Academic journal article Academy of Strategic Management Journal

Ceos Characteristics and the Successful of Turnaround Strategy: Evidences from Indonesia

Academic journal article Academy of Strategic Management Journal

Ceos Characteristics and the Successful of Turnaround Strategy: Evidences from Indonesia

Article excerpt

BACKGROUND

Prominent theory of upper echelons received significant attention from scholars. This view has been used to explain organizational performance from strategic leadership literature. Hambrick and Mason (1984) argued that organization is a reflection of its strategic leader because they are the actors who making and implementing strategic decisions. Afterwards, scholars have started to work on the connection between leader characteristics and organizational performance.Despite of common believed that strategic leaders have significant determination on performance, the conclusive finding of specific characteristics has not achieved yet (Finkeilstein, Hambrick, & Cannella, 2009). Previous studies found that performance will increase as their companies lead by short tenure executives (Puranam, 2001). On the other hand, the growth appeared to be sustain when companies are directed by senior executives (Sorenson, 1999). Other studies did not find any relationship (Boone, Brabander, & Wtteloostujin, 1996; Iaquinto & Frederickson, 1997; Balkin, Markman, & Gomez-Meija, 2000). Similar findings also generated for industrial setting. Each industry has not indicated a consistence result for each variable.

Situational theory stated that neither single characteristics nor single styles should satisfy every work condition (Daft & Lane, 2008). Successful leader in competitive market cannot be a guarantee for their success in the soundless competition. Daft and Lane (2008) argued that the style of leaders should align with organizational problems and environmental conditions. Therefore, traits of leader which usually determined their style will also considerably different (Bass, Avolio, Jung, & Berson, 2003; Fulmer, 2000).

Environmental situation required company to take rational measures for continuously adapt with change. Often companies failed in the process which consequently brings them into critical conditions. At this point, leaders need to consider strategic moves in order to save their companies (Pretorius, 2008). Strategic moves are necessary to avoid the condition of stuck in the middle (Porter, 1979). Generic strategy to solve this problem is by initiating turnaround strategy of setting new direction and cutting operational inefficiency.

Significant impact of turnaround strategy is not as sound as the investigation of the topic especially the investigation in the strategic leadership perspective. Very rare found the empirical paper regarding the successful of turnaround strategy based on the characteristics of leaders. There are empirical papers on turnaround strategy, but it discussed from the corporate strategy (Smith & Graves, 2005), financial moves (Evans, Chitnomrath, & Christopher, 2013), marketing tactics (Day & Moorman, 2013) and porter's generic strategy (Pretorius, 2008). Few papers are discussed the strategy from leadership view such as Harker and Sharma (2000) discussed organizational development conducted by leaders, Boyd (2011) explains generic steps of how leaders implement turnaround strategy.

This paper discusses turnaround strategy from the perspective of strategic leadership using upper echelon theory as foundation. As Hambrick and Mason (1984) stated that the characteristic of top leader could be use as dimensions to understand organization, this paper attempted to seek particular characteristics of leaders on the successful of turnaround strategy. The characteristics are limited to demographical traits which are educational level, functional background, and tenure.

Most studies in strategic leadership argued that the characteristics of leader determined the choice of particular strategy. Finkeilsten et al (2009) stated that leaders who have extensive experience in output functional are more risk takers rather than that of from throughput functional. However, there are limited evidences from particular turnaround process. Similarly, educational level which posited as proxy of cognitive complexity often associated with innovation (Wally & Baum, 1994), however previous studies were conducted in normal condition. …

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