e x i b i l i t y and c o n t r o l l a b i l i t y .  Question 1 measured the amount of perceived turbulence in the firm's environment (Emery and T r i s t , 1965). ured by three questions.  The dimension of complexity is meas-  Question 4 examines the concept of dependency as  a component of complexity (Osborn and Hunt, 1974).  Question 9 examines the  degree of environmental heterogeneity (Child, 1972).  Question 8 deals with  routineness as a component of complexity (Jurkovitch, 1974).  The combined  dimensions of turbulence and complexity influence the degree of uncertainty facing a firm (Duncan, 1972).  Organizations with environments perceived as  predominantly simple and s t a t i c , theoretically w i l l experience significantly less uncertainty than organizations with environments perceived as predominantly complex and dynamic.  I t was hypothesized that there would be a  strong positive correlation between high environmental uncertainty (complex and turbulent) and perceived susceptibility to crises. The third dimension of environment investigated in the questionnaire is the degree of predictability.  Question 6 measured this dimension.  High  - 61 predictability suggests a more certain environment (Steers, 1976) with potentially fewer crises than in highly uncertain environments.  Question 2  also examined the dimension of p r e d i c t a b i l i t y , but in terms of the firm's predictions vis-a-vis r e a l i t y .  The more successfully an organization can  predict the extent and direction of environmental change, the greater the degree of certainty i t enjoys.  With increased certainty, there is a higher  probability the firm can develop appropriate coping responses to deal with changes and either avoid crises or manage crises better when they do occur. I t is essential for an organization to develop effective coping strategies to deal with environmental discontinuities.  Coping with complex,  dynamic, and unpredictable environments requires a high degree of organizational f l e x i b i l i t y .  Two questions measured the degree of perceived f l e x i -  b i l i t y of the respondent firms.  Question 3 examined the firm's motivation  to respond adaptively to perceived environmental turbulence (Segal, 1974). Firms that are unwilling to alter goals and structures may be insufficiently flexible to deal with rapid environmental change. Question 7 examined the extent to which f l e x i b i l i t y is b u i l t into organizational structures in the form of slack (Cyert and March, 1963). High slack is equated with high f l e x i b i l i t y and the potential to cope with crises.  The orientation of decision-makers with regard to the environment  w i l l also affect organizational coping a b i l i t i e s .  A decision-maker can per-  ceive the environment as either offering an opportunity, or posing a threat (Perrow, 1970).  Decision-makers who view the environment as threatening are  judged to have a defensive orientation; those who perceive environmental opportunities are judged to have an entrepreneurial orientation.  The coping  mechanisms of firms run by defensive managers may be aimed towards developing protective contingency plans to deal with environmental change.  In contrast,  - 62 the coping mechanisms of firms with entrepreneurial managers may be more in the nature of sophisticated information systems capable of alerting the firm to new opportunities brought about by changing environmental conditions. In addition to the Likert scale items in Section 4, a number of questions in Section 7 (Background) are related to dimensions of the firm's environment.  Specifically these questions concern firm size (5), type of  industry (6), competitive situation (8), and degree of vertical integration (9).  Responses to these items provided an estimate of the degree of control  the firm is able to exert over i t s environment.  For example, a very large  firm is able to extend a much greater degree of control than can a small firm.  The competitive nature of the environment is also important.  One  may reasonably expect a firm in a monopoly position to face a much smaller degree of uncertainty than a firm in an environment where cutthroat competition is the norm.  Likewise, a firm that is integrated ver-  t i c a l l y can exert influence on the product market ( i f integrated forward) and control sources of raw materials ( i f integrated backward).  Such firms  face a lesser degree of uncertainty than firms with no integration. The particular industry within which a firm operates is a c r i t i c a l factor.  Some industries by their very nature are extremely complex and  dynamic, generating high levels of uncertainty (for example, merchandising and electronics).  Firms in other industries may face rather low levels of  uncertainty due to the relatively simple and static nature of their environments (for example, public u t i l i t i e s ) .  One hypothesis is that firms with  a high degree of control, and thus a lower level of uncertainty, i n i t i a l l y w i l l be less prone to crises.  However, firms in crisis-prone industries may  be more adept at managing crises (a s k i l l developed through necessity) than firms from relatively stable industries where crises are uncommon events.  - 63 Section 5 of the questionnaire is concerned with the perceptions of senior managers vis-a-vis the performance of their corporation when exposed to a variety of events. phenomenon.  Heretofore, crises have been treated as an unitary  I t is clear, however, that there are many different kinds of  crises, some of which may be less threatening (and therefore perceived as more manageable by some organizations) than others. section addressed the following questions: dimension?  The items in this  a) is there a general crisis  b) what classes of c r i s i s are perceived as most threatening?  c) how do managers perceive the a b i l i t y of their corporation to deal with different types of crises? Four general classes of events were posited: nation, decline, and cycles.  discontinuities, stag-  Questions 1, 2, and 5 assessed perceived  a b i l i t y to deal with different types of discontinuous threats, that i s , unexpected threats in markets, personnel, or the natural environment. Although some managers may perceive a high a b i l i t y on the part of their organization to deal with a sudden market slump, they may not have the same confidence in their firm's a b i l i t y to deal with the sudden death of key senior executives. Question 4 is concerned with a discontinuous opportunity, the potent i a l to rapidly increase sales.  Some firms may be capable of coping with  threatening events, but lack the a b i l i t y to capitalize On opportunities that are suddenly presented.  Failure to exploit opportunities, in the long  term, can be threatening for the firm. tries where technology changes rapidly.  This is especially true in indusFor example, in the ' s i x t i e s ,  firms that u t i l i z e d newly developed semi-conductor technology in the electronics industry found themselves with almost unlimited opportunities for growth.  On the other hand, firms that were more conservative and failed  - 64 to switch over to the new technology, rapidly lost market share.  Many  soon found themselves on the verge of bankruptcy. Question 3 examined a manager's perceptions of his firms a b i l i t y to deal with conditions of market stagnation.  While this situation is not  commonly associated with threat and c r i s i s , a steady-state environment with no real growth can indeed constitute a threat to a firm whose existence is predicated on unlimited growth and expansion.  The current economic ' c r i s i s '  of many Western nations is the result of d i f f i c u l t i e s in adjusting to a slow-down in growth; many firms are faced with the same phenomenon.  Stag-  nant market conditions may require entirely different marketing techniques, new products, and even a different management to deal with new r e a l i t i e s . The need for such drastic changes can precipitate a c r i s i s . A long term decline in markets (question 6) can also pose a threat. However, the threat is so insidious that firms may not recognize the condition as inherently threatening.  Market decline may be so gradual that  companies take l i t t l e corrective action; the situation is often viewed as merely 'a bad year'.  By the time the true situation is realized, a firm  may be in a very precarious financial position. Cyclical market conditions (question 7) can pose either a threat or an opportunity to a firm depending on i t s f l e x i b i l i t y .  In many industries  cyclical conditions are common, and firms that adapt to them, thrive.  For  instance, merchandising firms make a very large percentage of their yearly sales in the two months of November and December, and a very small percentage in January and February.  However, their operating systems, procedures,  and personnel levels are designed to cope with such extreme cycles. environmental variation can be beneficial for some firms.  Clearly  They become more  adaptive and f l e x i b l e , and are able to capitalize on market upswings.  - 65 However, firms in more stable environments may perceive a much lesser a b i l i t y to cope with cyclical conditions.  A manager's confidence in the  a b i l i t y of his firm to cope with various contingent events may be highly correlated with the type of industry in which the firm operates and i t s prior preparations for c r i s i s .  - 66 5.  ANALYSIS OF RESULTS The general response rate to the questionnaire was 25.0% (94 com-  panies).  The returns were distributed as follows:  64 Canadian companies,  (a 34.6% response rate) and 30 American companies (a 15.7% response rate). Due to technical reasons such as preparation of covering letters and collation of the questionnaire package, the U.S. portion of the sample was sent out approximately three weeks later than the Canadian portion.  Unfortu-  nately, a postal strike occurred shortly after the American questionnaires were mailed and an embargo was placed on all U.S. mail coming into Canada for the duration of the strike.  This may be one reason why the U.S.  response rate was not higher.  5.1  Demographic Attributes The participants in the study were from the most senior ranks of  their companies.  Forty-four percent of the respondents (n = 41) were  Presidents or Chief Operating Officers of their firms.  The remaining  respondents were primarily vice-presidents, controllers, or executives of equivalent rank.  Sixty percent of the executivesiin the sample had back-  grounds in major staff or line functions, for example, production (16%), sales marketing (22%), and finance/accounting (22%).  Only one respondent  gave R&D as his primary experience, and only 2 respondents gave their backgrounds as Human Relations functions.  Table I I shows the frequency  distribution by categories. Sixty-five percent of the respondents were age 50 and older; 28% were between 40 and 49; and only 6% younger than 39 years of age.  Seventy-  three percent of the Presidents and Chief Operating Officers participating  - 67 -  Table I I Functional Background of Respondents  Function  n_  °k  Production  15  16.,0  Sales, marketing  21  22,.3  Finance, accounting  21  22.,3  Personnel, industrial relations  2  2.,1  R&D  1  1..1  20  21.,3  4  4..3  10  10,.6  94  100.,0  General administration Miscellaneous D.N.A.  - 68 in the study were clustered in the over 50 year age group. dents were between 30 and 39 years of age.  Only 3 Presi-  They were CEOs of a petroleum  exploration, a r e t a i l i n g , and a food manufacturing firm, respectively, and all 3 were in Canadian companies. Overall, the participating executives had a very high level of formal education.  Eighty-four percent of the respondents had completed  university, and 40% had obtained a graduate degree.  The average level of  education for American executives was higher than for Canadians; 94% of the American respondents had completed university versus 80% of the Canadians.  5.2  Managerial Style Researchers have found that during crises there is a need for a  qualitatively different kind of leadership than during normal times (Mulder, van Eck, and de Jong, 1971; Hamblin, 1958b; House and Dessler, 1974).  L i t t l e progress has been made, however, in identifying the pat-  terns of behaviour that are the mark of an effective leader.  This study  examined executives' preferences for a number of theoretically important dimensions of leadership.  In particular, any shifts in preferences of  leadership style between normal times and times of crisis were noted. Three categories of leadership variables were examined:  styles of task  performance; autocratic/democratic orientation; and people/production orientation.  Preferences were assessed on a 7 point Likert scale.  Differences between the means for normal periods and c r i s i s periods were tested. The results of the analysis indicate that executives favour a process management style of task performance during non-crisis periods.  During  - 69 crises, however, their preferences s h i f t towards a style of specific task direction (question 3:  x  n Q r m a 1  = 4.426 > x  c r i s i s  = 3.479; a < .05).  It  is interesting to note that although managers prefer task supervision over process supervision during c r i s i s , there is no significant difference between the degree of programming and enforcement of rules preferred during these periods.  Those who favour a high degree of programming in task  performance, tend to do so, whether or not a c r i s i s exists. There was consensus among executives that a democratic style of management was most suitable during normal times.  There is a significant  s h i f t in preferences, however, towards a more autocratic style of management during crises.  Tests of differences between the means in normal and crisis  periods were significant for the three questions comprising this dimension (question 2:  x ^ ^  = 5.989 > x  s  = 5.032; a < .05;  question 5:  x ^ ^  = 2.500 < x ^ . ^  = 3.096; a < .05;  question 11:  x ^ ^  = 2.936 < x ^ . ^  = 4.245; a <_ .05).  c  H  s  i  The majority of executives recognize the need to explain directions to employees during normal times in order to f a c i l i t a t e implementation of decisions.  During crises, however, there is a significant s h i f t in prefer-  ences towards more directive management (question 7: ^crisis  =  2-670; a < .05).  x  n o r m a  - | = 2.096 <  The urgency of a crisis situation may preclude  the need for explanations and may j u s t i f y a more autocratic style to f a c i l itate the accomplishment of organizational objectives. There is agreement among respondents that during normal times i t is important to achieve a balanced management style stressing both the human needs and the production goals of the organization.  However, there is a  significant shift towards preferences for a more problem-solving orientation during crises.  In the short term, the need to meet production goals  - 70 becomes dominant.  The objective of meeting employees' social needs (a long  term goal) seems to be expendable during a crisis (question 6: 4.053 > x  ^  n o r m a  -]  =  . . = 2.851; a < .05). crisis '  A goal of maintaining organizational harmony can be particularly important during crises since i t affects implementation.  I f there is f r i c t i o n  between individual employees or groups there may be intentional or unintentional subversion of directives and lack of coordination, both of which can adversely affect attempts to reduce a c r i s i s .  There was a consensus among  respondents that i t is important to encourage organizational harmony at all times.  This need for harmony, however, is perceived to be somewhat less  important during crises (question 1:  x  n o r m a  ] = 2.106 < x ^ ^  = 2.638;  a < .05).  During normal times, on the average, executives agree that achievement of job satisfaction for subordinates is an important goal.  During c r i s i s ,  however, there is a highly significant s h i f t away from this norm.  I t is  interesting to note the relationship of the satisfaction variable (question 4) with the harmony variable (question 1).  During c r i s i s , i t is perceived  that harmony is more important (due to implementation requirements) than is satisfaction. Employee satisfaction, while a desirable goal in the long term, is an expendable goal during the short term (question 4: >< -|  =  norma  1.745 < x  . . = 3.202; a < .05). crisis  Executives indicate a willingness to trade-off high employee morale for increased production during c r i s i s .  In normal times high employee  morale is an important organizational goal, however, during c r i s i s there is a significant s h i f t towards a greater emphasis on productivity (question 8:  x  . • = 2.883 < x  . .  = 3.296; a < .05).  I t is interesting  to note that the degree of concern for employee morale during normal times is less than concern for employee satisfaction.  5.3  Corporate Attributes The frequency distribution by industry for the responding firms is  given in Table I I I .  Minor discrepancies between industries sampled (Table  I) and industries responding (Table I I ) are due to the respondent's perceptions of his firm's industry a f f i l i a t i o n .  Respondents were asked directly  to give the industry a f f i l i a t i o n of their firm.  For this reason, the clas-  sification was subjective and may d i f f e r somewhat from standard industry classifications given by Fortune and the Financial Post.  For example, one  of the respondents gives his industry as Agriculture but no firms in the sample were so classified.  Most probably this firm belongs to the Food  and Beverage industry. Fifty-seven percent of the executives responding to the questionnaire described the competitive situation of their industry as one where a few firms dominate the market (oligopoly).  Twenty-nine percent responded that  their firms operated in a competitive environment with many firms but none dominating, and 7% indicated a market situation dominated by one large firm Only 22% of the respondents suggested their firms had any degree of control over sources of raw material.  The remainder of the firms were dependent to  a greater degree on institutions within the environment for their sources of supply.  Fully 30% of the firms indicated no control over inputs, a  situation that suggests high vulnerability to environmental fluctuations. There was a great deal of consensus with respect to the nature of the environment of participating firms.  Most respondents perceived their f i r m '  environment as very complex, with many diverse components, and very  - 72 -  Table I I I Frequency Distribution by Industry of Respondent Firms  Industry Description  No. of Firms Responding  Agriculture Forestry Mines Fuels Food and beverage Furniture and fixtures Printing and publishing Metal and metal fabricating Transportation equipment Electrical products Rubber and chemicals Construction Transportation Communications Utilities Trade Finance Amusement, recreation Professional consultants Conglomerates, holding companies  1 3 3 4 11 2 1 4 5 6 8 3 2 2 3 3 8 1 3 10  Miscellaneous Did not answer  8 _3 94  Total  - 73 turbulent.  Approximately 86% of the executives f e l t their firm's environ-  ment was in a continual process of change.  The respondents' perceptions  varied as to the degree of predictability of their environment.  Some  executives thought their firm's environment was very predictable, others characterized the environment as highly unpredictable. As might be expected, there is some positive correlation between perceived predictability and characterization of the firm's problems as routine and capable of being dealt with by established corporate procedures (x = .23, a = .05).  The degree of perceived complexity of the firm's environment  is the major determinant of predictability of events.  Those executives who  noted their firm's environment had only a small number of homogenous components, (that i s , a simple environment) often perceived a higher degree of environmental predictability (T = .45, a = .01). There was consensus among respondents that their firms were w i l l i n g to alter structure and goals to respond to the demands of a changing environment.  In other words, they perceived high f l e x i b i l i t y on the part of  their firms.  This is an important characteristic to consider when assess-  ing susceptibility to c r i s i s .  With a high degree of f l e x i b i l i t y , i t is  possible for firms to develop coping strategies to deal with environmental change.  In this way the firm either can avoid crises, or manage crises  better when they occur. In the total sample of 94 firms, only 45% of the executives responded that their firms had any formal plans to deal with potential crises.  In  general, the plans to deal with crises were not well developed, perhaps reflecting the respondents optimism that crises were not a probable occurrence.  Only 14% of all respondents assigned a greater than .50 probability  of a c r i s i s occurring in their firm within 5 years.  Respondents were  - 74 s l i g h t l y more pessimistic when assessing the probability of c r i s i s in an average firm in their industry. .50 probability.  Twenty-nine percent gave a greater than  Obviously the respondents think of their own firms as  better than average performers.  This is perhaps a reasonable assessment  given that the firms in the sample were drawn from a population of top performing companies.  Overall, executives were very optimistic about the  probability of crises occurring; f u l l y 64% of respondents gave a probabil i t y of .25 or less to a c r i s i s occurring in their firm.  5.4  Interactions Between Variables As a f i r s t step in understanding the dynamics of crises, the pattern  of correlation's between the component variables were investigated.  Since  a portion of the sample data was not distributed normally, Kendall's tau (x) rank order correlation was used.  12  Although Spearman's rho (r ) may be the more commonly used nonparametric correlation coefficient, the Kendall and Spearman techniques are quite similar in that both produce standardized coefficients based on the amount of agreement between two sets of ordinal rankings.  However, Nie,  et a l , (1975:289) note that the Kendall coefficient may be more appropriate when the sample data contain a large number of tied ranks, and a large number of cases are classified into a relatively small number of categories. Since the sample data in this study met these conditions, the Kendall coefficient was used. 'r  Kendall's x has a further advantage over Spearman's  in that i t can be generalized to a partial correlation coefficient.  T2 The Kolmogorov-Smirnov Test was used to test the sample data for a normal distribution (see Appendix 2).  - 75 In general, the absolute value of tau tends to be smaller than the parametric Pearson's r.  Siegel (1956:223) notes that when used on data  to which the Pearson r are properly applicable, tau has an efficiency of 91 percent.  Kendall's tau was used to investigate the relationships be-  tween variables that affected susceptibility to crises and coping a b i l i t i e s .  .5.5  The Nature of Crises An analysis of the data indicates that the most important criterion  identifying a situation as a c r i s i s is the high degree of uncertainty f e l t by decision-makers with respect to possible outcomes of decisions. Criteria of secondary importance in defining a crisis are:  an element of  surprise; a threat to high p r i o r i t y goals; and a restricted time for decisions.  I t was postulated i n i t i a l l y that stress would be one of the univer-  sal c r i t e r i a defining a c r i s i s (H^).  This hypothesis was not supported.  Stress was not rated highly by the respondents as an important factor. Executives, in fact, ranked the two c r i t e r i a of stress on decision-makers and the failure of SOPs as the two least important factors in defining a cri sis. One must be aware of a possible bias in the respondents' answers to this item.  The degree of f e l t stress is not a criterion on which a respond-  ent can rate himself objectively.  Executives may be unwilling to admit that  they feel stressed during crises.  In fact, many executives may not be aware  of the levels of stress under which they operate.  I t is l i k e l y that stress,  as a contributing factor to c r i s i s , arises from the interactions of uncert a i n t y , threat, and time pressure within a given situation.  The degree of  stress experienced by decision-makers w i l l be a function of the type of  - 76 goal threatened, the immediacy of the threat, the degree of generated uncertainty, perceived time for decision, and the personality of the decision-maker. The degree of f e l t stress is positively correlated with the level of goals threatened and i t is also a function of how soon the impact of that threat w i l l be f e l t .  Some threats may have potentially serious impacts on  an organization, however, i f this impact is far in the future, the level of stress experienced by managers w i l l be low.  The combined factors of threat  to high p r i o r i t y goals and the immediacy of impact have a synergistic effect on stress levels. Unfami1iarity with a type of threat, or surprise associated with i t s occurrence also w i l l have considerable influence upon the degree of stress felt.  I f a threat is of a type that is unfamiliar to an organization, the  level of stress w i l l be higher than that generated by more 'familiar' threats.  Lack of experience with an event induces a high level of stress  since the organization has no repertoire of responses to help i t cope with the threat and the effects of the potential impact are uncertain. The surprise occurrence of familiar situations also may induce stress but i t has a shorter l i f e span than the stress produced by uncertainty. When organizations attempt to deal with uncertainty there is a need to develop a model of the situation with an appropriate repertoire of responses. This process of concept formation typically is slow, as i t requires discrimination among alternative models of the situation and estimation of their parameters.  When an organization deals with familiar threats the  a v a i l a b i l i t y of a model to manage the situation permits quick convergence in reconciling new data (the surprise) with existing concepts in the organization.  - 77 Although structural factors are important, the personality of a decision-maker may be the factor that contributes most to feelings of stress. Certain personality types are stress-prone and this tendency is accentuated under conditions of threat.  As managers come under high stress levels,  psychotic and neurotic tendencies which may have been latent are aggravated. They in turn elevate the level of perceived stress in a self-perpetuating cycle (de Rivera; 1968). Hypothesis 2 postulated that the c r i t e r i a defining a crisis were invariant irrespective of a particular firm's environment. was not supported. variables:  This hypothesis  Significant differences were found on two environmental  f l e x i b i l i t y and predictability.  Executives from firms with  considerable f l e x i b i l i t y perceived restricted decision time as a much more important criterion in defining a crisis than executives from firms without much f l e x i b i l i t y .  The high f l e x i b i l i t y group also rated the criterion of  uncertainty as significantly less important in defining a c r i s i s than did other managers. There was also a significant difference in the way certain managers viewed a failure in SOPs.  Executives from firms with predictable environ-  ments indicated a failure in SOPs was more important to them in defining a crisis than executives whose firms operated in unpredictable environments. When environments are predictable, consistency of actions becomes possible. Firms are able to develop standard operating procedures as a major management t o o l .  In contrast, unpredictable environments do not allow firms to  develop standard responses since they would be obsolete rapidly.  A failure  in SOPs is not as c r i t i c a l for such organizations as i t is for firms that rely extensively on standardization.  - 78 5.6  Determinants of Susceptibility to Crisis Some organizations may be particularly prone to crises; others have  the f a c i l i t y to avoid serious crises.  Organizations that avoid crises may  be only marginally different from those organizations that encounter crises. Starbuck, et a l , (1978:116) note that a l l organizations possess disadvantageous characteristics and a l l organizations make mistakes.  Crises occur  when environmental threats pick out specific organizations and bring them face-to-face with their mistakes.  Hypotheses 3 through 7 postulated envi-  ronmental and individual factors that may affect a firm's susceptibility to crises. A positive association was found between the degree of environmental predictability of a firm and the perceived probability of crisis (Hg: .49; a = .01).  T=  The Chief Operating Officers of firms with predictable envi-  ronments assessed a lower probability of c r i s i s occurring in their firms than did COO's operating companies in unpredictable environments.  Steer's  (1977) observation appears accurate when he notes that the degree of change and complexity of a firm's environment are not in themselves c r i t i c a l factors.  Susceptibility to crises is more a function of the extent to which  environmental change can be predicted with some measure of certainty. Those firms who cannot adequately predict their environments w i l l be more susceptible to crises. Management style also seems to be a contributing factor to c r i s i s susceptibility.  The results indicated that process oriented managers per-  ceived their companies to have a lower probability of crisis than task oriented managers (H : g  T = .15; a = .05).  Line managers who are evaluated  and supervised on the basis of outputs have the f l e x i b i l i t y enabling them  - 79 to act quickly on threats at the local level.  In contrast, organizations  managed by executives who are primarily concerned that subordinates follow all the specified procedures and who do not encourage individual i n i t i a tives, do not have this same f l e x i b i l i t y .  One can speculate that this  l a t t e r style may be appropriate in simple, placid environments, but during times of rapid environmental change or during crises, organizational requirements for independent problem-solving, c r e a t i v i t y , and innovation may outweigh any advantages of r i g i d programming.  A process management orien-  tation seems to provide some of the f l e x i b i l i t y needed to avoid major organizational crises. I t is surprising to note that no relationship was found between the degree of control a firm has over i t s environment and i t s susceptibility to c r i s i s (H^, H^).  These results are counter-intuitive to accepted prem-  ises of why businesses attempt to extend control through growth or diversification.  There is also a well developed body of theory suggesting that  vertical integration, large size, market control, etc. help to buffer firms against environmental uncertainty (Pfeffer and Salancik, 1978; Williamson, 1970, 1975).  No significant differences were found in perceived suscep-  t i b i l i t y to crisis between firms with a high degree of environmental control and firms with l i t t l e control. Susceptibility to crises may also occur as a result of group interactions within the decision-making process.  Jam's (1972) documented  instances of defective decision-making behaviour in policy making groups that resulted in a high susceptibility to c r i s i s .  This behaviour, which  took the form of defensive-avoidance decision-making, was called groupthink. Hj postulated that certain organizations would be particularly susceptible to crisis when their managers preferred strategies associated with  - 80 groupthink.  This hypothesis, unfortunately, could not be tested since the  number of respondents who met the c r i t e r i a defining groupthink behaviour was too smal1. Predicting Susceptibility to Crisis A major purpose of this study was to test some specific relationships between variables that hypothetically contribute to c r i s i s susceptibility. From a managerial standpoint, however, a secondary purpose was to predict those companies or individuals who were particularly susceptible.  For this  purpose, discriminant analysis was used to develop an index representing profiles of attributes that predict high and low categories of crisis susceptibility. Discriminant analysis is a multivariate technique that permits a researcher to distinguish between two or more groups of cases.  A dis-  criminant function is derived from the data that consists of variables measuring characteristics on which the groups are expected to d i f f e r . Mathematically, discriminant analysis weights and linearly combines selected variables so that the resulting groups are as s t a t i s t i c a l l y different as possible.  In the simplest case of categorizing into two  groups, discriminant analysis is basically multiple regression analysis where the dependent variable is group membership (Kerlinger and Pedhazur, 1973:337). Discriminant analysis has a two-fold objective in research: and classification.  analysis  As an analytic technique, discriminant analysis pro-  vides a s t a t i s t i c a l test for determining how well the resulting function actually distinguishes between groups.  The variable coefficients "can be  interpreted much as in multiple regression or factor analysis . . . they  - 81 serve to identify the variables which contribute most to differentiation along the respective dimension" (Nie, et a l , 1975:436).  Once a function  has been derived that provides satisfactory discrimination for cases with known membership, the technique can then be used to classify new cases with unknown membership. The conceptual model of c r i s i s developed in a previous section suggests that the environmental context, the individual context, and the organizational context are dimensions relating to c r i s i s .  Specific v a r i -  ables were selected from these dimensions to derive a discriminant function that predicts high and low susceptibility to c r i s i s .  (High susceptibility  was defined as a probability > .5 of a c r i s i s occurring in a company within five years.)  The variables included in the analysis were:  programmed  behaviour, decision-making strategies, environmental characteristics, managerial style, and perceived coping a b i l i t i e s . A stepwise discriminant analysis produced the following function: D - - ,224C - .298'C - .3780^ + ,365C + 1.974 S 3 32 55 61 0  00  C1  This equation reflects the fact that severe environmental turbulence (C^g) and low levels of organizational slack (Cg-j) are important contributors to c r i s i s susceptibility.  Similarly, tendencies to cope with threats by  adopting extreme retrenchment strategies (C^) or, in contrast, by adopting high-risk innovative strategies ( C ) 32  probability of c r i s i s .  a  l  s  o  contribute to an increased  - 82 The discriminant function classified 79% of the highly susceptible cases correctly.  5.7  This figure is rather impressive given that Cp  fQ  = .52  The Dimensionality of Coping A b i l i t i e s This section examines the premise that the a b i l i t y to cope with  crises is unidimensional, that i s , generalizable to all types of c r i s i s situations.  Coping a b i l i t i e s may not be confined to certain specialized  types of crises,  PI^Q postulated that organizations capable of coping suc-  cessfully with one type of c r i s i s are capable of coping with any type of crisis.  This hypothesis was supported.  develop some general coping a b i l i t i e s .  I t seems that organizations do A positive relationship was found  between the a b i l i t y to cope with crises brought about by two very different types of events, discontinuous threats and continuous threats (T = .439, a = .001). Crises precipitated by discontinuous threats are defined as those with an abrupt onset, for example, the death of a number of key executives 1  o  The discriminant analysis program provides a classification table of the following type: Classified group ll 1 n n  i  group 1  21  group 12 2 22 n  n  where ( n ^ + n )Actual / n is the proportion of cases classified correctly. ~ group 2 The maximum chance criterion (C ) is the appropriate s t a t i s t i c to use max i f one is interested in maximizing the percentage of cases correctly classified. I f the discriminant function cannot do better than C , max a l l cases should be classified as belonging to the larger of the two groups. When one wishes to correctly identify members of both groups, and in particular the smaller group, the proportional chance criterion (C ) is the correct s t a t i s t i c to use (Morrison, 1969:157,158). 22  - 83 in an a i r disaster.  Crises brought about by continuous threats, in con-  trast are defined as those having a gradual onset, and where a c r i s i s condition is not recognized as existing until a c r i t i c a l threshold is reached. A long term decline in market share is an event that f a l l s into this class. The results suggest that successful coping a b i l i t i e s are learned behaviours that can be applied to either of these two classes of crises. Although there is evidence of a general dimension of coping a b i l i t i e s , certain firms develop a special capability to cope with particular types of crises.  The effects of general coping a b i l i t i e s were removed from the data  by discounting for average performance and constructing two indices: representing discontinuous crises and the other continuous crises.  one When  these two indices were correlated a perfect inverse relationship was found between them (x = -1.00, a = .001).  The results suggest that although a  firm may have a b i l i t i e s to cope with all types of crises i t has specialized advantages in dealing with crises brought about by either continuous or discontinuous threats.  Coping with continuous threats, for example, may  require the a b i l i t y to develop a long term perspective.  Since continuous  threats build up gradaully, i t may be necessary to develop information systems or other 'early warning systems' to cope adequately. Discontinuous threats, in contrast, have a sudden, unpredictable onset.  Successful coping with this type of c r i s i s may be predicated on  having sufficient b u i l t - i n f l e x i b i l i t y and organization slack for the firm to act quickly in response to threats and to absorb short run impacts. Since discontinuous crises are associated with a sudden onset, they may be perceived as more threatening than those crises with gradual onsets (H22)•  T ' ni  s  hypothesis was not supported when tested.  In general, execu-  tives did not perceive discontinuous crises as more threatening than  - 84 continuous ones.  One particular type of discontinuous c r i s i s , however,  was rated by most respondents as potentially very threatening. the death of key senior executives in an air disaster.  This was  Of seven types of  events given in the questionnaire, executives perceived that their firms had the least a b i l i t y to deal with unexpected losses of key personnel. The differences in perceived coping a b i l i t i e s between this particular type of discontinuous c r i s i s and the continuous crises were found to be significant (T = 2.18, a = .032; T = 3.12, a = .002). The analysis shows that managers thought certain strategies would be most effective with a particular type of c r i s i s .  I t was found that a pre-  dictable threat in stable environments tended to stimulate information gathering a c t i v i t i e s ( H : 23  T = .14, a = .05).  A relationship also was  found between the degree of organizational slack and the a b i l i t y to cope with some types of market threats.  The more slack an organization has (in  terms of mobilizable resources) the greater is i t s perceived a b i l i t y to cope with a sudden drop in sales (T =..18, a = .05). perhaps can switch product emphasis more easily.  High slack organizations I t is interesting to note,  however, that this a b i l i t y does not seem to apply in predictable cyclical markets where a 'boom' is followed by a 'bust . 1  High slack also does not  seem to give an organization any special capabilities in exploiting markets when a technological breakthrough occurs. The a b i l i t y to cope with a sudden drop in sales also was found to be associated with the role f i e l d managers and department heads play during a crisis.  Firms that rely on the mobilization of these managers during crises  have confidence in their a b i l i t y to deal with a sudden drop in sales ( H : 25  x = -.19, a = .05).  Organizations that centralize authority and decision-  - 85 making during crises may lose 'on the spot' market information and contacts v i t a l for successful resolution of the c r i s i s . The a b i l i t y to cope with certain broad classes of crises or with a specific type of threat may be a function of the environmental context of the firm.  I t was posited, for instance, that experience with a complex  environment would improve general coping a b i l i t i e s relative to a l l types of crises (H g). 2  Two constituents of complexity were tested:  of heterogeneity and the degree of routineness.  the degree  No relationship was found  between environmental complexity and coping a b i l i t i e s that were generalizable to a l l types of crises.  A relationship was found, however, between  complexity and the a b i l i t y to deal with a specific type of threat.  Firms  with complex environments, measured by high degrees of heterogeneity and unpredictability, obtained a significantly higher rating of their a b i l i t y to cope with periodic growth and decline of markets (cyclical) than did firms with simple environments (T = -2.00, a = .049; T = -1.96, a = .05). Another hypothesis tested was that managers operating in turbulent environments (that i s , environments with a high rate of change) would develop general c r i s i s coping a b i l i t i e s (H -,). 2  was not supported.  Surprisingly, this hypothesis  No relationship was found between the degree of envi-  ronmental turbulence and the a b i l i t y to cope either with general classes of crises or with specific threats.  Experience with a turbulent environment  may develop some capabilities to deal with change but these capabilities do not seem to be generalizable to c r i s i s situations. The relationship between turbulence and the a b i l i t y to cope with cyclical markets was also tested ( H ) . 2g  Again, i t was found that f a m i l i -  a r i t y and experience with dynamic environments does not seem to induce improved coping a b i l i t i e s .  The results indicate, in f a c t , that the  - 86 reverse relationship holds.  Firms rated as having a high a b i l i t y to cope  with cyclical conditions tend to have more placid environments (T = -2.05, a = .043).  When environmental components do not undergo much change they  may become manageable through the use of SOPs.  Cyclical market conditions  would seem to have sufficient regularity that they also could be managed by SOPs.  The degree of predictability of this type of threat may match the  organizational style of firms in placid environments and, thus, their a b i l i t i e s to cope are increased. Managerial characteristics or behaviours may also affect a firm's abil i t y to cope with particular types of crises.  The results of the analysis  show that managers with an aggressive marketing orientation perceived a high a b i l i t y to cope with crises brought on by a sudden drop in sales ( H ^ : .15, a = .05).  x=  The special a b i l i t i e s of market oriented managers seem to be  tailored to cope with this type of c r i s i s .  Market oriented firms with SOPs  emphasizing aggressive strategies w i l l be attuned to coping with market failures.  No relationship was found, however, between an aggressive mar-  keting orientation and the a b i l i t y to exploit market opportunities (ri^g not supported). I t was noted previously that the death of key executives was perceived as a highly threatening event for most respondents.  I t was hypothesized,  however, that participatory organizations would be able to cope with this type of crisis more easily than other organizations. not supported (H^^)-  This' hypothesis was  Although there may be greater depth of management  talent in participatory organizations, executives from these firms perceive them as equally vulnerable to this threat as other firms.  - 87 5.8  The Determinants of Organizational Coping A b i l i t i e s The long term v i a b i l i t y of an organization ultimately rests upon  i t s a b i l i t y to cope with threats.  An i n a b i l i t y to cope with environmental  discontinuities leaves a firm particularly vulnerable to crises.  In this  section some factors were examined that may f a c i l i t a t e organizational adaptation to new circumstances and that increase a b i l i t i e s to buffer threats and cope effectively with them. What Patterns of Decision-Making Contribute to Effective Coping? During crises certain aspects of the decision-making process may become susceptible to pathological behaviour.  These pathologies can cause  an organization to be particularly susceptible to c r i s i s (for instance, groupthink) or reduce the chance of a successful resolution of the c r i s i s . Section 2 of the questionnaire provided the data for examining the underlying patterns of decision-making, some of which may be pathological to the firm. The items in Section 2 of the questionnaire concentrated on four broad classes of a c t i v i t i e s that could affect the quality of decision-making during crises:  communications, evaluation, choice, and implementation.  The  frequency analysis of the variables in this section showed that there is a great deal of consensus in the responses to six of the items: - 98% agreed i t is important for employees to understand the decisions of management (variable 1). - 89% f e l t i t was important for those responsible for implementing a decision to be involved in making the decision (variable 2). - 81% agreed i t was more important to reach the 'best' decision during a crisis rather than satisfying certain interest groups within the organization (variable 8).  - 88 - 86% f e l t that executives should not remain silent i f they disagreed with proposed policies (variable 9). - 92% f e l t i t was desirable to have a very strong leader during crises (variable 14). - 80% agreed that during crises executives need to make decisions quickly and decisively to maintain corporate confidence in the leadership (variable 16). The consensus on variables 1 and 2 reflect the importance placed on factors that increase the probability of successful implementation.  In  part, this may demonstrate the successful dissemination of 'good' management principles.  These attitudes are consistent with behaviour that re-  duces the probability of misimplementation, particularly in two areas: lack of motivation to carry out instructions and misunderstanding orders. One important area of possible d i f f i c u l t y is ignored, however, the sample group rejects the premise that acceptability of a decision to certain interest groups within the organization sometimes may be more important than the optimality of a decision (the p o l i t i c a l aspects of decision-making). There is ample evidence in the literature that p o l i t i c a l gamesmanship either can slow implementation, or prevent i t entirely even during c r i t i c a l periods (Allison, 1972).  However, one cannot determine whether or not subjects are  responding to this item in terms of an expected ' r a t i o n a l ' decision-making norm, or whether there is t r u l y a tendency to disregard (or f a i l to recognize) the p o l i t i c a l r e a l i t i e s in most organizations. The importance of strong directive leadership is illustrated by the consensus of agreement on variables 14 and 16.  The success or failure of  any organization is often dependent on the quality of the leader.  This is  true whether the organization is a nation, a business enterprise, or an athletic team.  During crises and times of rapid change, the perceived need  for strong leadership intensifies.  Yet, ironically when the need for strong  - 89 leadership interacts with group norms for cohesiveness-building, the result for the organization may be pathological (Janis and Mann, 1977). The items in Section 2 of the questionnaire were analyzed to identify the important-underlying concepts of decision-making during crises.  Factor  analysis is a technique commonly used by researchers to identify underlying structures in sample data which appropriately may be analyzed with parametric s t a t i s t i c s .  In this study, however, portions of the data were not  normally distributed, therefore, an alternate method of analysis was used. Smallest Space Analysis (SSA), a type of 'nonmetric factor analysis' was the technique selected. SSA is a multidimensional scaling technique that identifies underlying patterns in non-metric data and represents them in the form of a geometric model or picture (Shepard, 1972).  Although SSA is a method of rigorous  multivariate analysis i t differs from a traditional factor analysis in that i t provides a visual presentation of the dimensions.  Visualizability  is the most important criterion in SSA, therefore, the representation is confined when possible to two, or at most, three spatial dimensions. Interpretation of the spatial representation is made in a number of ways: a) by examining directionality of the axes; b) by looking at the manner in which data points cluster into homogeneous groups throughout the space; and c) by examining how the data are ordered into simple geometric structures. Appendix 3 gives a detailed description of Smallest Space Analysis. The results of the SSA appear in Table IV (2-space coordinates) and in Figure 2 (a geometric representation).  The data can be represented  adequately in two dimensions (coefficient of alienation = .19461, Kruskal's stress = .16776).  The goodness of f i t did not improve appreciably with  greater dimensionality.  (The coefficient of alienation for m = 3 is .12623).  - 90 -  Table IV Smallest Space Coordinates for m = 2 Patterns of Decision-Making Dimension Variable 1 2 3 4 5 6 7 8 9 10  .  1 77.507 100.000 -65.693 5.239 45.828 52.576 -55.679 -100.000 -94.783 -58.012  2 0.780 -17.576 -42.101 -96.383 18.093 61.961 45.408 -30.826 10.063  11 12  -14.626 -69.438  1.529 58.983 4.848  13 14  -34.098 4.503  -42 .'390 -9.558  15 16  69.440  -65.858  10.211  17  74.568 -55.558  -40.197 -43.910  18  -100.000  Guttman-Lingoes Coefficient of Alienation = 0.91461 1  Kruskal's Stress = 0.17221  - 91 FIGURE 2  SSA GEOMETRIC REPRESENTATION: PATTERNS OF DECISION-MAKING  VECTOR PLOTS VECTOR 2 PLOTTED AGAINST VECTOR 1 100 92  VECTOR 1  -100  -80  -60  -40  -20  20  VECTOR 2  40  60  80  100  - 92 Figure 2 shows a structural configuration in the form of a rough wheel.  One central cluster of variables forms the hub of the wheel and  other clusters l i e at various points on the rim. defined as a leadership cluster.  The central cluster is  I t is composed of variables 14 and 16,  which denote two aspects of leadership:  a) problem-solving a b i l i t y , and  b) decisiveness and the a b i l i t y to maintain subordinates' confidence.  The  placement of the leadership dimension in the spatial configuration reflects the centrality of leadership to c r i s i s decision-making.  (Note that vari-  ables 14 and 16 are items on which there was a high level of agreement.) Other clusters of variables on the rim of the wheel define various aspects of decision-making along two vectors:  a) the quality of the deci-  sion-making process (vector 1), and b) exposure to uncertainty (vector 2). The quality of the decision-making process is a latent dimension that delineates decision-making styles on. the basis of the number of people p a r t i c i pating in the decision, the extent to which alternatives are generated, the 14 amount of alternative evaluation, etc.  The decision process becomes more  rational and open, moving from l e f t to right on vector 1.  (The rational  decision model assumes a complete information base and generation of all alternatives.) posture.  Exposure to uncertainty is delineated in terms of risk  The lower end of vector 2 represents exposure to risk while the  upper end'of the vector represents risk absorption.  The central placement  of the leadership dimension (relatively neutral on both vectors) suggests that i t is independent of a particular decision-making orientation.  Strong  leadership is associated with all styles of decision-making during a c r i s i s . ^ A particular paradigm is implied by the use of the word "quality". In this context i t is assumed that better c r i s i s decisions are made given free flows of information, diverse sources of alternative generation and evaluation, and an enlarged decision c i r c l e .  - 93 -  The f i r s t decision-making component is defined by three variables spread along vector 1 in the upper half of the space. sents a bureaucratic risk absorption component.  This cluster repre-  The central variable of  the cluster (11) reflects patterns of risk preference in strategic choices. To the l e f t lies variable 7, which is concerned with internal risk absorption through hierarchical f i l t e r i n g . in the cluster.  Variable 6 makes up the third variable  I t is concerned with the predictability of organizational  responses as represented by the degree of programming in the firm. The second broad cluster of variables represents an implementation component.  I t consists of three variables (5, 1, 2) and is concentrated  on the far right side of vector 1.  Variable 1 is at the center of the  cluster and i t is concerned with the degree of understanding that implementors possess with respect to decisions made.  To the l e f t there is a  variable (5) that reflects the extent of employee agreement with decisions. Variable 2 makes up the third item in the cluster.  I t reflects a strategy  of active involvement by implementors in decision-making.  One should note  that the degree of openness in decision-making increases as one moves from l e f t to right along vector 1 in the cluster, for example, from variable 5 to 1 to 2.  The circle of participants in the decision process is enlarged.  Agreement with a decision (variable 5) involves only a passive role; understanding a decision (variable 1) may offer the potential for active involvement in the process; while actual involvement of implementors (variable 2) enlarges the scope of the decision-making process. Moving clockwise along the rim of the wheel, the next cluster of variables is defined as an evaluation component. ables 17 and 15.  I t is composed of vari-  Both of these variables represent a high degree of open-  ess to ideas, alternatives, and people (high on vector 1) and represent a  - 94 relatively high level of risk confrontation (vector 2).  Variable 17 re-  flects the willingness of executives to be exposed to ideas and opinions outside the normal management decision c i r c l e .  This strategy is augmented  by variable-15, which reflects an orientation of confronting and emphasizing a l l the negative aspects of proposed solutions.  In a sense, vari-  able 15 measures the degree of dialectic confrontation b u i l t into the decision process. At the bottom of the wheel there is a cluster of variables representing a component of risk confrontation (variables 4 and 18).  Variable  4 represents the risk facing orientation of the decision-making process as reflected by the conceptual model of the task environment held by executives. (Do executives see themselves as being in competition with an aggressive environment?)  Variable 18 reflects tendencies for risk-taking as a  response to threats. The final broad cluster on the wheel is composed of six variables (8, 3, 13, 10, 12, 9).  This cluster represents a collection of threats to  the quality of decision-making, that i s , threats to optimality.  Variables  9 and 13 reflect closure of the domain of alternatives by exerting pressure on decision-makers to adhere to the consensus of group decisions.  Two vari-  ables are concerned with actions that may bring about premature closure of the alternatives.  Variable 12 reflects a tendency towards myopia in  decision-making, that i s , only concentrating on short term effects, and variable 10 is concerned with restricting the domain of alternatives. A further threat to optimality may occur through the behaviour suggested by variable 8.  The negative impact of consensus searching may threaten the  quality of decisions taken.  The last variable in the cluster (3) is con-  cerned with the pathological effects on information processing that may  - 95 occur when the decision circle is tightened too much.  Information overload  of key decision-makers can result when middle managers are by-passed and responsibility for decision-making is not delegated. The variable clusters identified in the Smallest Space Analysis emphasize certain factors.  I t was found that strong leadership is central  to c r i s i s decision-making.  Specific patterns of decision-making adopted  by managers, however, can be defined on the basis of the quality of the decision-making process, (for example, susceptibility to pathologies), and the degree of exposure to uncertainty.  The relationships of these variables  to some specific questions are now examined. What are the Relationships between Decision Structures and the Environment? As well as trying to identify some of the various decision-making styles that may be selected during crises, some specific hypotheses that might reduce a firm's coping a b i l i t i e s were examined, for instance, strategies that increase susceptibility to pathologies.  I t was postulated that  managers in complex environments would l i m i t the number of alternatives considered during c r i s i s to avoid cognitive overload (Hg). not supported.  This hypothesis was  In fact, the correlation matrix suggests that i t is managers  from simple environments who tend to r e s t r i c t the number of alternatives they consider (x = .14, a = .05). environment.  This tendency may be a function of the  In simple environments there are fewer factors of which one  needs to take account; the number of alternatives generated reflects this condition. A related hypothesis, that managers from firms with complex environments w i l l concentrate on short term effects of solutions rather than long term effects during crises also was not supported ( H , , ) .  The results of the  - 96 analysis indicate that, as with Hg, i t is managers from simple environments who display this tendency.  Cyert and March (1963) note that concentration  on short run effects helps to simplify the decision process.  In simple  environments there may not be great negative consequences in ignoring long term effects.  In this sample, however, the competing hypothesis advanced  by Forrester (1969) may be correct.  Executives from complex environments  are sensitized by their experiences to the danger of ignoring the long term.  There need not be a contradiction between the premises of Cyert and  March (1963) and Forrester (1969). of executives not their actions.  The questionnaire tests the attitudes During a c r i s i s , the f e a s i b i l i t y of par-  ticular actions ultimately determines whether a short term or long term perspective is adopted. No relationship was found between complexity and turbulence of the firm's environment and a tendency to develop SOPs (Hg, H^)-  There was a  relationship, however, between management style and adherence to SOPs.  .  Tests suggest that task oriented managers find i t useful to follow SOPs closely during crises ( r = .25, a = .01).  While this tendency may l i m i t  individual i n i t i a t i v e s and thus reduce a firm's coping a b i l i t i e s , task oriented management is not feasible without precise specification of procedures and enforcement of those procedures. What are the Relationships between Decision Structures and Managerial Style? A task oriented management style requires an extensive information system as a control device since decision-making is usually centralized. For this reason perhaps, a strategy of increasing information gathering was perceived as being useful by task oriented managers.  Conversely, a  negative relationship was found between information gathering a c t i v i t i e s and .a process management style.  Since process management is based on the  - 97 premise of local coping and decentralization, the need for (centralized) information a c t i v i t i e s was not perceived.  (H-^ was supported; T = .25,  a = .01). Two other hypotheses concerning coping a b i l i t i e s and managerial style were supported (H-|g, H ^ ) .  Executives who favoured a democratic managerial  style during crises indicated they found i t useful to involve employees in decision-making, especially when those employees were responsible for implementation (T = .39, a = .01).  These executives appeared to give credence to  the rationale that acceptance of a decision is often essential to ensuring that the decision is carried out.  Maier (1970) notes that acceptance comes  about through participation in the decision-making process.  Since crises  may generate problems that require solutions dependent upon the support of others to be effective, participation becomes an even more important facet of decision-making during such times. Previously i t was noted that most of the executives participating in the study believed i t is important to have a strong leader during crises. Twenty percent of the sample, however, diverged from the consensus.  Tests  of the differences between these two groups show a delineation based on preferred managerial style.  Those executives who favoured strong leaders  during crises tended to be more autocratic than those executives who did not think strong leaders were important (x = 2.73, a = .008).  The ration-  ale for the hypothesis seems to be that during crises, autocratically oriented managers feel an intensified need to work in an organization reflecting their own style. The two remaining hypotheses in this section (H-|g, H-jg) that posited relationships between maintenance of group harmony and the tendency towards developing group pathologies were not supported.  Although Janis (1972)  - 98 notes that cohesive groups may be particularly susceptible to these pathologies, in this study no support was found for this premise.  One  must note, however, that the act of maintaining group harmony may not be equivalent to building group cohesiveness. Predicting Coping A b i l i t i e s Some of the individual hypotheses tested in the previous section suggested that organizations have differentiated a b i l i t i e s to cope with spec i f i c types of c r i s i s .  From a managerial point of view, i t is interesting  to identify those characteristics that promote high coping a b i l i t i e s .  A  series of discriminant analyses were run for seven different threatening situations. 1)  Coping with a sudden drop in sales The following discriminant function was derived: Ds = .225C25, + .424C„ 32 - .310C-, 41 + '.344C55- - 2.677 0  ct  The equation reflects the fact that successful coping with this type of threat is predicated upon a firm being risk averse in general ( C ^ h but not so bound by conservatism that i t cannot adopt innovative measures when they are required (C^) • A relatively low level of environmental turbulence (Cg^) also seems to contribute to success in dealing with market failures.  The discriminant function  correctly classified 85% of the cases with high coping abilities ( C  p r o  = .64; C  max  = .76).  - 99 Coping with sudden death of key executives The following discriminant function was derived: Ds = - .504C28 + .296C^ 31 - .243C„ 33 - .424C54, r  OQ  + -269C  55  n  K/  + 1.346  An organization's success in coping with the sudden death of key decision-makers is related to i t s experience with complex environments ( C ^ ) and to i t s a b i l i t i e s in developing a wide network of external inputs to decision-making (Cg-]).  Success-  ful firms tend to adopt norms of autocratic management (Cg^) and to cope with threats by focussing on productive needs rather than employees' needs (C ) in the short run.  More importantly,  33  however, successful firms do not concentrate the locus of decision-making power in the hands of a single strong leader (C2g)-  The discriminant function correctly classified 66% of  the organizations with high coping a b i l i t i e s (Cp  rQ  = .56;  C = .68). max ' Coping with stagnant markets The following discriminant function was derived: D = .266C - .251C ,' + .454C - 1.860 s 37 51 61 07  C  C1  This equation reflects the fact that a process management style (C ) and high levels of organizational slack (Cg-j) are impor37  tant contributors to successful coping in stagnant markets. Similarly, a tendency to abide by established organizational traditions seems to promote coping a b i l i t i e s (  c 5 1  ).  The dis-  criminant function correctly classified 75% of the cases with high coping a b i l i t i e s ( C  p r Q  = .59; C  max  = .72).  - 100 Coping with a major technological breakthrough The following discriminant function was derived: D = .472C  - .419C„ + .958  1C  16  S  32  The equation suggests that successful exploitation of opportunities in expanding markets is predicated upon a firm adopting strategies that involve implementors in decision-making (C-|g). Tendencies to avoid innovative, but high risk strategies also promote successful coping.  The discriminant function correctly  classified 62% of the cases with coping a b i l i t i e s (Cp  rQ  = .50;  W • ->52  Coping with natural disasters The following discriminant function was derived: D = - .303C s  54  + .469C  57  - .197C  5g  + .390C  61  - .701  This equation suggests that a strong orientation towards achieving corporate goals (Cg ) contributes to successful 7  coping with a major natural disaster.  A low level of organi-  zational slack (Cg-j) and a strong sense of threat emanating from the environment (C^g) seem to reinforce preferences for high levels of independent actions on the part of employees to cope with this event.  The discriminant function  correctly classified 67% of those cases with high coping abilities (C  p r Q  = .65; C  max  = .78).  Coping with a long term market decline The following discriminant function was derived: D = - .187C + .283C - + .382C,- + .488C - 2.294 S 32 55 57 61 00  ct  7  C1  -  101  -  The equation suggests that experience with turbulent environments (Cgg) and high levels of organizational slack (Cg-|) contribute to successful coping in declining markets. A firm's coping a b i l i t i e s are also increased by adoption of a risk averse stance ( C )  a n Q l  a  32  willingness to alter goals and  structures to meet new contingencies (C57).  The discriminant  function correctly classified 69% of the cases with high coping a b i l i t i e s ( C 7)  p f 0  = .55; C  max  = .66).  Coping with cyclical markets The following discriminant function was derived: D  =  . 3 7 4 C ,  S  +  n  .436Coo  10  -  3.736  6tL  The equation suggests that a firm's a b i l i t y to cope with cyclical markets is increased when i t centralizes decisionmaking authority  (C-|Q).  A  tendency towards risk averse stra-  tegies also promotes coping a b i l i t i e s ( C ^ ) - The discriminant function correctly classified 68% of the cases with high coping abilities ( C 5.9  p r o  = .51; C  m a x  = .56)  Standard Responses Invoked During Crises In a previous section i t was noted that organizations develop Standard  Operating Procedures (SOPs) to coordinate complex routines and tasks.  These  SOPs ensure economical information processing and p r e d i c t i b i l i t y of responses to recurring stimuli.  However, since SOPs are grounded in the basic norms  of the organization, even novel situations w i l l trigger the same predictable patterns of responses as routine situations.  Like organizations, individ-  uals develop preferences for set patterns of behaviour that aid them in  - 102 'decision-making and problem-solving.  This behaviour is programmed in the  sense that i t is not consciously selected, but is a function of personality, background, a particular organizational climate, and previous successful interventions. Section 1 of the questionnaire was designed to investigate the types of programmed behaviour that executives may select during crises.  The  i n i t i a l premise was that two dimensions of programmed behaviour would be evident in the types of strategies that managers believe to be useful in helping an organization cope with a financial c r i s i s . of behaviour are:  The two dimensions  1) a defensive style characterized by retrenchment or  cutback strategies with an emphasis primarily oh financial factors.  Indi-  viduals who favour this type of behaviour tend to focus on costs not benef i t s when evaluating programs; 2) an entrepreneurial style characterized by a preference for offensive strategies that potentially enable an organization to exert control over i t s environment. Further, i t was surmised that behaviour could be categorized into three types of strategies that are a function of an executives' background: personnel (human relations orientation); operational (functional orientat i o n ) ; developmental (long term orientation).  I t was expected that a mana-  ger's business specialization and previous experience would programme him to prefer one of these categories of strategies.  For example, executives  with a financial background may prefer defensive or cutback strategies, focussing primarily on cost reductions.  In contrast, an individual with  a marketing background may prefer entrepreneurial strategies such as increased advertising and a stepped-up sales programme as a solution to a financial c r i s i s .  - 103 The frequency analysis of the variables in section 1 indicated that the responses were normally distributed on all but three of the questions. The respondents were in consensus, however, in their ratings of questions 4, 9, and 13.  Most respondents rated these three strategies as being  particularly useful during a financial c r i s i s : a)  enlisting the support of unions to improve product i v i t y (72% of respondents);  b)  cutting back on expense items such as photocopying, long distance telephone c a l l s , etc. (87% respondents);  c)  introducing Management by Objectives (MBO) and p r o f i t incentive programmes (75% of respondents).  The high consensus on the strategy of cutting back on expense items is probably best explained by the ease with which this step can be implemented.  Also, on the surface, i t seems an obvious step to take when a firm  is financially pressed, and in the short run, benefits w i l l probably outweigh any negative impacts. is more puzzling.  The consensus on the other two items however,  With respect to enlisting union support, the state of  mistrust or antagonism that permeates the relationships between management and unions in many firms would seem to preclude any real chances of cooperation.  The introduction of a Management by Objectives programme, while an  attractive idea, also has i t s own p i t f a l l s .  Most notable of these is the  d i f f i c u l t y in measuring an individual's contribution and establishing standards and norms against which performance is measured.  In addition,  MBO is not l i k e l y to provide a short term solution to problems since the technique requires a period of organizational learning before i t functions properly.  The marked degree of consensus on these two strategies may  reflect the dissemination of current teachings about "good" management  - 104 practices.  A 1974 survey suggested that less than 10% of Fortune 500 firms  had implemented a true MBO program although the term was freely used by many companies (Schuster and Kindall, 1974). A smallest space analysis (SSA) was performed on the 14 variables of section 1 to test the premise concerning the underlying dimensions of programmed behaviour.  The results of the SSA appear in Table V (2-space  coordinates), and in Figure 3 (geometric representation).  The data could  be represented adequately in two dimensions (coefficient of alienation = .19533, Kruskal's stress = .16776).  The goodness of f i t does not improve  in large increments with greater dimensionality.  The coefficient for  m = 1 is .33198 and that for m = 3 is .12260. There are no obvious clusters of homogenous variables in the geometric representation.  The configuration of the variables in the space  seems to lend i t s e l f best to interpretation based on the two axes. 1 was identified as an entrepreneurial/defensive orientation. sion lends some support to the original theory.  Vector  This dimen-  Moving from l e f t to r i g h t ,  the individual strategies become less active or entrepreneurial and more defensive.  The entrepreneurial orientation is characterized by strategies  that attempt to shape or control the firm's environment in line with organizational objectives, as opposed to strategies that are merely reactive or defensive responses to environmental threat. examples of entrepreneurial strategies are:  The three most clearcut variable 1:  developing an  aggressive marketing strategy to increase sales; variable 7:  increasing  capital expenditures on more e f f i c i e n t equipment to reduce production costs; and variable 8: tion.  expanding R&D to help maintain a .firm's competitive posi-  These strategies may help a firm to alleviate a c r i s i s by enabling  i t to gain a competitive advantage, greater market share, or higher p r o f i t s .  - 105 -  Table V Smallest Space Coordinates for m = 2 Programmed Behaviour  Dimension  1  2  1 2 3 4. 5 6 7 8 9 10  -100.000 77.329 92.797 17.881 100.000 97.074 -86.808 -77.222 -6.052 89.062  55.270 66.514 13.625 85.033 44.012 -47.969 -36.129 -31.639 61.100 -100.000  11 12 13  -27.851 35.782 3.852  -29.458  14  64.166  68.355  Variable  7.658 49.699  Guttman-Lingoes Coefficient of Alienation = 0.19533 1  Kruskal's stress = 0.16776  a  - 106 FIGURE 3 SSA GEOMETRIC  REPRESENTATION: DIMENSIONS  OF PROGRAMMED  BEHAVIOR  VECTOR PLOTS VECTOR 2 PLOTTED AGAINST VECTOR 1 100 92 84 72 64 56 48 40 32 24 16 8 VECTOR 1 -8 -16 -24 -32 -40 -48 -56 -64 -72 -84 -92 100 •100  14 9 13  12  11  10 -80  •60  -40  -20  20  VECTOR 2  40  60  80  100  - 107 In all three cases, a firm seeks to control events by i t s actions; i t t r i e s to produce greater benefits to alleviate financial d i f f i c u l t i e s . Variable 11, increasing information gathering a c t i v i t i e s , is also an entrepreneurial strategy but to a lesser extent than the previous ones. Greater information may improve a firm's 'early warning system' and alert i t to possible threats.  By removing the element of surprise, a firm has  time to cushion i t s e l f against possible adverse impacts.  In this way, the  organization retains some control over i t s destiny and is not forced merely to react to external stimuli. In contrast, the defensive orientation is characterized by programmed behaviour that is clearly reactive consisting of retrenchment or cutback strategies.  Most of the variables at the upper end of this vector are con-  cerned with financial cutbacks:  variable 2:  cut back operating budgets of  departments; variable 3:  make across-the-board cutbacks of budgets in a l l  departments; variable 5:  reduce s t a f f ; variable 6:  profitable new products to reduce costs.  eliminate marginally  A variable concerned with organi-  zational reforms (variable 14) also is considered to be indicative of financial retrenchment.  Although this variable may at f i r s t appear to be  qualitatively different than the more obvious financial strategies, i t is interpreted as a cost-saving move.  For example, firms may undertake major  organizational reforms to eliminate redundant s t a f f , departments, or programmes to reduce costs. Variable 10, reducing the authority of f i e l d managers and department heads, is also a highly defensive strategy.  There is some essence of  financial retrenchment implicit in this behaviour.  Reduced authority  often is related to decreased discretionary budget and expense control.  - 108 This strategy also implies a greater centralization in decision-making power with responsibility being assumed by senior management. All these actions represent a retrenchment in the face of a hostile or threatening environment.  By employing these strategies, managers do not  try to change the course of events but merely try to 'ride i t out' in the best way possible.  I f indeed, the cause of a financial c r i s i s is lack of  adequate financial control, these strategies may be effective.  However,  i f the c r i s i s is rooted in another area of operations, for instance, obsolete products or insufficient market share, these actions w i l l only deal with the symptoms not with the underlying causes. The remaining 4 variables in the section are relatively neutral along this dimension, not clearly entrepreneurial or defensive.  They have more  explanatory power with respect to the second dimension. The second dimension of programmed behaviour (vector 2) identified by the SSA, is concerned with the immediacy of impact of crisis management strategies.  Strategies that w i l l have an immediate impact in reducing the  deleterious effects of a financial crisis are located at the upper end of the scale.  There are two types of strategies represented, those previously  identified as being primarily of a financial nature such as cutting budgets, reducing s t a f f , cutting expense items, etc. (variables- 2, 5, 9, 14) and strategies that are concerned with improving the firm's productivity. This l a t t e r group includes seeking union cooperation, introducing MBO, and increasing sales (variables 4, 13, 1). The financial strategies contribute to immediate alleviation of the c r i s i s (at least the symptoms) by improving cost effectiveness.  Cash re-  sources are reallocated in a more effective manner, adapting to the firm's current state.  I t is interesting to note the differences between variable  - 109 2 (cutting departmental budgets) and variable 3 (making across-the-board cuts in departmental budgets).  In the SSA, variable 2 appears to be higher  in this vector, that i s , i t is more effective in immediately relieving the crisis.  The behaviour associated with variable 2 suggests some evaluation  of programs.  Financial cutbacks are made, but in selective areas, presum-  ably in less effective (in terms of p r o f i t ) departments or programmes.  In  contrast, across-the-board cuts, although equitable, may in fact contribute further to the financial pressure on a firm.  Operating budgets may be re-  duced proportionately in all departments without evaluating the contributions of various parts of the organization.  This adversely affects operations by  cutting back on very profitable programs that contribute more than their share to overhead.  The productivity enhancing strategies help to a l l e -  viate the financial c r i s i s by concentrating more on achieving greater benefits than costs. One should note the positioning of variables 4, 9, and 13 on the upper part of this dimension.  These are the three variables on which there  was a high degree of consensus that they were useful strategies to employ during c r i s i s .  The interpretation of the second dimension, the degree of  immediate impact on c r i s i s , is supported by the skewed responses to the item.  One of the reasons the majority of respondents find these strategies  to be very useful is because they believe the strategies contribute to an immediate r e l i e f of the c r i s i s . Strategies on the lower end of the scale may not contribute much to the immediate alleviation of a c r i s i s . short run problems).  (They may indeed aggravate the  Variables 7, 8, and 11 which are concerned with in-  creasing capital expenditures, R&D, and information gathering, for example, are strategies with long run impacts.  While in the long term they may  - 110 -  substantially contribute to a firm's effectiveness by developing new technology and increasing productivity, in the short run these strategies w i l l be costly.  Implementing them diverts resources from current operations.  Eliminating new products, s t i l l only marginally profitable (variable 6 ) , and reducing the authority of f i e l d managers and department heads (variable 1 0 ) , are two defensive strategies with low immediate impact.  I t could be  less damaging for a firm to f i r e managers outright (variable 12) than to reduce their authority and leave them in a position to cause trouble for the organization. The results of the SSA suggest a division into 4 broad categories of strategies based on the two dimensions:  entrepreneurial/high immediate im-  pact; entrepreneurial/low immediate impact; defensive/high immediate impact; defensive/low immediate impact.  While some of the strategies are relatively  neutral on one or both of the dimensions, i t is possible to identify some variables that represent extreme types of programmed behaviour in each category as shown in Figure 4. One would expect that strategies on the diagonal of the matrix would be the most different since they are opposite on both dimensions.  Examina-  tion of the SSA geometric representation (Figure 3) shows that the two most different strategies (as measured by the greatest distance between pairs) are variables 1 and 10. These are located in the upper l e f t and lower right cells.  Developing an aggressive marketing strategy (variable 1) and re-  ducing the authority of managers (variable 10) are diametrically opposed behaviours.  There is a highly significant negative correlation between  these two variables (x = - . 2 6 , a = . 0 1 ) .  - Ill -  Figure 4 Categories of Programmed Behaviour Developed from SSA  high immediate impact on c r i s i s  entrepreneurial mode  defensive mode  • Develop an aggressive marketing strategy to increase sales (var.  • Undertake major organizational reforms (var. 14)  D  • Cut back the operating budgets of all d i v i sions and departments (var. 2) • Reduce staff (var. 5)  low immediate impact on crisis  • Increase capital expenditures on more e f f i c i e n t equipment (var. 7) -  • Reduce the authority of f i e l d managers and department heads (var. 10)  • Expand R&D to help maintain competitive position (var. 5)  • Eliminate new products, s t i l l only marginally profitable (var. 6)  - 112 I t is interesting to note the relationship between variables 6 and 10 (both in the lower right c e l l ) .  These two variables have a significant  positive correlation (T = .25, a = .01).  Although these strategies are  substantively different, in terms of specific content, they are qualitat i v e l y the same, in terms of their impact on the organization.  As might  be expected, variable 6 also is negatively correlated with variable 1 on the diagonal, although at a lower level of significance (T = -.16, a = .05).  I t is not too surprising to find great distance between these three strategies.  Logically, strategies of reducing a manager's authority (var.  10) and eliminating new products (var. 6) are incompatible with developing a strong marketing presence (var. 1).  Quite often the a b i l i t y to close a  sale is predicated upon the authority to make in-the-field decisions without having to wait for time-consuming referrals to head office.  Timing can be  c r i t i c a l for sales personnel, especially in fiercely, competitive markets. I t is often the new product that attracts customers to a firm.  Dropping  innovative products from the l i n e , even though they s t i l l make only a marginal contribution to p r o f i t , may weaken an organization's competitive position. The two next most distant strategies are found on the other diagonal. They are variable 5, reducing s t a f f , and variable 7, increasing capital expenditures.  Although this pair is negatively correlated, i t is not imme-  diately obvious how the two strategies are conflicting (T = -.14, a = .05). I f one examines the geometric representation, however, i t can be seen that the greatest delineation between the two occurs on the entrepreneurial/ defensive dimension.  Increasing capital expenditures is highly entrepre-  neurial, and cutting staff is highly defensive.  Although there is a  - 113 considerable difference between the two strategies as regards their imme- . diate contribution in relieving crises, this axis appears to be of secondary importance in accounting for the differences between the strategies. Qualitatively, variable 7, increasing capital expenditures, and v a r i able 8, increasing R&D, are the same strategies.  The reader w i l l note a  highly significant positive correlation between these two variables (T = 34, a = .01).  Like variable 1, the R&D strategy is negatively correlated  with a strategy of reducing staff (T = -.18, a = .05).  In addition to  their placement on the entrepreneurial/defensive dimension, the distance separating these two items best can be explained in terms of f e a s i b i l i t y . Increasing R&D and reducing staff would seem to be mutually exclusive behaviours.  When staff cutbacks are made, they usually are implemented in  'non-essential' departments, quite often in staff functions.  Since R&D is  a personnel-intensive operation, which may be considered a 'luxury', and therefore expendable by many executives, this function would feel the direct impact of staff cuts.  At the very least, i t would seem a d i f f i c u l t  feat to increase manpower for R&D projects while staff cuts were being made in other parts of an organization, unless the firm had an extraordinary 15 commitment to R&D or that function was the firm's primary business. There is also a great spatial distance between the two entrepreneurial strategies in the lower l e f t cell and variable 14, undertaking major organizational reforms and variable 2, cutting operating budgets (both in the upper right c e l l ) .  As mentioned previously, these l a t t e r two strategies  are interpreted as financial retrenchment actions (note their positive The reader should note that this discussion applies to business enterprises. The two strategies need not be incompatible in highly bureaucratized organizations such as government departments where there may be l i t t l e lateral communication or accountability.  - 114 -  correlation, x = .25, a = .01). Their distance from variables 7 and 8 is not surprising.  The two entrepreneurial strategies require increased out-  lays of resources and call for behaviour that is completely antithetical to cutting budgets in all departments.  Although the immediacy of impact  on c r i s i s is an important dimension of d i f f e r e n t i a t i o n , again i t is the entrepreneurial/defensive vector that is the most explanatory. One other relationship on the SSA geometric representation is worth noting.  Although variable 1 (aggressive marketing strategy) and variable  5 (reduce staff) are approximately equal with respect to immediate contribution in alleviating a c r i s i s , spatially, they are one of the most distant pairs of variables.  The two variables also have a significant negative  correlation (x = -.20, a = .05). Their great separation occurs almost entirely as a result of differences along the entrepreneurial/defensive dimension.  Referring to Table V., the reader w i l l note that on vector 1,  variable 1 = -1000.000 and variable 5 = 100.000. The two types of behaviour would appear to be incompatible and l i k e l y would be favoured by firms in different industries. The perceived value of certain strategies is emphasized by noting the distribution of responses to the four major types of programmed behaviour.  The distribution of variable 1, a highly entrepreneurial strategy,  is positively skewed (x = 3.447, S.D. = 1.899). Approximately 51% of respondents indicated that an aggressive marketing strategy would be useful in a c r i s i s , while 23% thought i t would be damaging to the firm.  Most  respondents did not find the other two entrepreneurial strategies (variables 7 and 8) to be nearly as useful.  Thirty-nine percent of the execu-  tives judged a strategy of increasing capital expenditures to be useful (x = 4.234, S.D. = 1.589). A large group of respondents (51%) indicated  - 115 they thought increasing R&D would be damaging to the firm during crises (x = 4.596, S.D. = 1.476).  I t seems obvious that the long term nature of  these l a t t e r two strategies diminishes their value in the eyes of most managers. The usefulness of short term ' f i r e f i g h t i n g ' strategies is once again emphasized when one examines responses to some of the defensive variables. Executives clearly favoured the short term defensive behaviour over the long term.  51% of respondents indicated i t was useful to make budget cuts  (variable 2) in all divisions and departments (x = 3.819, S.D. = 1.906). 63% thought i t was useful to reduce staff during a crisis (x = 3.96, S.D. = 1.422).  In contrast the long term defensive strategies were seen to be far  less useful by most executives.  Only 27% of respondents, for example, indi-  cated i t would be useful to eliminate new products (x = 4.66, S.D. = 2.019). Most executives did not favour a strategy of reducing the authority of f i e l d managers and department heads.' In fact, a majority (54%) believed that this would be damaging behaviour during a crisis (x = 4.683, S.D. = 1.831). I t was hypothesized originally that managers from firms with a high degree of f l e x i b i l i t y would invoke entrepreneurial behaviour as a response to crises ( H ) . 3 2  No support was found for this premise, however.  b i l i t y may be a general dimension.  Flexi-  There is no evidence of any selection  process occurring, that i s , entrepreneurs seeking out flexible organizations and vice versa.  Rather, one speculates that entrepreneurs create their own  flexibility. Dearborn and Simon (1958) suggested that an executive's business specialization influences the way he approaches business problems.  No  evidence was found, however, that managers w i l l respond parochially on the basis of their functional backgrounds during a crisis (H~o).  Implementation  - 116 of a particular management style also had no effect on the patterns of programmed behaviour displayed (H34). Predicting Programmed Behaviour A stepwise discriminant analysis was used to try and predict the variables that contribute to entrepreneurial and retrenchment behaviour. The following function was derived for entrepreneurial behaviour: DS = .379C„ 33 + .196C., 41 - .232C51 - .290CV 63 + .848 C1  o  This equation reflects the fact that managers who prefer entrepreneurial behaviour tend to be highly democratic, encouraging a l o t of employee input to decision-making ( C ^ ) , and to be very concerned with maintaining organizational harmony even during times of threat ( C ^ ) .  Entrepreneurial  managers also tend to come from firms with very complex environments (Cg ) 3  but tend to rely on organizational traditions to lend s t a b i l i t y to their actions (C^-j).  The discriminant function correctly classified 12% of the  entrepreneurial managers (C = .66; C = .79). pro max r  3  I t was not possible to derive a discriminant function to predict retrenchment behaviour.  The best function consisted of twelve variables;  these were too many for meaningful interpretation.  - 117 6.  IMPLICATIONS FOR COPING WITH CRISIS  6.1  Reducing Susceptibility to Crises Two specific findings associated with corporate susceptibility to  crises emerged from the analysis (see Table VI for a summary of a l l hypotheses tested).  F i r s t , firms have a lower susceptibility to c r i s i s  i f their environments are predictable.  While this observation may seem  rather simplistic, i t has implications for corporate behaviour.  Since  most firms today operate in turbulent and complex environments with l i t t l e inherent p r e d i c t a b i l i t y , i t becomes essential for them to upgrade their intelligence systems and long range forecasting.  Improved scanning and  monitoring techniques of the information environment w i l l help ensure that key decision-makers receive timely and useful information.  Special  information systems concentrating on particularly vulnerable areas may be developed.  These systems, based on effective sampling techniques, would  flag c r i t i c a l trends above a given threshold. Constant scanning of the organizational environment for possible threats may reduce the chance of surprise.  I t may be possible, for ex-  ample, to form special intelligence groups whose major responsibility would be the identification of possible rare events with threat potential. While the formation of special scanning groups offers an advantage to the organization in anticipating the future, the problem associated with such independent centers is one of c r e d i b i l i t y .  The hyper-innovative tendencies  of such groups may build up feelings of mistrust among other organizational groups.  The result is an isolation from power with accompanying i n a b i l i t y  to influence decision processes.  The problem of c r e d i b i l i t y can be  eliminated p a r t i a l l y by involving other organizational members in the a c t i v i t i e s of such groups.  Table VI Summary of Result Hypotheses  Results  The Nature of Crises H-p  Threats to high p r i o r i t y goals, stress, and restricted decision time are universal c r i t e r i a in labelling a situation as a c r i s i s .  Not supported:  stress was rated as one of the least important factors in defining a c r i s i s . Threat to high p r i o r i t y goals and restricted decision time are very important determinants of c r i s i s .  H :  The subjective c r i t e r i a defining a c r i s i s are invariant with the type of environments that individuals face.  Not supported:  differences were found based on the degree of f l e x i b i l i t y + environmental p r e d i c t a b i l i t y .  ?  Susceptibility to Crisis H^:  Firms operating in predictable environments have a low frequency of crises.  Supported  H.:  Firms with a high degree of control over t h e i r environments have a low susceptibility to crises.  Not supported  Hr:  Firms that are very dependent on 'other elements in the environment are prone to crises.  Not supported  H :  Organizations managed by process oriented managers w i l l have a low frequency of crises.  Supported  H,:  Managers who prefer decision-making strategies associated with groupthink come from organizations that are prone to crises.  Not tested; not enough respondents met c r i t e r i a for groupthink.  fi  Preferred Decision Structures H„:  Managers from firms with complex environments w i l l tend to consider only a limited number of alternatives during crises.  Not supported:  Hg:  Firms operating in complex environments w i l l develop strong adherence to Standard Operating Procedures.  Not supported  H,Q:  Managers from firms with more complex environments w i l l seek the aid of many individuals to help evaluate actions and alternatives during crises.  Not supported  H,,:  Managers from firms with more complex environments w i l l concentrate on the short term effects of proposed solutions rather than long term effects during crises.  Not supported  managers from simple environments tend to l i m i t the number of alternatives considered.  Table VI (cont'd) Resul  Hypotheses Preferred Decision Structures (cont'd) H,„: Finns operating in turbulent environments w i l l not develop strong adherence to Standard Operating Procedures.  Not supported  H,,:  Task oriented managers w i l l follow SOPs closely and use only o f f i c i a l information channels during crises.  Supported  H..:  Process oriented managers w i l l not perceive information gathering to be an important a c t i v i t y during crises.  Supported  H.,-'  During crises, process oriented managers w i l l find i t p a r t i c u l a r l y important for employees to understand the decisions made by management.  Not supported  H,g:  Executives who prefer a democratic management style w i l l encourage individ uals who are responsible for implementing a decision to be involved in mak decisions during crises.  Supported  H, :  Executives who prefer an autocratic style of management w i l l find i t desirable for an organization to have a directive leader during crises.  Supported  H,„:  Managers who think i t s important to maintain organizational harmony during crises encourage executives who disagree with company policies to keep their reservations to themselves.  Not supported  H.g:  Managers who find i t important to maintain organizational harmony during crises encourage members of an executive committee to minimize c o n f l i c t within i t s e l f to be loyal to the Chief Operating Officer.  Not supported  7  The Dimensionality of Coping A b i l i t i e s Hp : Organizations that are capable of coping successfully with one type of threat are capable of coping with any type of threat. 0  H„,:  Supported  Organizations develop special a b i l i t i e s to cope with one of two types of threats: those that occur precipitately and without warning (discontinuous), or those that build up gradually over a period of time (continuous)  Supported  Organizations have less a b i l i t y to cope with threats that have a sudden onset than with threats that build up gradually.  Not supported  Predictable threats in stable environments w i l l stimulate information gathering a c t i v i t i e s during crises.  Supported  Table VI. ( c o n t ' d ) Results  Hypotheses The D i m e n s i o n a l i t y o f  Coping A b i l i t i e s  (cont'd)  H„.:  O r g a n i z a t i o n s t h a t have a h i g h l e v e l o f s l a c k can cope b e t t e r w i t h c r i s e s i n v o l v i n g t h r e a t s t o m a r k e t s h a r e o r s a l e s t h a n t h e y can w i t h c r i s e s i n v o l v i n g t h r e a t s t o other areas of o p e r a t i o n s .  Supported f o r  H -:  Organizations that maintain a decentralized decision-making structure u n d e r t h r e a t c a n cope b e t t e r w i t h c r i s e s p r e c i p i t a t e d by a d r o p i n s a l e s than o r g a n i z a t i o n s t h a t c e n t r a l i z e d e c i s i o n - m a k i n g a u t h o r i t y under t h r e a t .  Supported  H  F i r m s o p e r a t i n g i n c o m p l e x e n v i r o n m e n t s have a g r e a t e r a b i l i t y w i t h c r i s e s than f i r m s operating i n simple environments.  Not  supported  Not  supported  ? (  ? f i  :  to  cope  W^-j'  F i r m s o p e r a t i n g i n t u r b u l e n t e n v i r o n m e n t s have a g r e a t e r a b i l i t y w i t h c r i s e s than f i r m s operating in s t a t i c environments.  H„ :  F i r m s o p e r a t i n g i n t u r b u l e n t e n v i r o n m e n t s have a g r e a t e r a b i l i t y t o cope w i t h c y c l i c a l market c o n d i t i o n s than f i r m s operating i n s t a t i c environments.  f l  to  cope  Hgg:  F i r m s managed by e n t r e p r e n e u r i a l e x e c u t i v e s have a g r e a t e r a b i l i t y t o cope w i t h a m a j o r t e c h n o l o g i c a l b r e a k t h r o u g h t h a n f i r m s n o t managed by e n t r e p r e n e u r s  H,Q:  F i r m s managed by e x e c u t i v e s w i t h an a g g r e s s i v e m a r k e t i n g o r i e n t a t i o n have a g r e a t e r a b i l i t y t o cope w i t h a sudden d r o p i n s a l e s t h a n f i r m s managed by executives with other o r i e n t a t i o n s .  H.,,:  F i r m s managed by more d e m o c r a t i c e x e c u t i v e s have a g r e a t e r a b i l i t y t o cope w i t h t h e d e a t h o f a number o f key e x e c u t i v e s t h a n f i r m s managed by l e s s democratic executives.  S t a n d a r d Responses t o H  3 2  :  Not s u p p o r t e d :  responses  based on t h e i r  are  likely  Hg,:  Managers make p a r o c h i a l during crises.  functional  Ho-:  P r o c e s s o r i e n t e d managers p r e f e r programmed b e h a v i o u r s t r a t e g i e s manipulate the managerial s t r u c t u r e of the f i r m during c r i s e s .  to  adopt  backgrounds  that  firms with ability  Not s u p p o r t e d  Supported Not  supported  Not  supported  Not  supported  Not  supported  Crises  Managers f r o m f i r m s w i t h a h i g h d e g r e e o f f l e x i b i l i t y e n t r e p r e n e u r i a l b e h a v i o u r as a r e s p o n s e t o c r i s i s .  sudden d r o p i n  sales  placid environments  t o cope w i t h c y c l i c a l  ,  have a g r e a t e r conditions.  ^  o i  - 121 Corporate susceptibility to crises also can be reduced by enriching an organization's repertoire of responses, for example, by developing contingency plans with appropriate, sensitive trigger mechanisms.  The serious-  ness of environmental threats can be mitigated by timely, appropriate responses.  At a minimum, the impact of surprise associated with a threat  can be reduced by contingency planning. The second important finding is that a process style of management (one that evaluates employees on the basis of results rather than on how well they follow specific procedures) is associated with reduced suscept i b i l i t y to crises.  Creativity and independent problem-solving appear to  be necessary requirements in evading c r i s i s .  Process management allows for  individual discretion and gives greater f l e x i b i l i t y to employees for dealing with local threats before they escalate to the c r i t i c a l level. Although r i g i d programming and task specification provide a corporation with a greater degree of control, a high level of task programming is only effective in coping with anticipated events.  I f programming is too  r i g i d , corporate vulnerability to crises is increased when novel situations occur.  Inappropriate procedures may delay the realignment required to cope  with novel decision situations.  Corporations must, therefore, obtain an  appropriate balance between standardization, which ensures control, and f l e x i b i l i t y , which enables employees to deal with local threats. The executives who.participated in this study clearly perceive their corporations to be susceptible to crises.  Only 13% of the respondents  indicated that there was no probability of a c r i s i s occurring in their companies within five years.  In contrast, 15% of executives suggested  that there was at least a .50 probability of crisis occurring.  - 122 Although the respondents perceived crises to be probable events, only 45% of the firms had any formal plans to deal with crises.  Contin-  gency budgeting was the most common measure adopted by corporations to reduce the impact of crises.  Other types of plans included:  decision-  making and problem-solving training, vulnerability analysis, long range planning, secondary document sources, and management succession plans. F i f t y - f i v e percent of the sample corporations, however, had no plans to help them weather the effects of a c r i s i s , in spite of their own assessments of susceptibility. Corporations must be w i l l i n g to make a strong commitment to precrisis training, both in time and in money, to effectively reduce their susceptib i l i t y to crises.  Clearly the size of a corporation, i t s resources, and  i t s objectives w i l l determine the specific strategies chosen to help reduce susceptibility and to improve coping a b i l i t i e s .  One relatively simple meas-  ure that a firm can take is to enrich i t s repertoire of Standard Operating Procedures.  Quite often SOPs increase organizational inertia and lead to  the subversion of new programs, however, the institutionalized committment to procedures can be made to work for the firm's advantage.  Special cues  for triggering new automatic programs designed to deal with crises can be developed and incorporated into existing SOPs.  These cues can be rein-  forced by the use of precrisis d r i l l s and simulations.  During an actual  c r i s i s , much of the required behaviour i s , thus, preprogrammed, reducing the latitude for error. On a more major scale, basic modifications can be made in an organization's structure that w i l l improve i t s performance in crises.  For  example, a firm can develop dual structures, one for routine situations and the other for crises, with appropriate cues that determine when either  - 123 structure is to become operational.  The structure for crises would be  characterized by a flexible repertoire of operating procedures capable of responding to novel situations.  Key positions in staff and line units  would be f i l l e d by c r i s i s specialists (who may not be the same executives f i l l i n g key positions during normal operations).  These individuals would  be selected on the basis of their creative, adaptive a b i l i t i e s in highstress situations.  Special emergency communications networks and  intelligence systems can be developed to augment the c r i s i s structure. The concept of dual structures is not particularly radical; the closely-related project management form of organization has been used successfully by many corporations for years.  Personnel are assigned on a  temporary basis to particular projects; when a firm's needs change, personnel are reassigned.  This type of structure is particularly suitable  for situations that require flexible strategic and operational responses (Ansoff and Brandenburg, 1971).  I t is important, however, that membership  in a crisis project management team remain relatively stable.  Studies have  shown that during periods of high stress, permanent decision-making groups tend to perform better than ad hoc groups (Hall and Williams, 1966).  6.2  Improving Coping A b i l i t i e s During Crises The analysis suggested that there is a general dimension of coping  a b i l i t i e s applicable to all types of crises.  Corporations that are capable  of coping successfully with one type of c r i s i s , in general, are capable of coping with any type of c r i s i s .  Firms develop specialized advantages,  however, in dealing with particular types of threatening events.  Some  firms are more adept at coping with threats that build up into a c r i s i s over a long term.  Successful coping in this situation requires the  - 124 a b i l i t y to develop a long run perspective.  Early warning systems and  other scanning techniques, thus, are needed to alert an organization to threatening trends developing in the environment. In contrast, threats that occur with a sudden onset, as for example, natural disasters, require different coping s k i l l s .  A high level of f l e x i -  b i l i t y , which allows a firm to act quickly in response to threats, and a high degree of slack, which allows a firm to absorb short run impacts, are prerequisites for coping with this type of threat. Strong leadership was found to be a crucial element for effectively coping with a c r i s i s .  Leaders may adopt many different styles and orien-  tations but two characteristics of leadership are considered essential: problem-solving a b i l i t y and the a b i l i t y to maintain the confidence of group members.  Five important components of the decision-making process  were identified.  These components were:  risk absorption, implementation,  evaluation, risk confrontation, and threats to optimality. Each of these components was delineated on the basis of two underlying dimensions:  the quality of decision-making processes (number of  people participating in the decision, number of alternatives generated, degree of evaluation, etc.) and the exposure to uncertainty (risk posture). The bureaucratic risk absorption component reflects a concern for the process of decision-making.  Exposure to uncertainty is minimized by reliance  on procedures and programming.  The implementation component is concerned  with ensuring that decisions, once reached, are put into effect.  The  degree of employees' understanding of decisions, participation in the process, and agreement with decisions are important factors.  The eval-  uative component is concerned with the quality of decisions reached.  It  represents a high degree of openness to ideas, alternatives, and people  - 125 to ensure an optimal choice.  The risk confrontation component represents  the extent to which decision-makers are w i l l i n g to accept high levels of uncertainty (risk) during the decision process.  Threats to optimality  reflects a collection of threats to the quality of decsion-making such as tendencies for groupthink and information f i l t e r i n g . Reducing Bureaucratization I t was noted previously that Standard Operating Procedures are valuable tools for an organization.  SOPs, however, are clearly dysfunctional  when they are used as a means to avoid decision responsibility by overreliance on rules and regulations (the bureaucratic syndrome).  A firm can  attempt to minimize the effects of bureaucratic risk absorption tendencies either by expanding the repertoire of programmed solutions to account for more contingencies, or by building higher levels of personal discretion into existing procedures. A strategy of expanding SOPs involves high development and maintenance costs to an organization, and, clearly, i t is effective only in coping with events that can be anticipated.  The vulnerability of the  organization is actually increased when novel situations occur.  Complex  but inappropriate decision programs may delay organizational realignment necessary to cope with the novel decision situation.  While an expanded  repertoire of SOPs w i l l reduce the number of errors that occur when information is forced into r i g i d formats, the complexity involved w i l l increase random noise in the information system and make the tracing of errors more difficult.  A strategy of allowing more individual discretion in following  procedures gives greater f l e x i b i l i t y but organizational economies obtained by standardization and programming are lost.  - 126 Every organization must develop SOPs to obtain an appropriate balance between f l e x i b i l i t y and standardization to f i t i t s specific environment. A dialectic component can be b u i l t into every information processing and decision program, however, to guard against the introduction of biases. The dialectic w i l l ensure that counterplans are developed for all major decisions and contradictory points of view are examined. any latent biases can be identified.  In this manner  This procedure is similar to the  dialectical approach suggested as a measure to prevent groupthink — episodic dialectics are supplemented by routine programmed dialectics. Reducing Implementation Dysfunctions An organization's effectiveness in coping with crises is a function of i t s a b i l i t y to implement decisions.  Dysfunctions in the implementation  component of decision-making, clearly, can have grave consequences for a firm.  Implementation f a i l u r e s , in part, can be prevented through the de-  velopment of general coping a b i l i t i e s .  For example, a group's motivation  to implement a decision can be improved by involving at least one representative from each group in the actual decision process.  When a group  solves a problem, each member participating feels responsible for making the solution work.  I f a solution has been imposed without consultation,  however, there is not the same commitment to implementation. Action groups involved with the decision w i l l also be more aware of c r i t i c a l timing factors.  Maier (1967:249) noted that "a low-quality solu-  tion that has good acceptance can be more effective than a higher-quality solution that lacks acceptance".  Motivation also can be improved by  thorough indoctrination programs for a l l members of the organization to develop a heightened commitment to goals.  While this procedure w i l l not  - 127 remove entirely the problems of p o l i t i c a l games and bargaining between units, there w i l l be some reduction in the incompatibility of goal structures between the diverse units of the organization. Problems of comprehension are also reduced by participation in the decision process.  Implementation units frequently do not understand the  reasons for choosing a course of action that they regard as arbitrary or threatening.  A tendency to subvert the implementation process either con-  sciously or unconsciously often emerges.  Participation in the decision  process increases understanding of the decision through exposure to a l l the alternatives considered and the reasons for their rejection.  Partici-  pation also leads to a widened perspective of the total c r i s i s , including overall organization goals, not just a narrow perspective dominated by self-interest.  Commitment to and understanding of the decision f a c i l i t a t e s  diffusion of information throughout the organization. Implementation dysfunction, in the form of misinterpretation and lack of coordination, can occur as a result of noisy channels of communication between decision and implementation units.  This in part can be  alleviated by placing trusted people in the f i e l d to affect coordination. Usually such people w i l l be in direct communication with the senior decision-makers to reduce the probability of error. Reducing Evaluation Dysfunctions Previously, i t was noted that strong leadership is a desirable and necessary factor for effective coping during crises.  Strong leadership,  however, has been recognized as an element of group dynamics that can lead to dysfunction in the evaluative component of the decision process. f i c a l l y , a very strong leader promotes the tendency toward premature  Speci-  - 128 convergence on a single alternative without f u l l y evaluating a l l other alternatives (Maier, 1967; Jam's,  1972).  This tendency can be alleviated  by the Chief Operating Officer or other decision leader encouraging c r i tical evaluation of policies, perhaps assigning a specific role to each group member, and encouraging the expression of diverse points of view. A range of opinions is more l i k e l y to be elicited i f the leader refrains from c r i t i c a l evaluation and acts merely to guide the discussion (Thibaut and Kelley, 1959).  Although this procedure can work i f the leader is com-  mitted to ensuring c r i t i c a l appraisal of all alternatives, i t is d i f f i c u l t for most organizational members to overcome traditional hierarchical norms of deference to the leader.  I f one group or individual is intent on  pleasing the leader, the evaluation process can be subverted. Open criticism in debates can lead to damaged feelings i f members are carried away in their roles as c r i t i c a l evaluators.  "Feelings of rejections,  depression, and anger might be evoked so often when this role assignment is put into practice that i t could have a corrosive effect on morale and working relations within the group" (Jam's, 1972:210). leader in a discussion may also be a drawback.  Impartiality by the  An organization may be de-  prived of the services of one of i t s best decision-makers.  The result may  be a lower quality decision than would have resulted i f the leader had participated.  There is also the danger that nondirection by the leader  may result in a decision that is completely unacceptable to him. The proper role of the leader lies somewhere between the two extremes. Critical evaluation and the exploration of a wide range of policy alternatives is a time-consuming process. to adopt such procedures.  A firm may not have the time  During crises, decisions must be reached very  quickly to head off disaster.  High levels of stress f e l t by decision-  - 129'makers at this time also contribute to reduced cognitive a b i l i t i e s . Increased generation and evaluation of alternatives can contribute to information overload, which in turn increases the probability of information d i s t o r t i o n . Critical evaluation of alternatives can be promoted by inviting the opinions of outside experts, seeking opinions from associates in the organization, and generating alternatives through brainstorming, synectics, and other creative problem-solving techniques (Arnold, 1962; Stein, 1974). These techniques may prevent premature closure on a particular alternative, but they also substantially increase the probability of information overload. Janis (1972) noted that while the use of outside experts and trusted associates provides a decision-making group with fresh perspectives, there is always the danger of a breach of security or an information leak in an expanded group.  In highly competitive situations this is most undesirable  and potentially damaging to the organization.  I f expert assistance is to  be used effectively, assistants must be consulted early in the decision process before convergence on a particular alternative starts. Special effort should be made by the leader to ensure that a longrange perspective is introduced early into the deliberations by assigning special responsibility to certajn members for developing such a focus. Incremental decisions made for short-term expediency may have severe consequences on future policies and negotiating positions. Reducing Tendencies Toward Excessive Risk-Taking While i t is often necessary and desirable for corporations to take higher risks during crises, dysfunctions in the risk posture component of the decision process may promote excessive risk-taking.  The effects of  stress and individual biases can contribute to this tendency.  The  - 130 propensity to take high risks can be alleviated in part by thorough indoctrination and training in corporate objectives and the level of risk allowable to achieve those objectives.  We have noted previously the debilitating  effects of stress on decision-makers and i t s role in intensifying any underlying personality tendencies.  For example, i f an executive normally is a  risk-taker, under extreme pressure he may take even higher risks.  Clearly,  i t is important to select executives in stressful positions not only on the basis of their technical competence, but also on their a b i l i t y to handle stress. A variety of stress-reducing techniques can be incorporated into the daily routine of appropriate executives.  Techniques such as meditation,  and progressive relaxation are currently in vogue.  Key decision-makers may  also undergo behavioural modification treatment to raise their tolerance for stress.  Another possibility is to rotate decision-makers or tempo-  r a r i l y replace them with individuals selected and trained for high-stress situations (this is of course not feasible at the most senior levels of a corporation). Personal biases and inaccurate stereotypes of competitors are major factors that contribute to increased risk propensity during crises.  Role  playing and psychodrama are techniques developed by psychologists that may help to overcome the influence of stereotypes and- to increase understanding of competitors.  Scenario building is another technique that promotes  understanding of a rival and enables decision-makers to predict responses to their actions more accurately (Jam's, 1972). Role playing can be expanded to include general c r i s i s training for a number of hypothetical events.  This has the secondary effect of reducing  stress on managers when a real c r i s i s develops.  The cost of techniques  - 131 such as role playing, however, may be prohibitive since they are so time consuming.  Ideally these techniques should be developed as part of a  package of precrisis training. Reducing Decision-Making Dysfunctions There is evidence in the l i t e r a t u r e that organizations often engage in behaviour that threatens the quality of decision-making.  For example,  Janis (1972) and Jam's and Mann (1977) have documented dysfunctions resulting from group dynamics and manifested by symptoms of groupthink. Solutions to group problems such as the propensity to take increased risks can be found by focussing on an individual's responsibility for decisions. In this manner, a group-induced s h i f t toward greater risk taking can be avoided (Wallach, Kogan, and Bern, 1964).  Techniques such as building  'worst outcome' scenarios w i l l aid in r e a l i s t i c a l l y evaluating the seriousa  ness of proposed outcomes and w i l l reduce the propensity of decision-making groups to favour high-risk alternatives. Since decision-making groups that are subject to groupthink try to rationalize warnings and other disturbing information requiring a reevaluation of policy, i t is necessary to ensure that all alternatives are f u l l y evaluated.  The use of a 'devil's advocate' ensures that both good  and bad aspects of a proposal are examined.  The technique is based on the  premise that conflict is the best means of exposing hidden assumptions. The dialectical approach is another, more formal technique, that uses structured debate to bring forth alternative world views.  The use of  dialectics also exposes hidden assumptions allowing an organization to develop a new conceptualization of a problem and possible solutions.  - 132 Organizations can reduce pressures on decision-makers to conform to majority opinions by the use of techniques that allow for the anonymous expression of dissenting opinions and questioning.  A Kantian Delphi, for  example, is a structured technique that e l i c i t e s diverse points of view from individuals with different backgrounds (Mitroff and Pondy, 1974). The purpose of the technique is to enlarge the information base, relative to a decision situation, beyond that possessed by any one individual.  The  technique is particularly good for poorly-structured problems and i t serves to protect minority viewpoints. Information distortion is another threat to the quality of decisionmaking that can reduce coping a b i l i t i e s during crises.  Information over-  load is a serious problem for decision-makers during crises given the requirements of increased information flows, the debilitating effects of heightened stress, and shortened time horizons. not necessarily mean better information.  More information does  Improved scanning techniques  and monitoring devices of the information environment and presentation of information in special formats can help ensure that the information received by decision-makers is of the proper quality as well as a manageable quantity. Special information systems can be developed that include extraordinary channels of communication to cut through the organizational hierarchy and, in some instances, to u t i l i z e direct links with the environment or more than one source of the same information (Downs, 1967).  These tech-  niques w i l l also help reduce the effects of time delays, isolation of decision-makers, and screening processes at various levels of the hierarchy as information is f i l t e r e d upward.  In terms of resources, however, such  systems can be costly for an organization.  In many instances, personnel  - 133 are diverted from their regular pursuits to participate in these systems, sometimes at the expense of the day-to-day functioning of other parts of the organization.  Most certainly there are costs of system development  that must be incurred.  Expansion of organizational systems also has the  drawback of making the firm more unwieldly, especially in i t s a b i l i t y to affect coordination.  The proliferation of new departments promotes an  increased danger of empire building, that can lead to intra-organizational conflict and bargaining. implement decisions.  This in turn w i l l affect a firm's a b i l i t y to  - 134 7.  METHODOLOGICAL OVERVIEW AND PLANS FOR CONTINUED RESEARCH The objectives of the study were four-fold: 1)  to integrate theories of c r i s i s behaviour into a conceptual model of crisis management to provide a basis for empirical research,  2)  to test specific hypotheses concerning crisis behaviour, susceptibility to crises, and coping a b i l i t i e s in the context of business organizations,  3)  to develop managerial tools for diagnosing organizational strengths and vulnerabilities in coping with crises,  4)  to develop prescriptions for improving crisis coping a b i l i t i e s and for preventing crises. .  This chapter reviews the success of the thesis in terms of achieving these four objectives and i t diagnoses the weaknesses of the study.  On the basis  of this analysis proposals are made for future research. A conceptual model was developed (Figure 1) that provided a means for studying decision-making and implementation processes during crises. The analysis was streamlined by focussing on the elements of the model and identifying 'principal actors' in the decision process.  In this  study, senior executives were selected as subjects; their cognitive abil i t i e s , behavioural preferences, and managerial styles were examined. The selection of senior executives as the focus of the study was j u s t i f i e d on the basis that during crises, decision processes tend to centralize and s h i f t to the top of an organization when goals central to the organization are threatened (Hermann, 1972).  Other decision-making  centers within an organization were studied in terms of their behavioural alignment with the principal actors on certain variables, for example, communications patterns and response times.  - 135 Although the conceptual framework permitted identification of a specific target for the empirical study (senior executives), nevertheless, this focus provided only a ' f i r s t cut' in the analysis.  Some important  aspects of crises that are not centered at the top of the hierarchy are not dealt with by the model.  For example, one must focus on the total  organization to assess the impact of structure and inter-unit relationships upon crisis management patterns.  Similarly, communications systems  and the evolution of organizational norms can only be analyzed in the context of the total firm. As a tool for empirically testing the theory, the study must be regarded primarily as a p i l o t .  I t explored areas showing promise and  meriting investment in more rigorous research designs.  The study iden-  t i f i e d underlying patterns in the data that were then used to further describe behaviour during crises.  These patterns also were used to test  the effectiveness of theoretical concepts as principals for organizing data. Smallest Space Analysis (SSA) was the technique used to identify these latent dimensions.  SSA was f i r s t applied to data representing  behavioural programs during a crisis.. important in delineating behaviour.  Two dimensions were found to be The f i r s t dimension was entrepre-  neurship versus defensiveness, and the second dimension was " f i r e - f i g h t i n g " versus long-term investment. sion-making structures.  SSA was also applied to data concerning deci-  Two dimensions were identified.  One axis repre-  sented quality of decision-making ( r a t i o n a l i t y ) , and the second axis represented the degree of exposure to uncertainty during decision-making. The findings of the Smallest Space Analysis supported the theoretical constructs.  - 136 The results derived from testing specific hypotheses suffered prima r i l y from two methodological shortcomings: conclusiveness of findings.  a) response effects, and b)  Cozby (1977) and Sudman and Bradburn (1974)  have reviewed the problem of response effects on v a l i d i t y .  An important  response effect is the problem of self-presentation in survey research. People tend to t r y and make as good an impression on other people as possible.  "The social desirability response set leads the individual to  answer in the most socially acceptable way -- the way he thinks most people respond or the way that reflects most favorably on him . . . i f a survey asked people to admit to behavior they may consider undesirable, the results may be considered suspect" (Cozby, 1977:49). In gathering data on senior executives' attitudes and behaviour during crises there was a danger that subjects would respond in a manner they perceived to be 'good management' practice.  The findings, however, were con-  sidered to be quite robust for two reasons.  F i r s t , since self-administered  questionnaires are anonymous, they seem to be less subject to the biases of self-presentation than face-to-face interviews (Sudman and Bradburn, 1974: o  40).  Secondly, this study sought only to examine the relationships between  variables in c r i s i s situations, not to determine absolute levels of performance. The second methodological shortcoming results from the fact that tests of hypotheses were based upon observed associations.  Although the  conclusiveness of the results may be questioned for this reason, the shortcoming is a general problem in non-experimental organizational research. Without using an appropriate experimental design, or at least a quasi- . experimental design, the findings of the study are inconclusive.  At best,  - 137 they can be regarded only as supportive evidence for the theory, and the quality of this evidence is not e x p l i c i t l y specified. There are several d i f f i c u l t i e s , however, in attempting to study c r i s i s behaviour experimentally.  Laboratory experiments, while feasible,  are'highlyconstrained by ethical considerations.  Much of the interesting  phenomena of crisis behaviour centers around reactions to intense stress generated by threats.  One must question whether an experimenter could  j u s t i f y subjecting participants to stressful experiences.  Without simu-  lating the stressful effects of a c r i s i s , however, the threats to external v a l i d i t y are magnified. Field experiments, in contrast, may be v a l i d , but are rarely feasible. I t would be most d i f f i c u l t to find an organization w i l l i n g to deliberately generate crises or stress for i t s e l f .  The third option, quasi-experimental  designs (Campbell, 1969) also has d i f f i c u l t i e s . of gaining access to relevant information.  The problem here is one  Organizations in c r i s i s no  doubt would be reluctant to give access to their f i l e s for reasons of security and self-representation. The third objective of the study was to develop managerial tools for diagnosing strengths and weaknesses.  Diagnostic functions were con-  structed that predicted vulnerabilities to c r i s i s on the basis of executive and organizational attributes.  Discriminant analysis was used to  derive the predictive functions and their powers of discrimination generally were high.  Such functions, however, should be used for  screening purposes only, since they are not based upon causal models, but only upon patterns of association.  The discriminant functions  derived in this study could be improved by enlarging significantly the sample size.  This would reduce the probability of discriminating on  - 138 the basis of c r i t e r i a specific to the sample of subjects, but irrelevant to the total population under study.  One could also use the discriminant  functions as inputs to a diagnostic simulation model to test alternative design propositions (Smart, Thompson, and Vertinsky, 1978). The fourth major objective of this study was to develop prescriptions for improving crisis coping a b i l i t i e s and for preventing crises. The prescriptions developed tended to concentrate on specific aspects of the conceptual model of c r i s i s (Figure 1).  For example, to reduce c r i s i s  susceptibility improved scanning and monitoring techniques were suggested to help temper the impacts of an uncertain environment.  On a more major  scale, basic modifications in organizational structure were proposed to improve performance in crises, for example, dual decision-making structures. Prescriptions for improving coping a b i l i t i e s during crisies focussed on components of the decision-making process derived from the Smallest Space Analysis.  These included suggestions to reduce the effects of bu-  reaucratization, implementation and evaluation dysfunctions, and excessive risk-taking.  The prescriptions were of a type that would increase general  management capabilities, for example, expanding the repertoire of standard operating procedures, improving the motivation of line units, and making procedural modifications in the decision-making process to use techniques such as a devil's advocate, dialectics, and scenario building. The development of prescriptions is i t s e l f an act of judgment based upon current knowledge.  Although many of the prescriptions suggested may  be effective in preventing crises or reducing their impacts, future studies should include an evaluation of the proposals.  I n i t i a l l y , this could be  accomplished, in part, by means of experiments using a r t i f i c i a l organizations in simulated environments.  laboratory  - 139 To conclude, future research should: Generate alternative theoretical perspectives to enrich the domain of analysis. Expand the sample space to include participants from different organizational hierarchical levels 'as well as more diverse organizations (e.g. cross-cultural studies). Improve the conclusiveness of findings by employing quasiexperimental designs. Evaluate prescriptions.  - 140 BIBLIOGRAPHY Ackoff, R. L. "Management Misinformation Systems", Management Science, XIV(4), December 1967, pp. 147-156. Albers, R. J. "Anxiety and Time Perspectives", Dissertation Abstracts, 21 , 1 966, 4848. Aldrich, H. E. "Technology and Organizational Structure: A Reexamination of the Findings of the Aston Group", Administrative Science Quarterly, 17(1), 1972, pp. 26-43. Allison, G. T.  Essence of Decision, Boston:  L i t t l e , Brown, 1971.  Andrews, F. M., and G. F. Farris "Time Pressure and Performance of Scientists and Engineers", Organizational Behaviour and Human Performance, 8, 1972, pp. 185-200. Ansoff, H. I . , and R. G. Brandenburg "A Language for Organizational Design: Parts I and I I " , Management Science, 17, 1971, pp. B705-731 . Arnold, J. E. "Useful Creative Techniques" in S. J. Parnes and H. F. Harding (eds.), A Sourcebook for Creative Thinking, Mew York: Scribner's, 1962, pp. 251 -268. Baker, F.  Organizational Systems, Homewood, 111.:  R. D. Irwin, Inc., 1973.  Barret, J. H. Individual Goals and Organizational Objectives, Ann Arbor: Institute for Social Research, The University of Michigan, 1970. Barth, R. T., and I. B. Vertinsky "Organizational Form and OR/MS Implementation in a Developing Region", Management International Revue, Vol. 13, 1 973. Barton, A. H. Communities in Disaster: A Sociological Analysis of Collective Stress Situations, New York: Doubleday, 1 969. Bass, B. M., E. R. Valenzi, D. L. Farrow, and R. J. Solomon, "Management Styles Associated with Organizational, Task, Personal, and Interpersonal Contingencies", Journal of Applied Psychology, Vol. 60(6), 1975, pp. 720-729. Bass, B. M., and G. Dunteman "Behavior in Groups as a Function of SelfInteraction and Task Orientation", Journal of Abnormal and Social Psychology, 66, 1963, pp. 419-428. Bass, B. M., and E. R. Valenzi "Contingent Aspects of Effective Management Styles" in J. G. Hunt and L. L. Larson (eds.), Contingency Approaches to Leadership, Carbondale: Southern I l l i n o i s University Press, 1974. Beier, E. G. "The Effects of Induced Anxiety on F l e x i b i l i t y of Intellectual Functioning", Psychological Monographs, 65, 1951, No. 326.  - 141 Bennis, W. G. Changing Organizations: Essays on the Development and Evolution of Human Organizations, New York: McGraw-Hill, 1966. Blake, R. R., and J. S. Mouton Publishing Co., 1964.  The Managerial Grid, Houston:  Blau, P. M. On the Nature of Organizations, New York: Sons, 1974.  Gulf  John Wiley and  Blau, P. M. "Decentralization in Bureaucracies" in Mayer N. Zald (ed.), Power in Organizations, Nashville, Tenn.: Vanderbilt University Press, 1970. •  Blau, P. M. "A Formal Theory of Differentiation in Organizations", American Sociological Review, 35(2), 1970, pp. 201-218. Blau, P. M., and R. A. Schoenherr Basic Books, 1971. Blau, P. M., and W. R. Scott 1962.  The Structure of Organizations, New York:  Formal Organizations, San Francisco:  Chandler,  Bloombaum, M. "Doing Smallest Space Analysis", Journal of Conflict Resolution, 14, 1960, pp. 409-416. Bouchard, T. J. (Jr.) "Field Research Methods: Interviewing, Questionnaires, Participant Observation, Systematic Observation, Unobtrusive Measures" in Marvin D. Dunnette (ed.), Handbook of Industrial and Organizational Psychology, Chicago: Rand McNally, 1976. Bowers, D. G. "Hierarchy, Function, and the General izabil i t y of Leadership Practices" in J. G. Hunt and L. L. Larson (eds.), Leadership Frontiers, Kent, Ohio: The Comparative Administration Research I n s t i t u t e , Kent State University, 1975. Burns, T., and G. H. Stalker Tavistock, 1961. Burnstein, E. Shift)",  The Management of Innovation, London:  "An Analysis of Group Decision Involving Risk (The Risky Human Relations, 1969, 22, pp. 381-395.  Campbell, D. T. "Reforms as Experiments", American Psychologist, Vol. 24, 1969, pp. 409-429. Campbell, J . P., M. D. Dunnette, E. E. Lawler, and K. E. Weick Managerial Behaviour, Performance, and Effectiveness, New York: McGraw-Hill, 1970. Cangelosi, V. E., and W. R. Dill "Organizational Learning: Observations Towards a Theory", Administrative Science Quarterly, 10, 1965, pp. 173-203. Carter, E. D. "Designing the Capital Budgeting Process" in Paul Nystrom and William H. Starbuck (eds.), Prescriptive Models of Organizations, New York: Elsevier North-Holland, 1977, pp. 25-42. Chandler, A.  Strategy and Structure, Garden City, N.Y.:  Anchor Books, 1966.  - 142 Child, J. "Organizational Structure, Environment, and Performance: Role of Strategic Choice", Sociology, 1972(6), pp. 1-22.  The  Child, J . , and R. Mansfield "Technology, Size,' and Organization Structure", Sociology, 6(3), 1972, pp. 369-93. Cozby, P. C.  Methods in Behavioral Research, Palo Alto, CA:  Mayfield, 1977.  Cribben, J . J . Effective Managerial Leadership, American Management Assoc. Inc., 1972. Crozier, M. The Bureaucratic Phenomenon, Chicago: Press, 1963.  University of Chicago  Cyert, R., and J. G. March A Behavioral Theory of the Firm, Englewood C l i f f s , N.J.: Prentice-Hall, 1963. Dawes, R. M. Fundamentals of Attitude Measurement, New York: and Sons, 1972.  John Wiley  Dearborn, D. C , and H. A. Simon "Selective Perception: A Note on the Departmental Identification of Executives", Sociometry, 21, 1958, pp. 140-144. Degerman, R. L. "The Geometric Representation of Some Simple Structures" in R. N. Shepard, et al (eds.), Multidimensional Scaling, Vol. 1, New York: Seminar Press, 1962, pp. 193-211. de Rivera, J. The Psychological Dimension of Foreign Policy, Columbus: C. E. M e r r i l l , 1968. Downs, A.  Inside Bureaucracy, Boston:  L i t t l e , Brown, 1967.  Duncan, R. B. "Characteristics of Organizational Environments and Perceived Environmental Uncertainty", Administrative Science Quarterly, 1972, pp. 313-28. Dunnette, M. D. (ed.) Handbook of Industrial and Organizational Psychology, Chicago: Rand McNally, 1976. Dynes, R. R. Organized Behavior in Disaster, Lexington, Mass.: and Co., 1970.  D. C. Heath  Easterbrook, J. A. "The Effect of Emotion on Cue Utilization and the Organization of Behavior", Psychological Review, 66, 1959, pp. 183-201. Edwards, A. L. The Measurement of Personality Traits by Scales and Inventories, New York: Holt, Riiiehart and Winston, 1970. Emery, F. E., and E. L. T r i s t "The Causal Texture of Organizational Environments", Human Relations, Vol. 18, 1965, pp. 21-32. Etzioni, A. "Toward a Theory of Guided Societal Change", Social Casework, 48, 1968.  - 143 Etzioni,'A. A Comparative Analysis of Complex Organizations, New York: The Free Press, 1 975. Festinger, L. A Theory of Cognitive Dissonance, Evanston, 111.: Peterson, 1957.  Row  '  Festinger, L. (ed.) Conflict, Decision and Dissonance, Stanford, Ca.: Stanford University Press, 1964. Fiedler, F. 1 967.  A Theory of Leadership Effectiveness, New York:  McGraw-Hill,  Filley, A., and R. House The Managerial Process and Organizational Behavior, Glenview, 111.: Scott, Foresman, 1969. Fink, S. L., J. Beak, arid K. Taddeo "Organizational Crises and Change", Journal of Applied Behavioral Science, 7, 1971, pp. 15-37. Fleishman, E. A., and J. G. Hunt Current Developments in the Study of Leadership, Carbondale, 111.: Southern I l l i n o i s University Press, 1973. Forrester; J. W. Urban Dynamics, Cambridge, Mass.:  MIT Press, 1969.  Frederiksen, N. "Factors in In-basket Performance", Psychological Monographs, 1962, 76(1), No. 541. Frederiksen, N., 0. Jensen, and A. E. Beaton Behavior, New York: Pergamon, 1972.  Prediction of Organizational  F r i t z , C. E., and E. J. Marks "The NORC Studies of Human Behavior in Disaster", Journal of Social Issues, 10, 1954, pp. 26-41. Galbraith, J. Designing Complex Organizations, Reading, Mass.: Wesley, 1973.  Addison-  George, A. "Adaptation to Stress in Political Decision Making:. The Individual, Small Group, and Organizational Contexts".in G. V. Coelho, D. A. Hamburg, and J. E. Adams (eds.), Coping arid Adaptation, New York: Basic Books, 1974. Ghiselli, E. E. "The Validity of Management Traits in Relation to Occupational Level", Personnel Psychology, 16, 1963, pp. 109-113. Gibb, C. A. "Leadership" in G. Lindzey and E. Aronson (eds.), The Handbook of Social Psychology, Second Edition, Volume Four, Reading, Mass.: Addison-Wesley, 1969, pp. 205-282. Godschalk, D. R. Planning in America: Learning From Turbulence, Washington, D.C: American Institute of Planners, 1 974. Gullahorn, J. E. "Multivariate Approaches in Survey Data Processing: Comparisons of Factor, Cluster, and Guttman Analyses and of Multiple Regression and Canonical Correlation Methods", Multivariate Behavioral Research Monographs, No. 67-1.  - 144 Guttman, L. "A General Nonmetric Technique for Finding the Smallest Coordinate Space for a Configuration of Points", Psychometrika, 33(4), December, 1968, pp. 469-504. Haas, J. E., and T. E. Brabek Complex Organizations: Perspective, London: Col 1ier-MacMillan, 1 973.  A Sociological  Haas, J. A., A. M. Porat, and J. A. Vaughn "Actual vs. Ideal Time Allocations Reported by Managers: A Study of Managerial Behavior", Personnel Psychology, 1969, 22, pp. 61-75. Hage, J . , and M. Aiken "Routine Technology, Social Structure, and Organization Goals", Administrative Science Quarterly, 14, 1969, pp. 366-376. Hage, J . , and M. Aiken "Relationship of Centralization to Other Structural Properties", Administrative Science Quarterly, 12(1), 1967. Haire, M., E. E. Ghiselli, and L. W. Porter "Cultural Patterns in the Role of the Manager", Industrial Relations, 1963, 2(2), pp. 95-117. Halberstam, D.  The Best and the Brightest, New York:  Random House, 1972.  Hall, J . , and M. S. Williams "A Comparison of Decision-Making Performances in Established and Ad Hoc Groups", Journal of Personality and Social Psychology, 1966, 3, pp. 214-22. Hall, R. H. (ed.) 1 972.  The Formal Organization, New York:  Basic Books, Inc.,  Hall, R. H. Organizations, Structure and Process, (2nd ed.), Englewood C l i f f s , N.J.: Prentice-Hall, Inc., 1977. Hamblin, R. L. "Group Integration During a Crisis", Human Relations, 1958a, 11, pp. 67-76. Hamblin, R. L.  "Leadership and Crisis", Sociometry, 1958b, 21, pp. 322-335.  Hampton, D. R., C. E. Summer, and R. A. Webber Organizational Behavior and the Practice of Management, Glenview, 111.: Scott, Foresman and Co., 1973 (Rev.). Harman, H. H. Modern Factor Analysis, 2nd Edition, Chicago: of Chicago Press, 1977.  The University  Hemphill, J. K. "Relations Between the Size of the Group and the Behavior of 'Superior' Leaders", Journal of Social Psychology, 32, 1950, pp. 11-22. Hermann, C. F. "Some Consequences of Crisis Which Limit the V i a b i l i t y of Organizations", Administrative Science Quarterly, 8, 1963, pp. 61-82.  - 145 Hermann, C. F. (ed.) International Crisis: Insights from Behavioral Research, New York: The Free Press, 1972. Heydebrand, W. V. Comparative Organizations, Englewood C l i f f s , N.J.: Prentice-Hall, 1973. Hickson, D. J . , D. S. Pugh, and D. C. Pheysey "Operations Technology and Organization Structure: An Empirical Reappraisal", Administrative Science Quarterly, 14, September 1969, pp. 348-397. Holling, C. S. "Myths of Ecological S t a b i l i t y : Resilience and the Problem of Failure", Journal of Business Administration, 9(2), Spring 1978, pp. 95-109. Holsti, 0. R. "Crises, Stress, and Decision-Making", International Social Science Journal, 23, 1971, pp. 53-67. Holsti, 0. R. Crisis, Escalation, War, Montreal: Press, 1972.  McGi11-Queens University  Holsti, 0. R. "Limitations of Cognitive A b i l i t i e s in the Face of C r i s i s " , Journal of Business Administration, 9(2), Spring 1978, pp. 39-55. House, R. J . , and G. Dessler "The Path-Goal Theory of Leadership: Some Post Hoc and A Priori Tests" in J. G. Hunt and L. L. Larson (eds.), Contingency Approaches to Leadership, Carbondale, 111.: Southern I l l i n o i s University Press, 1974, pp. 29-55. House, R. J . , and J. B. Miner "Merging Management and Behavioral Theory: The Interaction Between Span of Control and Group Size", Administrative Science Quarterly, 15, 1969, pp. 451-464. Hunt, J . G., and L. L. Larson (eds.) Leadership Frontiers, Kent, Ohio: The Comparative Administration Research I n s t i t u t e , Kent State University, 1975. Hunt, J. G., and L. L. Larson (eds.) Contingency Approaches to Leadership, Carbondale, 111.: Southern I l l i n o i s University Press, 1974. Indik, B. P, S. E. Seashore, and B. S. Georgepoulos "Relationships Among Criteria of.'Job Performance", Journal of Applied Psychology, 44, 1960, pp. 195-202. Jacobs, T. 0. Developing Questionnaire Items, Alexandria, Virginia: Resources Research Organization, 1974.  Human  Janis, I. L.  "Groupthink", Psychology Today, November 1971, pp. 43-46, 45-76.  Janis, I. L.  Victims of Groupthink, Boston:  Houghton M i f f l i n , 1972.  Janis, I. L., and L. Mann Decision Making, New York:  Free Press, 1977.  - 146 Jones, A., H. J. Wilkinson, and I . Braden "Information Deprivation as a Motivational Variable", Journal of Experimental Psychology, 66, 1961, pp. 126-137. Jurkovich, R. "A Core Typology of Organizational Environments", Administrative Science Quarterly, Vol. 19, 1974, pp. 380-394. Kahn, R. L., D. M. Wolfe, R. P. Quinn, J. D. Snoek, and R. A. Rosenthal, Organizational Stress: Studies in Role Conflict and Ambiguity, New York: John Wiley and Sons, 1964. Katz, D., and R. L. Kahn "Leadership Practices in Relation to Productivity and Morale" in D. Cartwright and A. Zander (eds.), Group Dynamics: Research and Theory, Harper and Row, 1953. Kerlinger, F. N. Foundations of Behavioral Research, New York: Rinehart and Winston, 1966.  Holt,  Kerlinger, F. N. and E. J. Pedhazur Multiple Regression in Behavioral Research, New York: Holt, Rinehart and Winston, 1973.' Kerr, S., C. A. Schriesheim, C. J. Murphy, and R. M. Stogdill "Toward a Contingency Theory of Leadership Based Upon the Consideration and I n i t i a t i n g Structure Literature", Organizational Behavior and Human Performance, 12, 1974, pp. 62-32. Khandwalla, P. P. "Environment and Its Impact on the Organization", International Studies of Management and Organization, 2(3), pp. 297-313, 1 972. Kogan, N., and M. A. Wallach Winston, 1964.  Risk Taking, New York:  Holt, Rinehart and  Kornhauser, A. Mental Health of the Industrial Worker, New York: Wiley and Sons, Inc., 1965.  John  Kupperman, R. H., R. H. Wilcox, and H. A. Smith "Crisis Management: Opportunities", Science, Vol. 187, February 1975, pp. 494-410.  Some  Langer, J . , S. Wapner, H. Werner "The Effects of Danger Upon the Experience of Time", American Journal of Psychology, 74, 1961, pp. 94-97. Lanzetta, J. T., and T. B. Roby "Effects of Work-Group Structure and Certain Task Variables on Group Performance", Journal of Abnormal and Social Psychology, 53, 1957, pp. 307-314. La Porte, T. R. (ed.) Organized Social Complexity: Challenge to Politics and Policy, New Jersey: Princeton University Press, 1975. Lawrence, P. R., and J. W. Lorsch Organization and Environment, Homewood, 111.: Richard D. Irwin, 1969.  - 147 Lawrence, P. R., and J. W. Lorsch Organization and Environment: Managing Differentiation and Integration, Cambridge, Mass.: Harvard Graduate School of Business Administration, 1967. Leavitt, H. J. Managerial Psychology, Chicago: Press, 1972. Leavitt, H., L. Pinfield, and E. Webb (eds.) New York: Praeger Publishers, 1974. Levine, S.  The University of Chicago  Organizations of the Future,  "Stress and Behavior", Scientific American, 224, 1971, pp. 26-31.  Lingoes, J. C. "A General Survey of the Guttman-Lingoes Nonmetric Program Series" in R. N. Shepard, et al (eds.), Multidimensional Scaling, Vol. 1, New York: Seminar Press, 1972, pp. 49-68. Lingoes, J. C. Guttman-Lingoes Nonmetric Program Series, Ann Arbor, Mich.: Mathesis Press, 1973. L i p p i t t , R., and R. K. White "The 'Social Climate' of Children's Groups" in R. G. Barker, J. S. Kounin, and H. F. Wright (eds.), Child Behavior and Development, New York: McGraw-Hill, 1943, pp. 485-508. L i t t e r e r , J. A.  The Analysis of Organizations, New York:  Wiley, 1973.  Loomis, C. P. Social Systems: Essays on Their Persistence and Change, New York: D. Van Nostrand, 1960. McClelland, D. C. Power, The Inner Experience, New York: Publishers, 1975. McClelland, D. C. McGregor, D.  The Achieving Society, New York:  Irvington  The Free Press, 1961.  Leadership and Motivation, Cambridge, Mass.:  MIT Press, 1966.  Maier, N. R. F. "Assets and L i a b i l i t i e s in Group Problem Solving: The Need for an Integrative Function", Psychological Review, 74, 1967, pp. 239-249. Maier, N. R. F. Problem Solving and Creativity in Individuals and Groups, Belmont, Ca.: Brooks-Cole, 1970. March, J. G., and J. P. Olsen Ambiguity and Choice in Organizations, 01 so: Universitetsforlaget, 1976. March, J. G., and H. A. Simon 1958.  Organizations, New York:  John Wiley and Sons,  Milburn, T. W. "The Management of Crises".,in Charles F. Hermann (ed.), International Crises: Insights From Behavioral Research, New York: The Free Press, 1972, pp. 259-277. Miller, G. A. "The Magical Number Seven, Plus or Minus Two: Some Limits on Our Capacity for Processing Information", Psychological Review, 63, 1956, pp. 81-97.  - 148 Miller, J. G. "Information Input Overload and Psychopathology", American Journal of Psychiatry, 16, 1960, pp. 695-704. Mintzberg, H.  The Nature of Managerial Work, New York:  Harper and Row, 1973.  M i t r o f f , I. I . , and L. R. Pondy "On the Organization of Inquiry: A Comparison of Some Radically Different Approaches to Policy Analysis", Public Administrative Review, 34, 1974, pp. 471-479. Morrison, D. G. "On the Interpretation of Discriminant Analysis", Journal of Marketing Research, Vol. 6, May 1969, pp. 156-163. Mulder, M., J . R. R. van Eck, and R. D. de Jong "Organizations in Crisis and Non-Crisis Situations", Human Relations, 24, 1971, pp. 19-41. Nathan, J . A.  "The Missile Crisis", World P o l i t i c s , 27, 1975, pp. 256-281.  Nie, N. H., C. H. Hull, J. G. Jenkins, K. Steinbrenner, D. H. Bent SPSS: Statistical Package for the Social Sciences, 2nd Edition, New York: McGraw-Hill, 1975. Olmstead, J. A. "Leader Performance as Organizational Process: A Study of Organizational Competence" in J. G. Hunt and L. L. Larson (eds.), Contingency Approaches to Leadership, Carbondale, 111.: Southern I l l i n o i s University Press, 1974. Osborn, R. N., and J. G. Hunt "An Adaptive-Reactive Theory of Leadership: The Role of Macro Variables in Leadership Research" in J. G. Hunt and L. L. Larson (eds.), Leadership Frontiers, The Comparative Administration Research I n s t i t u t e , Kent State University, 1975. Osborn, R. N., and J. G. Hunt "Environmental and Organizational Effectiveness", Administrative Science Quarterly, 1974(19), pp. 231-46. Paige, G. D.  The Korean Decision, New York:  The Free Press, 1968.  Perrow, C. "A Framework for the Comparative Analysis of Organizations", American Sociological Review, 32, 1967, pp. 194-208. Perrow, C. Organizational Analysis: Publishing Co. Inc., 1970.  A Sociological View, Waysworth  Pfeffer, J. "Size and Composition of Corporate Boards of Directors: The Organization and Its Environment", Administrative Science Quarterly, Vol. 17, 1972, pp. 218-228. Pfeffer, J . , and H. LebTebici "The Effect of Competition on Some Dimensions of Organizational Structure", Social Forces, 52(2), 1973, pp. 268-279. Pfeffer, J . , and G. R. Salancik The External Control of Organizations: A Resource Dependence Perspective, New York: Harper and Row, 1978. Porter, L. W., and E. E. Lawler "The Effect of Tall versus Flat Organization Structures on Managerial Job Satisfaction", Personnel Psychology, 17, 1964, pp. 135-148.  - 149 Porter, L. W., and J. Siegel "Relationships of Tall and Flat Organization Structures to the Satisfactions of Foreign Managers", Personnel Psychology, 18, 1965, pp. 379-392. Porter, L. W., E. E. Lawler I I I , and.'J. R. Hackman New York: McGraw-Hill, 1975.  Behavior in Organizations,  Postman, L., and J. Bruner "Perception Under Stress", Psychological Review, IV, 1948, pp. 314-323. Press, S. J. Applied Multivariate Analysis, New York: Winston, 1973.  Holt, Rinehart and  Pugh, D. S., D. J. Hickson, C. R. Hinings, and C. Turner "Dimensions of Organizational Structure", Administrative Science Quarterly, 13, June 1968, pp. 65-105. Pugh, D. S., D. J. Hickson, C. R. Hinings, and C. Turner "The Context of Organization Structures", Administrative Science Quarterly, 14, March 1969, pp. 91-114. Questionnaire Design Manual, London: 1 972. Raiffa, H.  Social and Community Planning Research,  Decision Analysis, Reading, Mass.:  Addison-Wesley, 1 968.  Robinson, J. A. "Crisis: An Appraisal of Concepts and Theories" in Charles F. Hermann (ed.), International Crises: Insights from Behavioral Research, New York: The Free Press, 1972, pp. 20-35. Rummel, R. J. "Understanding Factor Analysis", Journal of Conf!ict Resolution, I I , 1967, pp. 444-480. Rummel, R. J. Applied Factor Analysis, Evanston: Press, 1970. Sales, S. M. "Supervisory Style and Productivity: Personnel Psychology, 19, 1966, pp. 275-285. Sayles, L. R. Managerial Behavior: New York: McGraw-Hill, 1964.  Northwestern University Review and Theory",  Administration in Complex Organizations,  Schein, E. H. Organizational Psychology (2nd Edition), Englewood C l i f f s , N.J.: Prentice-Hall, 1972. Schuster, F. E., and A. F. Kindall "Management by Objectives: Where We Stand - A Survey of the Fortune 500", Human Resource Management, Vol. 13(1), Spring 1974, pp. 8-11 . Seashore, S. E., and E. Yuchtman "A System Resource Approach to Organizational Effectiveness", American Sociological Revue, 1972, 32, pp. 881-903.  - 150 Segal, M. "Organization and Environment: A Typology of Adaptability and Structure", Public Administration Review, 1974, 34, pp. 212-220. Shepard, R. N., A. K. Romney, arid S. B. Nerlove Multidimensional Scaling: Theory and Applications in the Behavioral Sciences, Vol. 1, New York: Seminar Press, 1972. Siegel, S. Nonparametric Statistics for the Behavioral Sciences, New York: McGraw-Hill, 1956. Simpson, R. L., and W. H. Gulley "Goals Environmental Pressures and Organizational Characteristics" in W. V. Heydebrand (ed.), Comparative Organizations, Englewood C l i f f s , N.J.: Prentice-Hall, 1973. Slovic, P., H. Kunreuther, and G. F. White "Decision Processes, Rationality and Adjustment to Natural Hazards" in G. F. White (ed.), Natural Hazards: Local, National, and Global, New York: Oxford Press, 1974. Smith, R. A.  Corporations in Crisis, New York:  Doubleday, 1963.  Smart, C. F., W. A. Thompson and I. Vertinsky "Diagnosing Corporate Effectiveness and Susceptibility to Crises", Journal of Business Administration, Vol. 9(2), 1978, pp. 57-96. Smock, C. D. "The Influence of Psychological Stress on the Intolerance of Ambiguity", Journal of Abnormal Psychology, 50, 1955, pp. 177-182. Sorenson, T. Decision Making in the White House: The Olive Branch or the 01ives, New York: Columbia University Press, 1963. Spector, S. J . , R. A. Clark, and A. S. Glickman "Supervisory Characteristics and Attitudes of Subordinates", Personnel Psychology, 13, pp. 301-316. Stanton, E. S. "Company Policies and Supervisors' Attitudes Toward Supervision", Journal of Applied Psychology, 44, 1960, pp. 22-26. Starbuck, W. H. Organizations and Their Environments, Berlin: International Institute of Management, February 1973, (Discussion Papers). Starbuck, W. H., A. Greve, and B. L. T. Hedberg "Responding to Crises: Theory and the Experience of European Business", Journal of Business Administration, 9(2), Spring 1978, pp. 107-135. Staw., B. M. "Knee-deep in the Big Muddy: A Study of Escalating Commitment to a Chosen Course of Action", Organizational Behavior and Human Performance, 16, 1976, pp. 27-44. Steers, R. M. Organizational Effectiveness: Ca.: Goodyear Publishing Co., 1977. Stein, M. I.  A Behavioral View, Santa Monica,  Stimulating Creativity, New York:  Academic Press, 1974.  - 151 Steinbruner, J. The Cybernetic Theory of Decision, Princeton University Press, 1974. Stogdill, R. M. "Personal Factors Associated with Leadership: A Survey of the Literature", Journal of Psychology, 25, 1948, pp. 35-71. S t o g d i l l , R. M.  Handbook of Leadership, New York:  The Free Press, 1974.  Sudman, S. and N. M. Bradburn Response Effects in Surveys, Chicago: Aldine Publishing Company, 1974. Suedfeld, P. "Information Processing as a Personality Model" in Harold M. Schroeder and Peter Suedfeld (eds.), Personality Theory and Information Processing, New York: Ronald Press, 1971, pp. 3-14. Sutton, R. L. "Cultural Context and Change-Agent Organizations", Administrative Science Quarterly, 19, 1974, pp. 547-562. Swingle, P. G. The Structure of Conflict, New York:  Academic Press, 1976.  Tannenbaum, R., and W. H. Schmidt "How to Choose a Leadership Pattern", Harvard Business Review, March/April, 1958. Tanter, R. "Crisis Management: A Critical Review of Academic Literature", The Jerusalem Journal of International Relations, Vol. 1(1), Fall 1975, pp. 71-101. Taylor, J. C. "Technology and Supervision in the Postindustrial Era" in J. E. Hunt and L. L. Larson (eds.), Contingency Approaches to Leadership, Carbondale, 111.: Southern I l l i n o i s University Press, 1974. Taylor, R. N. "Psychological Determinants of Bounded Rationality: Implications for Decision-Making Strategies", Decision Sciences, 6, 1975, pp. 409-429. Thibaut, J. W., and H. H. Kelley Wiley, 1959.  The Social Psychology of Groups, New York:  Thompson, J . D., and W. J . McEwen "Organizational Goals and Environment: Goal Setting as an Interaction Process", American Sociological Review, 23, February 1958, pp. 23-30. Tullock, G. The Politics of Bureaucracy, Washington, D.C: Press, 1965.  Public Affairs  Turner, B. A. "The Organizational and Interorganizational Development of Disasters", Administrative Science Quarterly, 21, 1976, pp. 378-397. Tversky, A., and D. Kahneman, "Judgment Under Uncertainty: Biases", Science, 185, September 1974, pp. 1124-1131.  Heuristics and  Vroom, V. "Leadership" in M. Dunnette (ed.), Handbook of Industrial and Organizational Psychology, Chicago: Rand McNally, 1976.  - 152 Vroom, V., and F. Mann "Leader Authoritarianism and Employee Attitudes", Personnel Psychology, 13, 1960, pp. 125-139. Vroom, V., and P. W. Yetton Leadership and Decision Making, Pittsburgh: University of Pittsburgh Press, 1973. Wagner, A. R. Crisis Decision Making: New York: Praeger, 1974.  Israel's Experience in 1967 and 1973,  Wallach, M. A., N. Kogan and D. T. Bern "Diffusion of Responsibility and Level of Risk Taking in Groups", Journal of Abnormal and Social Psychology, 68, 1964, pp. 263-274. Wallach, M. A., N, Kogan, and D. T. Bern "Group Influence on Individual Risk Taking", Journal of Abnormal and Social Psychology, 65, 1962, pp. 75-86. Wallach, M. A., N. Kogan, arid R. Burt "Are Risk Takers More Persuasive Than Conservatives in Group Decisions?" Journal of Experimental Social Psychology, 4, 1968. Warwick, D. P., and C. A. Lininger New York: McGraw-Hill, 1975.  The Sample Survey:  Theory and Practice,  Weick, K. E. The Social Psychology of Organizing, Reading, Mass.: Wesley, 1969..  Addison  Williamson, 0. E. Markets and Hierarchies: Analysis and Antitrust Implications , New York: The Free Press, 1975. Yuchtman, E., and S. E. Seashore "A System Resource Approach to Organizational Effectiveness" in F. Baker (ed.), Organizational Systems, Homewood, 111.: Richard D. Irwin, Inc., 1973.  - 153 -  Appendix 1 Letter of Invitation and Crisis Questionnaire  - 154 THE UNIVERSITY OF BRITISH COLUMBIA 2075 W E S B R O O K P L A C E  VANCOUVER, B.C., CANADA V6T FACULTY COMMERCE  AND  1W5  OF  BUSINESS A D M I N I S T R A T I O N  September 11,  1978  Conventional wisdom suggests that during c r i s e s men are capable of drawing upon hidden r e s e r v o i r s of strength to perform extraordinary feats of creative decision-making. There i s , however, growing evidence to c a l l into question the premise that during c r i s e s men always ' r i s e to the occasion'. Indeed, there are times when corporate performance i s so impaired that a major f i a s c o r e s u l t s . The Corporate C r i s i s Study Group at the University of B.C. was formed to study how corporations and managers working within those corporations respond to the challenges and demands of a business c r i s i s . Since c r i s i s d e c i s i o n making i s p r i m a r i l y a function of senior management and p a r t i c u l a r l y of the chief operating o f f i c e r , we are asking your assistance i n our study of c r i s i s phenomena. Enclosed i s a b r i e f questionnaire that i s designed to learn about the attitudes and decision-making styles of senior executives i n c r i s i s s i t u a t i o n s . General information about your corporation and i t s environment i s also requested. Would you please give us approximately t h i r t y minutes of your time and complete the questionnaire. Similar information i s being requested from a sample of the chief operating o f f i c e r s of the top 400 corporations i n Canada and the U.S. We wish to stress that responses to the questionnaire w i l l be kept c o n f i d e n t i a l and that i t w i l l not be possible to i d e n t i f y responses with i n d i v i d u a l s or s p e c i f i c corporations. Although the study w i l l be financed by Canadian and international agencies, no agency has control over the d i r e c t i o n of the study or over the information received. No i n d i v i d u a l responses w i l l be released to any agencies or other persons and the r e s u l t s of the study w i l l be published openly i n professional journals.  - 155 -  I f y o u r t i m e s c h e d u l e i s s u c h t h a t you cannot a s s i s t u s , would you p l e a s e pass the q u e s t i o n n a i r e t o a n o t h e r s e n i o r e x e c u t i v e i n your company t o c o m p l e t e . We s t r e s s t h a t t h i s i s a s t u d y of s e n i o r management not m i d d l e management. Please r e t u r n the q u e s t i o n n a i r e i n the e n c l o s e d envelope w i t h i n t h r e e weeks. To o b t a i n the most i n f o r m a t i o n from the s t u d y , your p e r s o n a l p a r t i c i p a t i o n i s v e r y i m p o r t a n t t o u s . We w i l l o f f e r you a copy of the r e s u l t s of the s t u d y ; t h e s e s h o u l d be a v a i l a b l e e a r l y n e x t s p r i n g . S i n c e the c o r p o r a t i o n s t h a t p a r t i c i p a t e i n t h e study w i l l be anonymous, we cannot send t h e r e s u l t s to you a u t o m a t i c a l l y . I f you a r e i n t e r e s t e d , p l e a s e w r i t e t o us and we w i l l send you t h e information. The C o r p o r a t e C r i s i s Study Group a l s o has r e c e n t l y p u b l i s h e d some more g e n e r a l m a t e r i a l on c r i s i s management t h a t we would be p l e a s e d t o send i f you so request. Thank you v e r y much f o r your Yours  cooperation.  truly,  Ilan Vertinsky, P r o f e s s o r of P o l i c y A n a l y s i s .  C a r o l y n e Smart, Project Director. IV/ee Encl.  - 156 CORPORATE CRISIS QUESTIONNAIRE  For the purpose of t h i s questionnaire, a c r i s i s i s defined as an unexpected event that s e r i o u s l y threatens major corporate goals and presents a r e s t r i c t e d time i n which a response can be made.  Section 1 Please examine the following statements describing some s p e c i f i c operating s t r a t e g i e s that an organization may use to help i t deal with an unexpected c r i t i c a l decline i n p r o f i t s . Without any further information, i n d i c a t e how useful you think these s t r a t e g i e s would be in r e l i e v i n g a f i n a n c i a l c r i s i s in a t y p i c a l f i r m i n your industry. Please c i r c l e the number on the scale that represents your evaluation 1.  To reduce a f i n a n c i a l c r i s i s , a company should develop an aggressive marketing strategy to increase s a l e s . (very useful)  2.  5  6  7  (very damaging)  1  2  3  4  5  6  7  (very damaging)  1  2  3  4  5  6  7  (very damaging)  1  2  3  4  5  6  7  (very damaging)  During a f i n a n c i a l c r i s i s , s t a f f should be reduced. (very useful)  6.  4  Management should t r y to e n l i s t the support of unions in a j o i n t e f f o r t to improve p r o d u c t i v i t y during a f i n a n c i a l c r i s i s . (very useful)  5.  3  To reduce a f i n a n c i a l c r i s i s , a company should impose across-theboard cuts i n the operating budgets of a l l d i v i s i o n s or departments. (very useful)  4.  2  During a f i n a n c i a l c r i s i s , a company should cut back the operating budgets of a l l d i v i s i o n s and departments. (very useful)  3.  1  1  2  3  4  5  6  7  (very damaging)  During a f i n a n c i a l c r i s i s , new products that are s t i l l only marg i n a l l y p r o f i t a b l e should be eliminated to reduce c o s t s . (very useful)  1  2  3  4  5  6  7  (very damaging)  - 157 7.  During a f i n a n c i a l c r i s i s , a company should increase c a p i t a l expenditures on more e f f i c i e n t equipment to t r y and reduce production costs. (very useful)  8.  7  (very damaging)  (19)  1  2  3  4  5  6  7  (very damaging)  (21)  1  2  3  4  5  6  7  (very damaging) (23)  1  2  3  4  5  6  7  (very damaging)  (25)  1  2  3  4  5  6  7  (very damaging) (27)  1  2  3  4  5  6  7  (very damaging) (29)  A company should introduce management by objectives and p r o f i t incentive programmes to help reduce a f i n a n c i a l c r i s i s . (very useful)  14.  6  During a c r i s i s , managers whose d i v i s i o n s have poor performance should be f i r e d . (very useful)  13.  5  A company should increase i t s information gathering a c t i v i t i e s during a f i n a n c i a l c r i s i s . (very useful)  12.  4  During a f i n a n c i a l c r i s i s , the a u t h o r i t y of f i e l d managers and department heads should be reduced. (very useful)  11.  3  During a c r i s i s , a company should cut back on expense items such as long distance c a l l s , photocopying, entertainment allowances, and t r a v e l . (very useful)  10.  2  Research and development a c t i v i t i e s should be expanded to help a company maintain i t s competitive p o s i t i o n during a c r i s i s . (very useful)  9.  1  1  2  3  4  5  6  7  (very damaging) (31)  Major organizational reforms should be undertaken to reduce the e f f e c t s of a c r i s i s . (very useful)  1  2  3  4  5  6  7  (very damaging) (33)  - 158 Section 2 In this section of the questionnaire we are interested in learning about attitudes and behaviours that may affect decision quality and organizational performance during a c r i s i s . Please indicate by c i r c l i n g a number on the scale whether you agree or disagree with the following statements. Base your replies on your own beliefs, expectations, and values. 1.  During a c r i s i s , i t is important for employees to understand the decisions made by management. (strongly agree)  2.  (strongly disagree)  1  2  3  4  5  6  7  (strongly disagree)  1  2  3  4  5  6  7  (strongly disagree)  1  2  3  4  5  6  7  (strongly disagree)  1 2  3  4  5  6  7  (strongly disagree)  1 2  3  4  5  6  7  (strongly disagree)  During a c r i s i s , lower level managers should transmit only important information to their superiors. (strongly agree)  8.  7  During a c r i s i s , i t is important for managers to follow standard operating procedures and to use o f f i c i a l communications channels. (strongly agree)  7.  6  During a c r i s i s , i t is important for employees to agree with the decisions made by management. (strongly agree)  6.  5  To develop team s p i r i t during a c r i s i s , i t is helpful i f managers think of themselves as being in a competition^with the environment as an aggressive opponent. (strongly agree)  5.  4  During a c r i s i s , top management should become involved in day-today operating decisions, by-passing middle managers i f necessary. (strongly agree)  4.  3  I t is important for individuals who are responsible for implementing a decision to be involved in making the decision during crises. (strongly agree)  3.  1 2  1 2  3  4  5  6  7  (strongly disagree)  I t is often more important to reach a decision that is acceptable to certain interest groups within the organization than to reach the 'best' decision to reduce a c r i s i s . (strongly agree)  1 2  3  4  5  6  7  (strongly disagree)  - 159 During a c r i s i s , executives who disagree with proposed p o l i c i e s should keep t h e i r reservations to themselves. (strongly agree)  1  2  3  4  5  6  7  (strongly disagree)  (51)  To avoid wasting time during a c r i s i s , i t i s best to consider only two or three a l t e r n a t i v e solutions to the company's problems. (strongly agree)  1  2  3  4  5  6  7  (strongly disagree)  (53)  During a c r i s i s , preference should be given to s t r a t e g i e s of lower r i s k even i f they may be less e f f e c t i v e than higher r i s k s t r a t e g i e s (strongly agree)  1  2  3  4  5  6  7  (strongly disagree)  (55)  Decision-makers should concentrate on the short term e f f e c t s of a proposed p o l i c y and forget about long range outcomes during a c r i s i s (strongly agree)  1  2  3  4  5  6  7  (strongly disagree)  (57)  During a c r i s i s , i t i s important f o r an executive committee to minimize c o n f l i c t w i t h i n i t s e l f and to be l o y a l to the c h i e f operating o f f i c e r . (strongly agree)  1  2  3  4  5  6  7  (strongly disagree)  (59)  During a c r i s i s , i t i s p a r t i c u l a r l y desirable to have a very strong leader who can provide s o l u t i o n s to the company's problems and push through d e c i s i o n s . (strongly agree)  1  2  3  4  5  6  7  (strongly disagree)  (61)  The negative aspects of a l l proposed solutions to a c r i s i s should be e x p l i c i t l y emphasized. (strongly agree)  1  2  3  4  5  6  7  (strongly disagree)  (63)  Executives need to make decisions q u i c k l y and d e c i s i v e l y during a c r i s i s to maintain corporate confidence i n t h e i r l e a d e r s h i p . (strongly agree)  1  2  3  4  5  6  7  (strongly disagree)  (65)  During a c r i s i s , executives should seek the aid of many people both i n s i d e and outside the company to help evaluate a proposed course o f a c t i o n . (strongly agree)  1  2  3  4  5  6  7  (strongly disagree)  (67)  When faced with a c r i t i c a l s i t u a t i o n , managers should adopt innovative s t r a t e g i e s even i f they are very r i s k y . (strongly agree)  1 2  3  4  5  6  7  (strongly disagree)  (69)  - 160 Section 3 The f o l l o w i n g statements d e s c r i b e c e r t a i n aspects o f managerial s t y l e . Please i n d i c a t e whether o r n o t you t h i n k these are a p p r o p r i a t e behavi o u r s f o r a manager ( a ) d u r i n g c r i s i s p e r i o d s , (b) d u r i n g n o n - c r i s i s periods. Please c i r c l e the number on the s c a l e t h a t r e p r e s e n t s y o u r opinion. 1.  I t i s i m p o r t a n t f o r a manager t o encourage and m a i n t a i n o r g a n i z a t i o n a l harmony. a)  during c r i s i s  ( s t r o n g l y agree) b)  during c r i s i s  ( s t r o n g l y agree) b)  4  5  6  7  (strongly  disagree)  4  5  6  7  (strongly disagree)  periods:  1 2  3  d e c i s i o n s and announce them t o  periods: 1 2  during non-crisis  ( s t r o n g l y agree)  3  4  5  6  7  (strongly  disagree)  4  5  6  7  (strongly  disagree)  periods:  1 2  3  Guidance o f s u b o r d i n a t e s s h o u l d be l i m i t e d t o general processes problem s o l v i n g r a t h e r than to s p e c i f i c task d i r e c t i o n . a)  during c r i s i s  ( s t r o n g l y agree) b)  of  periods: 1 2  during non-crisis  ( s t r o n g l y agree) 4.  3  A manager should make u n i l a t e r a l his subordinates. a)  3.  1 2  during non-crisis  ( s t r o n g l y agree) 2.  periods:  3  4  5  6  7  (strongly  disagree)  4  5  6  7  (strongly  disagree)  periods:  1  2  3  A manager should do h i s b e s t t o ensure t h a t s u b o r d i n a t e s achieve a high l e v e l o f j o b s a t i s f a c t i o n . a)  during c r i s i s  ( s t r o n g l y agree) b)  periods: 1 2  during non-crisis  ( s t r o n g l y agree)  1  3  4  5  6  7  (strongly  disagree)  4  5  6  7  (strongly  disagree)  periods: 2  3  - 161 When faced with a problem, a manager should encourage the contributions of a l l employees to solve the problem. a)  during c r i s i s periods:  (strongly agree) b)  1  2  3  4  5  6  7  (strongly disagree) (23)  4  5  6  7  (strongly disagree) (25)  during non-crisis periods:  (strongly agree)  1  2  3  A manager should regard the organization as a means to achieve production goals not meet the social needs of employees. a)  during c r i s i s periods:  (strongly agree) b)  1  2  3  4  5  6  7  (strongly disagree) (27)  4  5  6  7  (strongly disagree) (29)  during non-crisis periods:  (strongly agree)  1  2  3  Directions given to subordinates always should be accompanied by explanations. a)  during c r i s i s periods:  (strongly agree) b)  1  2  3  4  5  6  7  (strongly disagree)  (31)  4  5  6  7  (strongly disagree)  (33)  during non-crisis periods:  (strongly agree)  1  2  3  A manager should place equal weight on productive efficiency and high employee morale. a)  during crisis periods:  (strongly agree) b)  1  2  3  4  5  6  7  (strongly disagree)  (35)  4  5  6  7  (strongly disagree)  (37)  during non-crisis periods:  (strongly agree)  1  2  3  Employees should be highly programmed; procedures need to be spelled out and 'the rules' enforced. a)  during c r i s i s periods:  (strongly agree) b)  1  2  3  4  5  6  7  (strongly disagree)  (39)  4  5  6  7  (strongly disagree)  (41)  during non-crisis periods:  (strongly agree)  1 2  3  - 162 A manager should encourage the search for new ideas as long as organizational traditions are not violated. a)  during crisis periods:  (strongly agree) b)  1 2  3  4  5  6  7  (strongly disagree)  4  5  6  7  (strongly disagree)  during non-crisis periods:  (strongly agree)  1  2  3  A manager should encourage subordinates to make their own decisions and to act independently. a)  during crisis periods:  (strongly agree) b)  1  2  3  4  5  6  7  (strongly disagree)  4  5  6  7  (strongly disagree)  during non-crisis periods:  (strongly agree)  1 2  3  - 163 Section 4 This section of the questionnaire is concerned with collecting information about your organization's external environment, for example, client groups, markets, suppliers, government agencies and other organizations. Please indicate your agreement or disagreement with each statement as i t applies to your firm by circling the appropriate number on the scale. 1. The environment of your firm is in a continual process of change, (strongly agree) 2.  1  2  3  4  5  6  7  (strongly disagree) (51)  Your firm's predictions of environmental changes are usually accurate. (strongly agree)  1 2  3  4  5  6  7  (strongly disagree) (53)  3. Your organization i s prepared to alter both i t s structure and goals to respond to a changing environment. (strongly agree) 4.  1  2  3  4  5  6  7  (strongly disagree) (55)  Your firm relies to a large extent upon other organizations within i t s environment for growth and survival. (strongly agree)  1  2  3  4  5  6  7  (strongly disagree) (57)  5. The environment is a source of threat to your organization, (strongly agree) 6.  5  6  7  (strongly disagree) (59)  1 2  3  4  5  6  7  (strongly disagree) (61)  1  2  3  4  5  6  7  (strongly disagree) (63)  The problems generated by your firm's environment generally can be characterized as routine and can be dealt with by established corporate procedures. (strongly agree)  9.  4  Your organization has a pool of people and resources that allows i t to make quick adjustments to new situations caused by unanticipated environmental changes. (strongly agree)  8.  3  The environment of your firm is generally predictable, (strongly agree)  7.  1 2  1  2  3  4  5  6  7  (strongly disagree) (65)  There are only a small number of components in your organization's environment and these are somewhat similar to one another. (strongly agree)  1 2  3  4  5  6  7  (strongly disagree) (67)  - 164 Section 5 Following is a l i s t of events that an organization may encounter. How would you rate the a b i l i t y of your organization to cope with each of them. Please circle the appropriate number on the scale. 1.  1  2  3  4  5  6  7  (very low)  (7)  The death of three key senior executives in an air disaster, (very high)  3.  1(5)  A sudden and substantial drop in total sales of your company after a long period of increasing sales. (very high)  2.  (1-3)  1 2  3  4  5  6  7  (very low)  (9)  A steady state environment with zero real sales growth potential. (very high)  1  7  (very low)  01)  A major technological breakthrough with the potential for your company to double i t s sales within two years. (very high)  1  4  (very low)  (13)  A major natural disaster that destroyed 30% of your company's operations. (very high) 6.  1  (15)  A gradual long term decline in market share of your products, (very high)  7.  (very low)  1  2  3  4  5  6  7  (very low)  (17)  'Boom or bust market conditions that can be predicted, 1  (very high)  1  2  3  4  5  6  7  (very low)  (19)  _ 3  - 165 Section 6 Following is a l i s t of factors which are present in many crisis situations. Please indicate what factors in your opinion are the three most important ones in defining a crisis situation. Please select the three factors by placing 1, 2, or 3 in the appropriate space (1 = the most important).  _____  A threat to high p r i o r i t y organizational goals or values.  (21)  An element of surprise in the occurrence of a threatening event.  (23)  A restricted amount of time in which to make a decision.  (25)  A high degree of uncertainty in the possible outcomes of decisions.  (27)  The failure of standard operating procedures to deal with an event.  (29)  The feeling on the part of decision-makers that they are under a great deal of stress.  (31)  In this section of the questionnaire we are interested in your opinion about the possible role of governments in aiding corporations undergoing a financial c r i s i s . Please examine each statement and circle the number that represents your opinion of each action. When a corporation is undergoing a financial c r i s i s , an appropriate role for governments may be to: 1.  Buy common shares in the troubled corporation to increase equity financing. (no role)  2.  3  4  5  6  7  (active role)  (33)  1  2  3  4  5  6  7  (active role)  (35)  Provide direct subsidies to the corporation i f needed, (no role)  4.  2  Provide market information to the corporation, (no role)  3.  1  1  2  3  4  5  6  7  (active role)  (37)  6  7  (active role)  (39)  Make direct loans to the corporation. (no role)  1  2  3  4  5  - 166 5.  Provide management consultation in specific areas. (no role)  6.  (active role)  1  2  3  4  5  6  7  (active role)  1  2  3  4  5  6  7  (active role)  1  2  3  4  5  6  7  (active role)  1  2  3  4  5  6  7  (active role)  1  2  3  4  5  6  7  (active role)  1  2  3  4  5  6  7  (active role)  Intervene directly in labour markets and other resource markets to assure supplies when needed. (no role)  13.  7  Buy up excess inventories of the financially troubled firm. (no role)  12.  6  Restrict foreign competition by enacting quotas and higher t a r i f f s on directly competing imports. (no role)  11.  5  I n i t i a t e mergers and rationalization. (no role)  10.  4  Give preference to the firm in awarding government contracts as a means of temporary r e l i e f . (no role)  9.  3  Provide guarantees for loans made to the firm. (no role)  8.  2  Provide temporary tax r e l i e f . (no role)  7.  1  1  2  3  4  5  6  7  (active role)  Relax anti-combines legislation to allow mergers and rationalization. (no role)  1  2  3  4  5  6  7  (active role)  - 167 Section 7 To help us in the s t a t i s t i c a l analysis of the data, may we please have the following information about your corporate and personal status. 1.  (1-3) (5)  T i t l e of your present position in your company (7) In which functional area have you spent the majority of your career? Production Sales, Marketing, or Advertising Finance or Accounting Personnel, Training, or Industrial Relations Purchasing Research and Development General Administration Other (please specify):  9)  Age (check one) 20-29, 4.  5.  30-39,  40-49,  50+  (11)  Formal education (check the highest level completed) Some High School  Technical Certificate  High School Diploma  University Degree  Some University  Advanced Degree  (13)  Please indicate the approximate size of your company's sales in 1977 fiscal year (check one) Size group ($000s) less than 49,999  500,000-999,999  50,000-99,999  1,000,000-4,999,999  100,000-249,999  greater than 5,000,000  250,000-499,999 6.  15)  In what industry is your firm? 17-19)  4  - 168 7.  How many levels of management are there above your position? (give the number) )  8.  Which description best f i t s the competitive situation in your industry? (check one) One large firm dominates the market A few firms dominate the market Many firms in market but none dominate  9.  Does your company own or have control over i t s sources of raw materials? (please circle appropriate position on the scale) (complete control)  10.  (no control)  8  n/a  When making decisions, do you feel you gather more or less information than other managers in your company? (please circle the number on the scale) (very much less)  11.  1 2 3 4 5 6 7  1 2  3  4  5  6  7  (very much more)  Does your organization have any formal plans to deal with potential crises? yes no I f yes, what kind?  12.  How would you assess the probability of a major crisis occurring in an average firm in your industry within the next five years? (please circle the number closest to your evaluation) 0.0 .25 (very improbable)  13.  .50  .75  1.0 (with certainty)  How would you assess the probability of a major crisis occurring in your company within the next five years? 0.0 .25 (very improbable)  .50  .75  1.0 (with certainty)  THANK YOU VERY MUCH FOR YOUR COOPERATION  - 169 -  Appendix 2 The Kolmogorov-Smirnov Test for a Normal Distribution  - 170 -  The Kolmogorov-Smirnov Test for a Normal Distribution To determine which s t a t i s t i c a l tests are appropriate for analyzing the questionnaire data, i t is essential that we consider the nature of the population from which the sample was drawn.  The Kolmogorov-Smirnov one-sample  test was used to test whether or not the sample data could reasonably have come from a population that was normally distributed.  The Kolmogorov-Smirnov test  is sensitive to any differences between the sample distribution and a specified theoretical d i s t r i b u t i o n , in this case a normal distribution. for example, the degree of skewness and kurtosis.  I t tests,  The test involves specifying  the cumulative frequency distribution that would occur with a normal distribution and comparing this with the observed cumulative frequency d i s t r i b u t i o n . A s t a t i s t i c D is computed that is the point of maximum deviation between the two distributions.  This s t a t i s t i c is compared to a c r i t i c a l value from a  standard Kolmogorov-Smirnov table.  The larger the value of D, the less  l i k e l y the observed (sample) distribution is normal. D = max F (X) 0  S.(X)  where F (X) = the theoretical cumulative frequency distribution S (X) = the observed cumulative frequency distribution of a random n  sample of n observations (Siegel, 1956:48) All pertinent variables in the data set were tested for normality. Of the 70 variables tested, only 21 i n i t i a l l y were distributed normally. Since we wished to use parametric s t a t i s t i c s in the data analysis, i t was necessary to perform distributional transformations to t r y and achieve  - 171 normality.  Rummel (1970:284) discusses a number of transformations that may  be used to normalize and reduce o u t l i e r s , and in some cases to improve the homoscedasticity of the distributions. Depending upon the distributions of the sample variables, a number of different transformations were attempted.  Three transformations were applied  to variables with right skew distributions; these were log  , ( x ^ ) , and 2  1/x..  Four transformations were applied to variables with l e f t skew distribu2 ^ tions; these were (x^) , log x^/1 - x^, ^Ipg 1 + x^/1 - x . , and arcsin ( x ^ ) . 2  After transformations, the distributions were again tested for normality. An additional 21 variables in the data set were transformed to achieve normality, bringing the total to 60% of the sample variables.  However, the  remaining variables were found to have primarily J-shaped or reverse J-shaped distributions.  Rummel (1970:286) notes that for these types of distributions  there is no simple nongrouping transformation that w i l l normalize the d i s t r i bution.  - 172 -  Appendix 3 Smallest Space Analysis  /  - 173 -  Smallest Space Analysis SSA belongs to class of techniques subsumed under the term of 'multidimensional scaling'.  These techniques have been developed "for inferring  multidimensional metric structure from non-metric ordinal data" (Press, 1972: 400).  Despite the diversity of multidimensional scaling techniques, they all  have a unifying purpose of "somehow getting hold of whatever pattern or structure may otherwise l i e hidden in a matrix of empirical data and .... of representing that structure in a form that is much more accessible to the human eye -- namely, as a geometrical model or picture" (Shepard, 1972:1). SSA differs from a traditional factor analysis in that the technique provides a visual presentation of the dimensions.  Also, most factor analytic methods  lead to representations of such high dimensionality that i t is often d i f f i c u l t to identify and interpret the underlying structures. SSA is a nonmetric analysis developed by Guttman (1968).  Although i t  is a method of rigorous multivariate analysis, i t requires no special assumptions.  The technique requires as input, data in the form of a measure that  expresses an observed relationship between pairs of variables, for example, correlation coefficients or conditional probabilities. the Kendall correlation matrix was used as input.  In the present study  Generally, fewer dimensions  are needed to reproduce order information than to reproduce metric information (for example, as in a factor analysis).  To reproduce order information, one  requires a simpler and more direct representation of the data; this in turn f a c i l i t a t e s the interpretative process.  " I f our interest is in patterns or  configurations, the most natural concept for revealing them is order and the appropriate method for analysis is one which focuses on monotonic transformations" (Lingoes, 1972:52).  - 174 The algorithm employed in the SSA programs seek a mathematically"unique configuration of n points in some given type of coordinate space. tions must be satisfied.  Two condi-  The f i r s t condition is that of monotonicity.  To an acceptable degree of approximation, interpoint distances are related to interpoint proximities in the sense that d  i j < kl d  w h e n  s  i j > kl s  where d . . denotes the distance between the points A. and A. in the desired space, and s . . denotes the proximity between the points A. and A..  The  second condition is that the monotonicity condition must be satisfied in as few dimensions as possible (Guttman, 1968). SSA determines the smallest space (in terms of the fewest number of dimensions) in which the body of data may be adequately represented.  The  criterion of visualizabi1ity is the most important factor in smallest space analysis.  For this reason, the representation of the data should be confined  when possible, to two" or at most, three spatial dimensions.  However, the  user of SSA must be aware of the trade-off required between v i s u a l i z a b i l i t y and goodness of f i t .  A coefficient of alienation is calculated for each  analysis that assesses the goodness of f i t . better the f i t .  The smaller the coefficient, the  As the number of dimensions increases, goodness of f i t also  increases, but at the expense of v i s u a l i z a b i l i t y .  Shepard (1972:10) notes  "certainly i t is contrary to the whole s p i r i t and purpose of this approach to data analysis to focus exclusively on goodness of f i t . . . and, so, to go for a representation of so many dimensions that the structure is no longer accessible to the human eye". The following rule of thumb has been suggested to determine whether or not a representation is adequate in terms of goodness of f i t .  For a number  - 175 of dimensions m, i f when m = 2 the coefficient of alienation is much smaller than for when m = 1, and not much larger than when m = 3, the 2-space solution would be adequate (Bloombaum, 1970:411). Interpretation of the spatial representation may occur in a number of ways.  F i r s t , the researcher may look for directionality along the axes.  For  example, as one moves further in one direction through the space, the data may possess more of a particular property.  Second, one can look at the way data  points cluster into homogenous groups throughout the space.  Third, the manner  in which data points are ordered in simple structures such as triangles or circles may offer interesting insights (Degerman, 1972).  One prime advantage  of SSA, is that a researcher can look for interpretable representations without having to specify in advance exactly the form this representation must take (Shepard, 1972:4). Bloombaum (1970:415) provides a summary of the salient features of SSA: 1)  a multivariate technique suitable for f a i r l y large numbers of variables;  2)  geometric output to render the structure of a body of data easily comprehensible;  3)  no special assumptions with respect to level of measurement, l i n e a r i t y of data, etc.;  4)  gives the fewest number of dimensions;  5)  analyzes any matrix of observed relationships within computer size limitations;  6)  provides a measure of "goodness of f i t " ;  7)  results remain invariant under rotation;  8)  eliminates the necessity of choosing between orthogonal and oblique solutions;  9)  no communalities to estimate;  - 176.10.)  output may be checked directly against input table;  11)  available as part of a standard library of computerized programs.  Guttman and Lingoes have developed three sets of programs in the SSA series that allow for data input from square, rectangular, and partitioned matrices.  Each type of program is designed to accommodate either different  mathematical models or different contingencies of data collection (see Lingoes, 1973).  

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
http://iiif.library.ubc.ca/presentation/dsp.831.1-0076990/manifest

Comment

Related Items