The genesis of organisational crisis : a theory-building approach

Abstract

The aim of this thesis is to improve our understanding of the causes of organisational crisis. As crisis genesis research is still in its infancy, the main objective is to develop a theoretical framework that is well-grounded in data of crisis-causal processes. The first part of the literature review examines the need for crisis-causal research and comes to the following conclusions: Crises are significant phenomena for organisations. During crises, a company's survival is threatened and its central functions are deeply affected. Although interest in crisis research developed strongly over the last decade, the field is still in a pre-paradigmatic stage that requires an inductive logic of inquiry. In addition, the majority of research in this field is focused on the consequences of crises. This preponderance towards crisis consequences leaves crisis-causal research under-theorised. Hence, theory-building on the genesis of organisational crisis represents an important gap that needs to be addressed. The second part of the literature review presents the small field of extant causal research on crises as well as on crisis-related phenomena such as disasters. Insights of these studies are used to pre-specify potentially relevant constructs as well as to develop methodological implications for the subsequent theory-building task. In this thesis a case study methodology is employed. Four cases of crisis-causal processes in large U.S. public companies were examined in-depth. Firstly, a within-case analysis was conducted. Secondly, the results of each case were compared in an across-case analysis. For both analyses, four analytical strategies were employed, namely a quantification strategy, a narrative strategy, a visual mapping strategy and, most importantly, a grounded theory strategy. The results of the analysis are five well-grounded constructs that aim to explain the crisis-causal process common across cases. These constructs are the building blocks for two theoretical frameworks developed in this thesis. While the first framework presents a simple graphic depiction of these constructs, the second framework demonstrates how these constructs are linked. In general, the results suggest that a crisis is caused by a combination of company-specific factors and underlying dynamics that evolve through three distinct phases in an exponential fashion: a phase of stability (pre-crisis stage), a phase of increasing instability (crisis onset) and a phase of resolution (crisis and its aftermath). By setting up positive feedback loops that continually magnify the severity of problems generated by events, a self-reinforcing vicious cycle is established that increases the onset of crisis at an exponentional rate. The results suggest that a crisis unfolds due to a problem structure which becomes increasingly intractable. This is accompanied by an increasing number of events that the organisation needs to deal with as it approaches the crisis point. In addition, three underlying dynamics were identified as crisis-contributing factors: a process of increasing denial, a process of decreasing degrees of freedom and a process of decreasing support of key players. The thesis closes with a summary and discussion of the results. It is illustrated to what extent the theory developed in this work links to concurring and conflicting findings of the extant body of crisis knowledge.