Academic journal article Administrative Science Quarterly

Leadership Instability in Hospitals: The Influence of Board-CEO Relations and Organizational Growth and Decline

Academic journal article Administrative Science Quarterly

Leadership Instability in Hospitals: The Influence of Board-CEO Relations and Organizational Growth and Decline

Article excerpt

staff, local community groups, and local industry or business leaders. It is quite probable that each of these groups may emphasize different indicators of CEO performance, which may or may not correlate with long-term growth or decline in admissions. Within any given hospital board, the representatives of such groups may, in fact, come to dissimilar assessments of any given CEO. A careful examination of multiple constituencies and the performance measures they prefer, however, would likely require a more case-intensive study of micro-level CEO performance evaluations. Further, such a study would need to focus on the evaluations of individual CEOs by specific groups, rather than on long-term patterns of Organizational analysts have demonstrated a long-standing interest in the issue of managerial succession because of its potential effect on organizational strategy, performance, and change (Grusky, 1963; Gamson and Scotch, 1964; Eitzen and Yetman, 1972; McEachern, 1975; Pfeffer and Salancik, 1977; Allen and Panian, 1982). Most of these studies have in common a focus on individual chief executive officer (CEO) succession rather than on patterns involving multiple turnovers of top managers in a given organization. Such patterns of succession are important, because they reflect an organizational property--leadership instability--the consequences of which may be deeply felt by an organization. Prior research had demonstrated that succession in top-level management is often accompanied by discontinuous change in the structure and strategy of the organization (Pfeffer, 1972; Meyer, 1978; Carroll, 1984; Singh, House, and Tucker, 1986; Finkelstein and Hambrick, 1990), but leadership instability may produce "so much change in the distribution of power and in structures and procedures that concerted action will be difficult, and change so disruptive, that organizational ability to cope with environmental requirements will be harmed" (Pfeffer, 1981: 327). Organizations may also suffer from frequent top-level managerial changes in the form of low morale, employment uncertainty, and internal political turmoil (Staw, 1980; Fredrickson, Hambrick, and Baumrin, 1988; Dwore and Murray, 1989). Finally, frequent CEO succession may suggest something about the distribution of power in an organization, its ability to attract and retain management talent, and the tendency to scapegoat in response to organizational problems (Gamson and Scotch, 1964; Pfeffer and O'Reilly, 1987).

A second attribute of much of the extant literature on managerial succession is the focus on functional associations between CEO turnover and organizational performance. Recent research on succession, for example, has attempted to demonstrate that the CEO turnover event is predicted by poor financial or market performance (Brown, 1982; Warner, Watts, and Wruck, 1982; Coughlan and Schmidt, 1985; Boeker, 1992). While such theoretical formulations have considerable intuitive appeal, they do not necessarily lend themselves to an examination of long-term leadership instability. While poor organizational performance, particularly when performance measures are based on yearly observations of profits or sales, may have a modest impact on individual CEO turnovers (Fredrickson, Hambrick, and Baumrin, 1988), short-term performance is unlikely to be an important factor in understanding leadership instability over an extended period of time. We may need to consider a more systemic and long-term conceptualization of performance, such as the organizational life-cycle stage, defined by Whetten (1987) as temporal clusters of issues or problems that organizations must resolve and that tend to be sequentially linked. Life-cycle stages, such as growth or decline (Kimberly and Miles, 1981) may relate differentially to succession rates among top managers, such that different stages may represent different contexts affecting the level and type of uncertainty and stress faced by top managers and, consequently, their propensity to leave the organization (Cameron, Kim, and Whetten, 1987; Cameron, Whetten, and Kim, 1987). …

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