Environmental influences on the selection of restructuring strategies


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The interrelationships between organisation, strategic management and business environmental conditions have been enduring themes of organisation theory over the last four decades, and restructuring has emerged as a significant strategic mechanism in the successful adaptation of organisations to environmental influences (Clark, 2004). Such strategic decisions reflect the interaction between an organisation and its business environment (Ginsberg, 1988). Mintzberg, Raisinghani and Theoret (1976) describe a strategic decision as one which is significant, in terms of the actions taken, the committing substantial resources, or the precedents set. These decisions determine the overall direction of the organisation (Quinn, 1980). Strategic decisions are those infrequent decisions made by the top managers of an organisation about the bigger matters that critically affect organisational health and survival (Hickson, et al., 1986; Eisenhardt & Zbaracki, 1992). Thus, restructuring as a strategic decision is a purposeful strategic option for organisation renewal (Brauer, 2006), typically includes a set of activities such as downsizing, sale of a business line, closures or consolidation of facilities or business unites, business relocation, or changes in management structure, which often occur as part of organisational strategies intended to improve organisational efficiency, control costs, and adapt to an ever changing business environment (Lin, Lee & Peterson, 2006).

Strategic decision-making has given increased attention among various scholars and business experts (Ireland & Miller, 2004). Strategic decision-making has been classified into two broad categories. The first category is content research, which deals with issues of strategy content such as diversification, portfolio management, mergers and the alignment of organisation strategies with external environmental characteristics (Elbanna, 2006; Elbanna & Child, 2007). The second category is process research, which deals with the process by which a strategic decision is made and implemented and the elements, which influence it (Elbanna, 2006; Elbanna & Child, 2007). Despite most of the researches deal with content problems, equivalent concentration has to be placed on process research. The two categories of strategic decision-making are not separate but interrelated (Rajagopalan et al., 1997), and the essence of this process is the decision maker, who faces demands and pressures from several sources inside and outside the organisation.

In general, there are two opposing perspectives in the management literature about the importance of decision makers and the roles they play in institutions. Based on their assumptions on the free will and independent behaviour of individuals, the range of existing theories extends from totally deterministic to completely voluntaristic models (Hitt & Tyler, 1991). Deterministic models have built on the belief that strategic decisions and processes exhibit adaptation to threats, opportunities, constraints, and other environmental aspects. Deterministic models suggest that strategic decision makers are constrained by the external business environment or assume that there is only one best choice, which actually reduces organisational strategic decisions to one of mechanics (Pfeffer & Salancik, 1978; Porter, 1980; Hannan & Freeman, 1984; Porter, 1985). On the other hand, voluntaristic models have built on the belief that the characteristics of strategic decision maker, or the top management team of an organisation, can affect the strategic decisions made and processes adopted by an organisation. Voluntaristic models or managerial choice models suggest that strategic decision makers, as the dominant coalition, make organisational strategic decisions and, thus, have a significant effect on their organisations (Child, 1972; Hambrick & Mason, 1984; Child, 1997).

Hambrick and Mason (1984) have developed the upper echelons theory in macro organisational research. The central belief of upper echelons perspective (Hambrick & Mason, 1984; Herrmann & Datta, 2006) is that strategic decision makers create a "construed reality" of the organisation's strategic situation based on their experiences and characteristics that lead to particular strategic choices. Hambrick and Mason (1984) argued that organisational outcomes (organisational strategies and effectiveness) are considered as reflections of the values, perceptions and cognitive bases of powerful decision makers in the organisation. Moreover, the upper echelons perspective states that organisational outcomes can be partly anticipated from managerial backgrounds (Hambrick & Mason, 1984), and decision makers will make strategic decisions as a team that are compatible with their cognitive orientation and knowledge base (Hambrick & Mason, 1984; Knight et. al., 1999). Hambrick and Mason (1984) provided the bases for further research on a corporation's dominant coalition. Eschewing some significant but highly complex psychological matters, Hambrick and Mason (1984) suggest that their key focus is on strategic decision makers' characteristics as indicators of the given that a decision maker brings to an administrative issue. These managerial givens are observable demographic characteristics such as age, tenure, functional experience, educational background, and socio-economic roots. Upper echelon research on such managerial demographic characteristics shed light on their influence on organisation strategy (Wiersema & Bantel, 1992). Hambrick and Mason (1984) argued that decision makers' demographic characteristics influence the strategic decisions that they make and as a result the strategies adopted by the organisations that they lead. Thus, the upper echelons perspective assumes that strategic decision maker characteristics are important determinants of strategic choices (Pansiri, 2007). Moreover, advocates of this perspective claim that certain situational conditions (inside and outside the organisation) and decision maker characteristics lead to strategic choices that could not have been anticipated as strongly by knowing only one or the other (Pansiri, 2007).

Papadakis and Barwise (1997) brought attention to the problem of identifying the affecting factors of the strategic decision-making process. Hitt & Tyler (1991) claimed that a combination of various dimensions on the strategic decision-making process will contribute to a greater understanding of the factors that affect the strategic decision-making process. Brouthers, Brouthers, and Werner (2000), for example, explored two important perspectives of the strategic decision-making process: environmental conditions determinism and strategic or management choice perspective. Although each of these different strategic decision-making patterns presents unique and valuable insights which can help to clarify the factors affecting strategic decision-making process (Brouthers, Brouthers, & Werner, 2000), many scholars (Hitt & Tyler, 1991; Eisenhardt & Zbaracki, 1992; Dean & Sharfman, 1993; Rajagopalan, Rasheed & Datta, 1993; Hough & White, 2003) recommend that various perspectives contribute to clarify only part of the strategic decision-making process; there exists an interactive influence among the perspectives, which also reveals part of the process; and accordingly, researchers ought to propose and examine more integrated patterns.

Hough and White (2003) argued that examining strategic decision processes in light of environmental factors such as environmental dynamism provides an unclear, and perhaps inaccurate, picture of strategic decision making process. Integrative patterns such as Rajagopalan et al.'s (1997) multi-theoretic pattern of decision making should be used to simultaneously explore the influences of the context, managerial actions, and manager cognitions (Hough & White, 2003). Such integrative approaches allow for the explicit consideration of the cognitive schemas used by decision makers in strategic decision-making processes and may be the key to understanding why decision making processes vary between environmental contexts (Hough & White, 2003). Rajagopalan, Rasheed and Datta (1993), however, found that although scholars have recommended that influential interactions exist between different decision-making patterns (Hitt & Tyler, 1991; Schoemaker, 1993), few researches have explored these important interactions (Brouthers, Brouthers, & Werner, 2000). I, therefore, argue that the integrative model will contribute extremely to our understanding of the key factors that affect the strategic decision-making and choice, and will provide a clear picture of strategic decision making process. It is necessary that researchers examine such integrative models in public sector organisations, as there is currently a lack of such studies. Such studies are more likely to be of benefit to strategic decision makers in public sector organisation, especially in Arab public sector organisations, by helping them to understand the key factors affecting the decision-making process in their organisations.

Research Problem and Contributions:

As may be deduced from the above discussion, the problem will be addressed in this study is:

Are strategic decisions influenced by strategic decision makers' demographic characteristics and environmental conditions? If they are, to what extent the selected restructuring strategy has to find a fit between demographic factors and environmental requirements?

Sub questions:

Do strategic decision makers have an impact on their organisations? If they do, how much do they matter and under what conditions do they affect organisational strategic choice?

Do strategic decision makers consider the alignment of organisation strategies with external environmental characteristics? If they do, to what extent they can choose strategies based on their organisation's external environment in spite of their values and cognitive characteristics?

How applicable is the theory of Hambrick and Mason (1984) on upper echelons to the study of decision makers in public sector organisations? If it is, how can I adapt this theory to account for the role of Iraqi decision makers in strategic decision-making and choice in the context of the Iraqi industrial public sector?

Thus in this study, I will investigate the interactive effects of both strategic decision makers' demographic characteristics and environmental conditions on the selection of alternative restructuring strategies in the context of industrial public sector organisations, indicating that decision maker may limit the choice available. I consider that, examining strategic decisions in light of integrative model will provide a clear and complete picture of strategic decision making process and strategic choice, and will contribute extremely to our understanding of the factors that affect this process in the public sector organisations. Integrative approaches, being an extension of opposing perspectives (deterministic and voluntaristic models), argue that the magnitude of strategic decision makers' impact varies and depends considerably on various environmental, organisational, and individual characteristics (Hambrick & Finkelstein, 1987). Integrative approaches allow for the explicit consideration of the cognitive schemas used by decision makers in strategic decision-making processes and may be the key to understanding why decision making processes vary between environmental contexts (Hough & White, 2003).

This study will be based on the theory of Hambrick and Mason (1984), drawing upon and adapting their theoretical framework. In particular, it will be the first study to apply and expand the Hambrick and Mason's (1984) model on upper echelons to the study of strategic decision makers in public sector organisations. This will be a fruitful undertaking as the management literature focused on strategic decision makers is dominated by contradictory and controversial findings, and neglects the role of public sector's strategic decision makers in strategic decision-making and in strategic choices. This research will attempt to rectify that by devoting more effort to the study of strategic decision makers in public sector organisations. In contrast to previous studies, which did not explain how internal and external factors shape strategic decisions and choices in public sector organisations, I will attempt to develop a conceptual framework that will explain how strategic decision makers' attributes and external conditions shape strategic decisions and choices in public sector organisations. Thus, this study will make an important contribution to the strategic management and public management literatures by developing an integrative framework that will integrate factors associated with tow significant perspectives on the strategic decision-making and strategic choice of restructuring: (1) strategic decision makers' demographic characteristics, (2) business environmental dimensions. This is the first research to the best of my knowledge that will develop an integrative model that combines factors of both content and process of organisational strategic decisions in public sector organisations. The findings of the study, I hope, will help to determine the key factors that influence decision makers' strategic decisions in such organisations.

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