Corporate Strategies in Recession and Recovery (Routledge Revivals)

Social Structure and Strategic Choice

Richard Whittington

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781134647736
• Edition: 1
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

First published in 1989, this book is based on detailed comparative case studies of eight firms' responses to the recession of the early 1980s, the worst crisis for British manufacturing in the post-war period. Following these companies' progress from 1979 to 1985, Whittington examines the various recession strategies they adopted and the consequences of these for management change and financial performance in the recovery. Drawing on the Realist social theory of Roy Bhaskar, Whittington argues that the class, gender, generation and ethnicity of the decision-makers involved in the eight case studies collectively made an impact on their strategic choices. This is a timely and practical reissue, which will be of value to students, managers and academics concerned with strategic management, developments in organizational theory, and the current economic climate.

Chapter One

Strategic choice and recession

THE PROBLEM OF STRATEGIC CHOICE

‘Exemplar’ and ‘Rose’ are the pseudonyms of two rival British domestic appliance manufacturers. At the onset of the 1980s, both companies were industry leaders and household names; both were subsidiaries of large general engineering companies; both were dependent on the home market; and both were direct competitors in key market segments. Though superficially so similar, these two companies adopted almost opposite strategies in response to the 1979–81 recession. This is how two of their senior directors summed up their different recession strategies.

The director from Exemplar

When we come out of a recession in England, what happens? You begin to import like fury because everybody has abandoned their production capacity and run down. This cycle has destroyed British industry – this up and down – because no one can afford, due to the tax system et cetera, to develop during the recession. But that's what you've got to do, and that's why we hung on and that's what we did! (Bangs table)

The director from Rose

It is important to preserve things for the future and one would like to do that, and to drive one's way through the recession by investment. But on the one hand the theory is good; but if you are faced with a factory loss this month one has to decide what to do … We cut back heavily.’

Thus Rose responded to the recession by disinvesting, while Exemplar hung on and developed. As we shall see later, these different strategies had widely different consequences for the companies' performances, both during the recession and, in the longer term, during the recovery of 1982–5. Despite these divergences in strategies and performances, the two companies survived all seven challenging years of recession and recovery.

This contrast between the strategies of Rose and Exemplar takes us at once to the central issue of this book: how was it that two firms, outwardly so similar, could adopt such radically opposed strategies in response to the same recession yet each survive the most hostile economic conditions of the post-war period? Here we plunge into a fundamental debate within organization studies, and wider – between those who grimly adhere to the belief that human conduct is determined, and those who have faith in our capacity for strategic choice.

The divergent strategies of Rose and Exemplar are particularly awkward for the deterministic traditions that still dominate organizational and strategic studies. As these deterministic traditions will constitute my chief antagonists in this book, let me introduce them briefly now. I shall argue in Chapter 2 that these theorists take broadly two approaches to explaining corporate strategic conduct. For some -the environmental determinists – determinate conduct is guaranteed by external disciplines. Firms failing to conform to environmental contingencies are remorselessly eliminated by (usually) market selection mechanisms. If they are to survive, all must converge on the optimal solution. This environmental determinist approach constitutes a powerful stream of thought that, in recent times, stretches from Friedman (1953) in economics to Donaldson (1987) in organizational studies. But there exists another set of determinists who, rather than relying on external disciplines, prefer to trust in people's own readiness to conform. For these theorists – the action determinists – environments do not so much execute the deviant as feed simple human types with the stimuli that prompt them to programmed response. The same type will always respond to the same stimulus in the same way. This too is a substantial tradition. Within economics, action determinism remains fundamental both to managerial theories of the firm (for instance, Baumol, 1959) and to those concerned with the ‘principal-agent’ problem (Raviv, 1985). Action determinism takes a different form in sociology, but there too it has proved strangely influential upon both functionalist (Parsons, 1951) and Marxian (for instance, Nichols, 1969) approaches. Unfortunately, its influence does not end even here. It will be my contention that action determinism continues to corrupt many contemporary claims for strategic choice.

These are no more than caricatures of the two basic deterministic positions – finer distinctions will be drawn in the next chapter. However, the main thesis of this book is that neither form of determinism – action or environmental – provides an adequate grasp on explaining the divergent strategies of Rose, Exemplar, or indeed any of the six other companies that make up the empirical material to follow. The three UK domestic appliance manufacturers and the five office furniture manufacturers whose strategies I examine failed to conform to the dictates of determinism. Strategic decision-makers at these companies, far from corresponding to the simple, reactive stereotypes of action determinism, proved to possess both the active wills and the internal complexities necessary for generating strategies personal to themselves. Most, moreover, successfully called the bluff of the environmental determinists by pursuing their idiosyncratic strategies right in the midst of the hostile market conditions of deep recession. I will argue, therefore, that the strategies adopted by these eight firms were, in general, not determined but chosen.

This claim for strategic choice is made in the strongest sense. Loasby (1976, p. 5) has declared: ‘To be worth studying, choice must be meaningful, and this implies, first, that choice is genuine and second, that choice matters.’ For choice to matter, there must be a range of alternative actions available, each associated with different outcomes yet each compatible with survival. For choice to be genuine, decision-makers should have the internal capacity to choose independently between these alternatives. Contrary to action determinism, decisions should be free of all prior programming; contrary to environmental determinism, decisions should make a difference to subsequent events. Within contemporary organizational studies, this strong claim for strategic choice represents an extreme position. By comparison with recent moderate accounts, however, it does have the merits of significance and consistency.

More moderate organizational theorists have attempted two forms of accommodation between choice and deterministic approaches. The first seeks to resolve the conflict by confining the extent of choice to means towards the same end. Decision is merely between ‘functional equivalents’ (Child, 1981, p. 318) or ‘equifinal’ strategies (Hrebiniak and Joyce, 1985; Ford and Baucus, 1987, p. 375). This resolution does not entirely satisfy. The point can be quickly made that the existence of absolutely equifinal strategies is somewhat implausible. The possibility that firms have widely available to them strategic alternatives that possess exactly equal value for significant stakeholders at every moment during their implementation is empirically unlikely. More relevant here is that this form of choice effectively surrenders to determinism. Choice confined to equifinal outcomes presumes there is either no scope or no desire to pursue diverse objectives. Whether by civilized consensus, natural inclination or external disciplines, decision-makers are fated all to work towards some single unifying objective -more often than not, assumed to be the maximization of shareholder wealth. This is rather dull. In Loasby's (1976) stringent terms, choice between equifinal strategies is not worth studying, for it makes no difference to the predetermined unrolling of events. Just as in environmental determinism, it allows only one outcome to be feasible.

Moderate organizational theorists propose a second form of accommodation. Regretting the dichotimization of organizational studies, they urge a ‘dialectical’ synthesis in which both strategic choice and determinism are admitted to influence organizational action (Astley and Van de Ven, 1983, p. 267; Bourgeois, 1984; Hrebiniak and Joyce, 1985; Zammuto, 1988). Thus Hrebiniak and Joyce (1985, p. 337) assert: ‘1) choice and determinism are not at opposite ends of a singular continuum, but in reality represent two independent variables and 2) the interaction and interdependence of the two must be studied to explain organizational behaviour.’ This respect for both choice and deterministic approaches displays an attractive tolerance; it is not, unfortunately, tenable.

The problem with the moderates' second attempt at reconciliation is that the two perspectives are irreducible to equivalent variables operating within the same sphere. As I shall be arguing in the following chapters, deterministic and strategic choice approaches possess accounts of human actors and their environments that are fundamentally opposed. Determinism either demeans humanity so far or exhalts the environment so high that, in one way or another, actors are denied all control over both themselves and their surroundings. The strong form of strategic choice differs radically in being based on a vigorous assertion of human actors' potential for agency (Giddens, 1984; Reed, 1988). As agents, people do have control: internally they enjoy the capacity for constructing strategic objectives for themselves, externally they hold the power to realize these objectives in ways that alter their social and material environments. There exists between these views of actors and environments no ontological compatability. The human beings of determinism are not the same as the human beings of strategic choice theory, and they exist in different worlds. Analysts cannot, therefore, casually transport explanatory mechanisms from one world to the other according to their own convenience. Instead, analysts are confronted by a strategic choice of their own: in their research, they must decide which perspective best describes the world they experience and then stick rigorously within its distinct ontological and epistemological assumptions.

Seeking a complete repudiatiation of determinism, this book refuses to accept either of the moderates' attempts at compromise. Choice between equifinal outcomes is too trivial; mixing of determinist and agentive perspectives too indiscriminate. However, commitment to the strong form of strategic choice proposed by Loasby (1976) imposes a twofold task, empirical and theoretical. This book will have to demonstrate that the world really does afford corporate decision-makers significantly different strategic options between which genuine choice is possible; and it will have also to provide a coherent account of the world and its actors in which the exercise of strategic choice is plausible. Necessary is a theoretical perspective that, independent of determinism, establishes human beings as potential agents, with sufficient control over themselves and their environments both to select their own personal objectives and then to act upon them in a manner which significantly alters the course of events.

It will be my charge in Chapter 3 that existing approaches to strategic choice fail quite to establish an adequate account of human agency. This failure, I shall argue, is rooted in a neglect of social structures that is "common to both the major traditions upon which these approaches rely. On the one hand, there are the Action Theorists (Weick, 1969; Smircich and Stubbart, 1985; Berg, 1985), who, in their repudiation of environmental determinism, insist too much on the subjectivity of social structure. On the other hand are the individualists of the Carnegie School (Cyert and March, 1963; Quinn, 1980): they abstract their actors so purely from society that they finally risk condemning them to the same passive, internal simplicity as that typical of action determinism. While these two traditions, Action Theory and the Carnegie School, have inspired and informed a number of important accounts of strategic choice (e.g Child, 1972; Miles and Snow, 1978; Pettigrew, 1985; and Johnson, 1987), my contention in Chapter 3 will be that the subordination of social structure by the first and its neglect by the second ultimately prove fatal to an adequate notion of human agency. Deprived of social structural context, actors are stripped of both the intrinsic capacity to choose between courses of action and the extrinsic powers they need to carry them out.

I shall prefer, therefore, to base my claim for strategic choice upon the Realist social theory developed particularly by Rom Harré and Roy Bhaskar. The distinctive quality of this Realist perspective is its grounding of human activity in social complexity and its insistence on real social structures as preconditional for the agency upon which strategic choice depends. Indeed, it is precisely in their necessity for human action that social structures reveal themselves as ‘real’. Let me preview the central Realist argument of Chapters 4 and 5.

To become agents, ordinary human beings require two things. They need tools for action – not just one tool, but a whole box full allowing them to do all sorts of things. And they must be able to use these tools in different ways, with the self-confidence to choose positively between all the various courses they can take. According to Realism, it is society that provides people with the necessary tools, skills and confidence. Social hierarchies offer us a range...