Executive Succession and Organization Outcomes in Turbulent Environments: An Organization Learning Approach

Abstract

This paper explores executive succession as an important mechanism for organization learning and, thus, for organization adaptation. We argue that executive succession can fundamentally alter the knowledge, skills and interaction processes of the senior management team. These revised skills and communication processes improve the team's ability to recognize and act on changing environmental conditions. Especially in turbulent environments, succession may be critical for improving or sustaining the performance of the firm. We explore continuity and change of CEOs and their executive teams as associated with first- and second-order organization learning, which are differentially important under stable versus turbulent environmental conditions. We also link these organization learning ideas to the nature of organization evolution. A series of hypotheses link executive-team succession and strategic reorientation to subsequent organization performance. Results in a study of 59 minicomputer firms, all founded between 1968 and 1971, indicate that succession exerts a positive influence on organization performance. We also show that it is important to distinguish between CEO succession and executive-team change, which independently improve subsequent organization performance. The positive impact of succession is accentuated when it coincides with strategic reorientation. Finally we examined how longer term patterns in succession and reorientation affect organization performance. We discovered two modes of organization adaption in this turbulent industry. The most typical mode combines CEO succession, sweeping executive-team changes, and strategic reorientations. A more rare, and over the long-term more effective, adaptational mode involves strategic reorientation and executive-team change, but no succession of the CEO. Consistently high-performing organizations are managed to sustain a relatively high level of learning (through turnover of senior executives and strategic reorientation), and at the same time to maintain links with established organizational competencies (through retention of the CEO).

Organizational Environments in Flux: The Impact of Regulatory Punctuations on Organizational Domains, CEO Succession, and Performance

“…Because incumbent executives typically lack experience in these new markets, organizations often must recruit new ones. Thus in both situations, executive succession unfreezes norms and alters power distributions thereby facilitating the strategic reorientation needed to adapt to post-punctuation conditions (Virany et al 1992). There is some empirical evidence to support the proposition that organizations are prone to change CEOs after regulatory shocks (Miner et al 1990, Singh et al 1991.…”

Hanging Together, Together Hung? Career Implications of Interpersonal Ties Between CEOs and Top Managers

“…The dismissal of the CEO appears to have detrimental consequences for the continuance in office of an incumbent manager, especially if he or she has held strong relationships with the dismissed CEO. The supervisory board or the new CEO successor themselves cannot assume that the manager, if they stay in office, will be able to build sufficient trust and working relationships with the new CEO, as they are seen as the dismissed CEO's "partner in crime" (Shen and Cannella 2002b;Virany, Tushman, and Romanelli 1992). Moreover, we find that CEO routine turnover increases the likelihood that another member of the TMT is internally promoted or makes an advantageous career move externally.…”

“…Even if they are not promoted to the "top job", those seen as promising candidates for this position may ultimately benefit from the CEO's departure from the company. For example, a supervisory board that recognizes that a promising candidate has been "passed over" may give them an increased mandate in order to prevent the manager concerned from leaving their position voluntarily and reduce the potential negative consequences of fundamental changes in management (Barnett and Carroll 1995;Virany, Tushman, and Romanelli 1992). Overall, we expect the turnover of a CEO for routine reasons to enhance the chances of other TMT members to make an upward career move.…”

“…Similarly, Hayes, Oyer, and Schaefer (2006) in their analysis of top management team composition changes in cases where a CEO leaves, showed that CEO turnover significantly increases the likelihood of TMT turnover. However, in light of research on the perceived negative consequences generally associated with a break in management continuity (Barnett andCarroll 1995, Virany, Tushman, andRomanelli 1992), we would expect supervisory boards to stagger their dismissals of multiple top managers, if at all possible. Overall, we hypothesize that:…”

The Use of Feed-forward and Feedback Learning in Firm-University Knowledge Development: The Case of Japan

“…Among the structural-organizational factors, low turnover rates and high level of workforce homogeneity, especially among top management teams (March, 1991;Virany et al, 1992); competition with other MNEs that are tied with universities in North America and Western Europe (Sun and Scott, 2005); competence traps within the MNEs through long term success in their cooperation with universities other than Japanese ones (Levitt and March, 1998;Berthoin-Antal et al, 2003); inadequate communication between MNEs and universities (Elliott et al, 2000;Zell, 2001); political and power structures (Coopey, 1995;Beer et al, 2005); ineffective resource allocation (Beer et al, 2005); lack of learning values (Sun and Scott, 2005); and lack of cultural fit between innovation needs and organizational culture (Sun and Scott, 2005) are considerably powerful variables in explaining the barrier to interorganizational learning.…”