Skip to main content
NCBI home page
Medical Journal of the Islamic Republic of Iran logoLink to Medical Journal of the Islamic Republic of Iran
. 2017 Dec 11;31:76. doi: 10.14196/mjiri.31.76

Organizational failure and turnaround in public sector organizations: A systematic review of the evidence

Hamid Ravaghi 1, Russell Mannion 2, Haniye Sadat Sajadi 3,*
PMCID: PMC6109368  PMID: 30159256

Abstract

Background: Existing evidence with regards to the organizational failure and turnaround are derived from the private sector. There is few corresponding review of the empirical evidence in the public sector. This review aimed at providing a summary of the research investigating the above items in the public sector.

Methods: A search strategy was developed to identify empirical studies relating to organizational failure or turnaround process in public sector services on HMIC, Medline; SSCI, ASSIA, Business Source Premier, The SIEGLE and the ASLIB Index. A total of 11 673 studies were identified initially. After screening process of the articles, 23 studies were included in the systematic review. The selected studies were appraised and findings were synthesized.

Results: Symptoms of organizational failure along with secondary and primary causes of failure within different public organizations were identified. Factors that trigger organizational change were extracted. The review revealed that most of the studies employed turnaround strategies including reorganization, retrenchment, and repositioning, which are referred to "3Rs" strategies. The role of contextual factors in turnaround and the impact of turnaround strategies on organizational performance were explored. Furthermore, the key similarities and differences between 2 sectors in organizational failure and the turnaround process were demonstrated.

Conclusion: This review highlighted the gap in the literature in organizational failure and turnaround interventions within the public sector.

Keywords: Organizational Failure; Turnaround,; Public Sector; McKiernan’s Model; Stage Framework

↑ What is “already known” in this topic:

To design effective strategies for addressing underperformance, it is crucial to understand the causes of organizational failure and the factors that lead to successful turnaround.

→ What this article adds:

This review revealed a gap in the literature with regards to linkage between symptoms and causes of failure, tracking the time organizations sustain their hard won improvements in performance, the effectiveness of the turnaround strategies, the role of external organizations, and the impact of contextual factors on organizational failure, and turnaround interventions within the public sector.

Introduction

Over the last 2 decades, increasing political attention has been devoted to develop effective strategies to reform the financing, organization, and delivery of public services (1, 2). This reform agenda has generated a growing interest in measuring and assessing the performance of public sector organizations and institutions (3-5). As a result of this interest, a range of comparative performance metrics, rating, and scoring systems have been developed and used to assess and report the performance of public organizations, especially in the UK and US, across a range of services including education, health, and transport (6, 7). Organizations unable to achieve a minimum level of acceptable performance are often ‘named and shamed’ in public report cards or performance league tables and labeled as ‘poor’ or ‘failing’. Such schemes bring poor performance into the public domain and can contribute to political pressure to improve the performance of those organizations deemed to be failing (8). The greater visibility given to problems associated with poor performance has led to an increased interest in understanding how organizations can migrate from poor to satisfactory or good performance. This performance improvement process is commonly termed ‘turnaround’ in the academic and practitioner literature (9). However, to design effective strategies for addressing underperformance, it is crucial to understand the causes of organizational failure and the factors that can lead to successful turnaround. This is the subject of the current review.

To our knowledge, while an extensive literature is available on the nature of organizational failure and turnaround in the for-profit sector, such evidence is sparse in the public sector (2, 10-12). The first studies were conducted in the mid-1970s (13) and have grown in number to date (14-16). Borins (17) argues that early interest in the subject was on the part of practitioners rather than researchers, and focused on practical rather than theoretical concerns. Several commentators have also highlighted the paucity of robust empirical evidence and theoretical frameworks to explore turnaround in public sector organizations (6, 18). However, interest in this subject has grown a pace over recent years. Boyne argues that strategies deployed by managers to turnaround poorly performing public organizations have not been chosen based on robust evidence and well-constructed theory, adding that the quality and quantity of research on organizational performance in the public sector are limited and in need of development (6). Meier and Bohte maintain that the symptoms and causes of organizational failure in the public sector have been subject to insufficient academic attention, and policymakers and managers lack robust evidence to guide the triggers to change and implement successful strategies (19). It seems that only the ‘stage’ model was considered as a framework in which the process of organizational failure and/or turnaround is structured in sequential phases (20). A variety of stage theories or conceptual models has been applied in the literature eg, Mckiernan (21). The present study aimed at reviewing the findings of empirical studies concerning the processes of organizational failure and turnaround across a range of public services and identifying the key themes, findings, and areas of debate.

We tried to identify studies relating to organizational failure or turnaround process in public sector services, and thus we only included empirical studies undertaken in the public sector. All types of study design and research methods were eligible for inclusion. Studies were further limited to those published in English due to translation difficulties and costs, and papers published since 1970 up to data of updating our searching. Electronic databases, reference scanning of relevant papers, hand searching of key journals, and contacting experts and relevant organizations were used to find suitable and eligible evidences. Several key databases were searched including HMIC (Health Management Information Consortium via Ovid), Medline (Via Ovid); SSCI (Social Sciences Citation Index), ASSIA (Applied Social Science Index and Abstracts), and Business Source Premier. The SIEGLE (System for Information on Grey Literature in Europe) and the ASLIB Index to theses (http://www.theses.com) were searched for theses and dissertations produced in the UK and Ireland. Searches were done using a range of ‘failure’ and ‘turnaround’ synonyms, which were linked to ‘organization’ synonyms. The keywords used were as follow: ‘failure’, ‘decline’, ‘mortality’, ‘crisis’, ‘death’, ‘exit’, ‘turnaround’, ‘recovery’, ‘success’, ‘retrenchment’, ‘rejuvenation’, and ‘renewal’. An appropriate search strategy was used for each database. A key difficulty with the medical/health databases used was the use of similar phrases in clinical papers such as ‘failure’, ‘mortality’, and ‘death’.

Additional methods of exploration employed when electronic databases were searched to capture additional sources such as using the authors’ names of relevant papers as a search term. The initial search was conducted in January 2011 and updated in September 2016. To eliminate duplication, results from different databases were placed into a reference manager package and reference lists from the 2 reviews were crosschecked; and to avoid duplication, studies included in both were not abstracted.

Most of the included studies were qualitative, and thus to assess the quality of the quantitative studies, a checklist developed by Boynton and Greenhalgh (2004) was used (22).

A data extraction form was designed to distil details concerning the aims of the study, setting, study design, participants, method of data collection and analysis, reported findings, and implications for research and policy. Because the literature on organizational failure and turnaround processes is mainly discursive and the studies rarely include objective measurable outcomes commonly used in quantitative research, a narrative approach was used to synthesize the results of the studies. The stage theoretical framework (Mckiernon Model) was used to summarize and interpret the study findings.

Review of the literature

Description of Studies

Once duplicates were removed, the search identified 11 673 papers. During the initial stage, 11 134 papers were excluded upon the examination of the title and abstract. In the next stage, the complete texts of the remaining papers (539) were assessed against the inclusion criteria and a further 516 studies were excluded. Finally, 23 studies were included. Table 1 presents a detailed summary of the included studies. It is noteworthy to mention that many papers about organizational failure and turnaround were largely anecdotal and published in nonacademic journals. Moreover, some of the material studied was either deemed theoretically and/or practically weak or, more commonly, their covered areas were irrelevant to the review. It should be noted that 3 retrieved reviews (10, 23, 24) were not included and only the findings were used for further debate in discussion part.

Table 1. Summary of Included Studies .

Code First author Unit of analysis Time period Data Sources Methodology
1 Wilmott, 1999 School 1996-1998 Observations, interviews Qualitative single case study
2 Protop-saltis, 2002 Acute Trusts 2001-2002 Interviews, focus groups, workshop Qualitative multiple case studies
3 Harris, 2002 School Interview, review of data Qualitative multiple case studies
4 Harris, 2003 School 1998-2002 Interviews, review of data Qualitative multiple case studies
5 Meier, 2003 School 1995-1998 Secondary data Quantitative survey
6 Fulop, 2004 Acute Trusts 2002-2004 Interview, data analysis Qualitative multiple case studies
7 Eitel, 2004 Regional Office of a National Agency 1976-2001 Review of a range of archival and documentary sources Qualitative single case study
8 Joyce, 2004 Council 1996-1999 Interview Qualitative single case study
9 Paton, 2004 Local Authority, Health Care Trust, School Interview and Review of documents and data Qualitative multiple case studies
10 Turner, 2005 Local
Government Authorities 		2002-2004 Interviews, reviewing documentary Qualitative case study method
11 Harvey, 2005 Range of NHS Organizations 2003-2004 Interviews, review of documents Qualitative multiple case studies
12 Boyne, 2005 School Districts 1995-2002 Questionnaire Quantitative retrospective
survey
13 Andrews, 2006 Local
Government
Authorities 		2001-2003 Questionnaire Quantitative survey
14 Ravaghi, 2006 Acute NHS Hospital Trust 2003-2006 Interviews, document analysis Qualitative single case study
15 Stafrace, 2008 Nursing Home 2000-2006 interview Qualitative case study
16 Beeri, 2009 Local Authorities 2006 Interviews, document analysis, questionnaire Qualitative multiple case studies and questionnaire based survey
17 Marchal, 2010 Hospital 2006-2009 Interviews, document reviews, routine information system’s records Qualitative single case study
18 Beeri, 2011 Local Authorities 2006 Interviews, document analysis
questionnaire 		Qualitative multiple case studies and questionnaire based survey
19 Beeri, 2012 Local Authorities 2006 Questionnaire Quantitative survey
20 Deeds, 2014 School Interview Qualitative single case study
21 Rutherford, 2014 Schools 1993 - 2011 Secondary data Quantitative
22 Ravaghi, 2015 Acute NHS Hospital Trust 2003-2006 Interviews, document analysis Qualitative single case study
23 Favero, 2016 Schools 2008–2011 Secondary data Quantitative cross-sectional time-series
Open in a new tab

Setting of the Studies

Studies have been conducted across a wide range of organizational settings including health services (25-31), local government (8, 11, 32-36), schools (2, 12, 19, 37-41), and a combination of public services (42) (Fig. 1).

Fig. 1.

Fig. 1

Bar Chart for the Setting and Publication Time of the Included Studies

Open in a new tab

Aims of the Included Studies

The aims of the studies were multiple and diverse; 4 studies focused only on the symptoms, causes and patterns of failure, and the impact of contextual factors in contributing to failure (8, 19, 31, 41); 13 studies focused only on the turnaround strategies and factors that affected their impact (2, 11, 12, 27-30, 32, 35, 36, 39, 40, 42); and the remaining 6 studies explored both organizational failure and turnaround processes (25, 26, 33, 34, 37, 38).

Time of Publication

There has been a growing interest in this topic since the late 1990s: 1 study was published before 2000, 22 studies were published after 2002, and a number of high quality studies were published after 2005. All quantitative studies were published after 2005 (Fig. 1).

Terminology Used in the Included Studies

Most of the studies used the terms ‘failure’ and ‘decline’ to identify serious performance problems. None used similar terms to those that have been used in the for-profit sector (eg, organizational mortality, organizational death, and organizational exit) to represent failing situations. Turnaround, recovery, success, and retrenchment were used interchangeably to present performance improvement following a period of poor performance. The terms rejuvenation and renewal were sometimes used in the included studies.

Research Methods Used in the Included Studies

The most commonly used research method was the qualitative case study, employing interviews, document analysis, and observations to gather data. Nine studies used a single case study, and multiple case studies were used in 6 studies; In 2, the data were collected by interviewing a senior manager only to explore the objectives of the study; 6 studies used quantitative survey and cross- sectional time series methods; and 2 studies employed the mix method (qualitative-quantitative) to reach its objectives.

Theoretical Frameworks Used in the Included Studies

Several studies had no explicit theoretical framework to explain organizational failure and/or turnaround (2, 8, 19, 29, 32, 33, 38, 39, 41). However, some studies did use different stage theoretical framework including Argyowasmy’s 2- stage model (42) and McKiernan’s 6- stage model (25, 26, 31). A ‘realistic’ evaluation methodology (43) was adopted by Turner and Whiteman (34) and Marchal and et al. (30), who sought to identify the context for poor performance (causes), mechanisms for recovery, and outcome of the recovery interventions on local authority performance (CMOs model). Six studies used the “3Rs” strategy (retrenchment, repositioning, and restructuring) to explain the impact of interventions in turning around poor performance and designing the suitable tool to measure turnaround management strategies (35, 11, 12, 28, 36, 40).

Symptoms of Failure

In some of the studies included in this review, 4 different categories of symptoms of failure were identified: financial, physical, behavioral, and managerial. Table 2 summarizes the symptoms of failure reported in each included study.

Table 2. Symptoms of Decline .

Code
Symptom 		1 2 3 4 5 6 7 9 10 13 14 15 17 20
Physical
Inability to hit core targets ● ● ● ● ● ● ● ● ● ● ● ● ● ●
High level of staff turnover and/or recruitment problems ● ● ● ● ●
Poor public/press image ● ● ● ● ● ●
Poor working relations with media ● ● ●
Poor working relations with external stakeholders ● ● ● ● ● ●
Management turnover ● ● ● ● ● ●
inadequate competition (export of the clients to other providers) ●
Major incidents (deaths in hospital) ● ●
Unsatisfactory teaching quality ● ● ● ●
Financial
Poor financial control ● ● ● ● ● ●
Financial holes or Unexplained deficit ● ● ● ●
Managerial
Stagnating management ● ● ●
Employee distrust/ internal conflict ● ● ● ● ● ● ●
No visible mangers in organization ●
Lack of teamwork ● ● ● ● ● ●
Centralized decisions made behind closed doors ● ●
Behavioral
Low staff morale ● ● ● ● ● ● ● ●
Ignoring problem ● ● ● ● ●
Blames for problems placed on others ● ● ●
Loss of reputation/ no pride in organization ● ●
Low level of expectation ● ●
Poor behavior in classes ● ● ●
Cost financial solvency ●
Open in a new tab

Financial symptoms were addressed in 5 studies in the health sector (25, 26, 29, 30, 31), as obvious indicators of failure, though in the school setting it was not reported as an evident symptom. Inability to meet key performance targets is a common symptom in all studies, regardless of sector. Poor working relationships with external stakeholders, a high level of staff turnover, recruitment problems, and a poor public image were the symptoms that presented in all 3 settings (health, school, and local government sectors). Among managerial symptoms, employee mistrust, internal conflict, and lack of teamwork were the most prevalent markers across 3 settings (health, school, and local government sectors). Low staff morale was a common symptom (behavioral) reported in all 3 contexts. Unsatisfactory teaching quality, poor behavior in classes, and low levels of expectation were the specific symptoms identified in the school setting.

Included studies showed good managers leaving organization, a classic marker of failure, and a high level of management turnover ensued (25, 26, 29, 31, 33, 34). The posts tended not to be (or could not be) filled or inexperienced managers were brought in. Consequently, the organization lost its managerial capacity and capability (valued at a premium during the crisis phase) exacerbating the situation and likely to be the cause of further decline in performance (26).

Secondary Causes of Failure

A range of internal and/or external factors combine to cause organizational failure in the for-profit sector. The current review similarly found that both internal and external factors contribute to organizational failure in public services. This review identified 5 different internal secondary causes of failure within public sector including: (1) managerial, (2) financial, (3) organizational, (4) cultural, and (5) political. Also, changes in the external environment were a contributing factor to organizational failure reported in several included studies. Table 3 summarizes the internal and external secondary causes of failure reported by each of the studies.

Table 3. Causes of Decline .

Code
Symptom 		1 2 3 4 5 6 7 9 10 13 14 15 17
Internal factors
Poor managerial leadership √ √ √ √ √ √ √ √ √ √
Poor operational/financial management √ √ √ √ √ √
Poor performance management √ √ √ √ √ √
cultural issues √ √ √ √ √ √ √ √
Unaware of need to turnaround (lack of cognizance of poor performance) √
Inadequacy of staff engagement √ √ √ √ √ √
Distraction by major projects (eyes off ball) √ √ √
Silo management √ √ √
Insularity (insufficient Relationship with other stakeholders at local and/or central level) √ √ √ √ √ √ √ Not significant √
Lack of strategies √ √ √ √ √
Poor political leadership √ √
Stagnant political environment √
Volatile political environment √
Change to unitary status √
poor political-managerial relationship √
Poor corporate structure (departmentalism) √ √ √ √
Inertia related to the previous success √ √ √
Inattention to the warning external message √ √ √ √ √
Lack or inappropriate response to changing external environment √ √ √ √
Poor internal relationship √ √ √ √ √ No
significance 		√
Mismanaged priorities √ √ √ √ No
significance
Lacked management/
political will for turnaround 		√
Instability within the organization √
Organizational myopia √
Organizational trauma √
Lack of system process and policies √ √ √
Lack of attention to new governmental strategies √ √
Lack of corporate vision √ √ √
Lack of capability to turnaround √ √
Insufficient professional confidence and capability √ √ √
External factors
Policy change √ √ √ √ √
Increased competition √ √
Diverse services needs √ √
High level of poverty and deprivation √ √ √ √
Social class diversity √ Not significant √
Financial resources directly available to organization
Not significant
Open in a new tab

Primary Causes of Failure

According to the for-profit literature, both symptoms and secondary causes of decline were related to the primary causes of failure. McKiernan (21) argues that dysfunction in organizations in their organizational learning processes was a main cause of organizational failure. Several studies explored the primary causes of failure (26, 31, 33, 34). Fulop et al. (26) explicitly reported that organizational introspection or ‘eyes off the ball’, organizational myopia, organizational trauma, and organizational arrogance were the 4 important factors that had a negative impact on organizational learning processes, causing performance decline and failure among 9 case study NHS acute trusts. Turner and Whiteman (34) also indicated that resistance to external pressure (e.g. failure to implement modernization and change) was an important issue in declining performance in local government. They reported that inertia related to previous success (organizational arrogance) and lack of appropriate response to a changing external environment (organizational introspection) were causes of failure among their cases (poorly performing local government authorities). Ravaghi et al. (31) found that organizational introspection and organizational arrogance were perceived as 2 important factors having a negative impact on the organizational learning process. Some studies highlighted the lack of organizational learning in poorly performing organizations as a main cause of failure (33).

Findings of the above studies support evidence from the for-profit sector literature, which shows that the lack of an organizational learning capacity is a key primary cause of organizational failure.

Triggers for Change

Some of the studies in the current review explored triggers for change in various public services including school (2), health care (25, 26, 29, 31), local government (11, 33, 34), and mixed settings (42). Table 4 demonstrates the triggers reported by each study. As with the for-profit sector, both internal and external factors were recognized as triggers for change. Replacement of senior manager(s), change of politician(s), contact of internal managers with central government agencies concerning the poor performance of the organization, opposition at different levels of the hierarchy, conflict among different groups within the organization striving to maintain their autonomy, and reaction to the announcement of poor performance were internal triggers. New policies and programs originated by central government that aimed at improving the performance of the organization, external inspection, or intervention, and the concern of external stakeholders (e.g., consumers of services) served as external triggers. Replacement of senior manager(s) was the most common trigger found in all the above studies, which closely aligns with the findings from the for-profit sector.

Table 4. Triggers for Change .

Code
Triggers 		2 6 14 15 10 18 7 9 8 20 21
Replacement of senior manager(s) √ √ √ √ √ √
School 		√
Politician(s) change √
External inspection or intervention √ √ √ √ √ √ √
National office 		√
School 		√
Reaction to announcement of poor/excellent performance √ √ √ √ √ √ √
Contact of internal managers with central government agencies √ √
Concern of external stakeholders √ √ √
Open in a new tab

Role of External Organizations in Turning around Poor Performance

Some included studies considered the role of external agents in initiating changes and turning around failing organizations such as Beeri (11) in local government setting and Ravaghi (28) in an acute NHS Trust. Harvey et al. (27) explored the role of the Performance Development Team (PDT) as an external agent in promoting turnaround in failing NHS organizations.

An important strategy used to change political views and behaviors within local government was the introduction of political mentoring, where there were perceived weak political management and poor member-officer relations. Eitel (33) highlighted the important role of a US national office in turning around of a regional office by the appointment of a new management team.

Harris et al. (39) reported that additional resources and support, through external interventions or projects, were received by poorly performing schools. Harris and Chapman (38) also emphasized that these schools received external support from the Office for Standards in Education (OFSTED) or Local Education Authorities (LEA) advisors, which helped them develop external networks to facilitate the generation of ideas, professional development, and dissemination of good practice.

Turnaround Strategies Used in the Included Studies

Although there is no dominant classification of turnaround strategies in the for-profit literature (44), 3 generic strategies including reorganization (replacement), retrenchment, and repositioning (renewal) can be distinguished in the for-profit sector literature (18, 44). Different studies have used these conceptual categories (or similar labels) to examine the impact of different approaches to reverse organizational decline. However, some variables and labels do not fit neatly into any of these 3 conceptual categories. Therefore, some slightly different patterns of evidence might arise due to different subjective judgments (10). Moreover, Beeri (11, 13, 36), based on his findings, categorized these 3 turnaround strategies to 8 subgroups, reflecting different dimensions of turnaround strategies, which are as follow: 'retrenchment of services’ reflecting reduction in the scope of organizational activities; ‘retrenchment of expenditures’, meaning applying measures to make spending more cost-effective; ‘repositioning as innovative services’, referring to measures to increase the variety and accessibility of services; ‘repositioning as reaching out’, reflecting an organizational intention to reach out to new segments of consumers; ‘repositioning as renewed relationship’, referring to efforts to reconstruct relationships with external stakeholders; ‘reorganization at the organizational level’ including redefining organizational culture, updating strategic goals, internal changes, and retraining frontline employees; ‘reorganization at the personnel level’ including discharging individual personnel, shifting or eliminating positions, and changing role definitions; and 'reorganization as extent of centralization’, measuring the concentration of organizational power at the center. It seems that reorganization is more common among these complementary and interrelated turnaround strategies (36); and this may be due to the limits of the other strategies in public agencies, or it may be tied to political signals associated with reorganization for stakeholder groups (12). Table 5 demonstrates all the turnaround interventions used in each included study.

Table 5. Turnaround Interventions .

Studies
Intervention 		1 2 3 4 6 7 8 9 12 11 10 14 15 16 17 19 21
Replacement of CEO ● ● ● ● ● ● ● ● ● ● ●
Replacement of sr. Management team ● ● ● ● ● ● ● ● ● ●
Internal restructuring ● ● ● ● ● ● ●
Focusing on performance management ● ● ● ● ● ● ● ● ●
Focusing on main performance targets ● ● ● ● ● ● ● ● ● ● ●
Improving operational performance ● ● ● ● ● ● ● ● ● ● ● ●
Financial analysis and control ● ● ● ● ● ● ● ● ●
Focusing on human resources and organizational development ● ● ● ● ● ● ● ● ● ● ● ● ●
Participative leadership ● ● ● ● ● ● ● ●
Attempts to change organizational culture ● ● ● ● ● ● ● ● ● ●
Developing relations with external stakeholders ● ● ● ● ● ● ● ● ● ●
Developing strategic vision ● ● ● ● ● ● ●
Additional resources and external support ● ● ● ● ● ● ●
Using external consultants and peer mentors ● ● ● ● ● ● ● ●
Using interim management ● ● ● ●
staff and clients involvement in design & running of services ● ● ● ● ● ● ● ● ● ●
Refocusing of organization’s effort ● ● ● ● ●
Improving internal working relationship ● ● ● ● ● ● ●
Improving physical appearance as symbolic action ● ●
focus on client needs ●
Improving system process ● ● ● ● ● ●
Creation/renewal of staff commitment to the organization ● ● ●
Open in a new tab

* The details of turnaround interventions have not been mentioned explicitly in another study of Beeri (2011). He only pointed that the original 3 groups of turnaround strategies (3Rs) could be categorized into 8 subgroups.

Role of Contextual Factors in Turning around Performance

Some of the included studies, especially those in school settings, found that contextual issues (eg, social status and level of available resources) may be important factors in the success of turnaround strategies (2, 12, 37, 39, 40). In the health sector, 2 studies explored the role of contextual issues in turning around performance (28, 30). In the first study, it was reported that the characteristics of users of public services (eg, socioeconomic status and ethnic diversity) can affect the extent of local need for services, which may affect the performance of organization. This study concluded that in some situations, the performance of the organizations is related to factors that are beyond their control. Therefore, to assess the performance of the public organizations, the impact of contextual factors, particularly socioeconomic circumstances, on the performance of the organizations need to be taken into account (28). On the second study, the role of starting of National Health Insurance Scheme (NHIS) has been emphasized as a contextual factor in turning around performance (30).

Impact of Turnaround Strategies

The impact of turnaround strategies on the organizational performance (outcome of turnaround interventions) and on the staff are considered in the included studies, which are presented below:

Organizational performance: The included studies demonstrate that some organizations experienced successful turnaround and improvement in their performance, at least in the short term. For example, the results of studies, conducted in health (28-30) and school setting (2, 12), revealed that turnaround strategies had a positive impact on the organizational performance indicators. However, it should be noted that in some cases, after implementing the turnaround strategies, the performance of many organizations remained poor, if not worse than before implementing turnaround strategies. For example, Turner and Whiteman (34) reported that 6 organizations showed good progress, but 3 did not improve their scores.

Staff: Some of the included studies indicated that concerns were expressed by staff and managers about working under high levels of pressure, which were imposed on them by the turnaround interventions introduced by senior managers. As a consequence, low staff morale and a variety of change resistance strategies were reported relating to the replacement of some staff and greater expectations of the workforce. Furthermore, changes in job descriptions and increased stress among staff were further factors contributing to low staff morale and resistance to change (25, 26, 28, 33, 34). High workloads were perceived by staff, particularly when the reduction in staffing was used as a strategy to reduce the costs (25, 26, 33).

Several studies reported that some staff referred to work overload as ‘recovery fatigue’, as it impacted their energy and morale. Senior managers reported that they had to manage the turnaround process over and above their day to day responsibilities and that they were also required to invest a large proportion of their time, energy, and efforts in responding to the demands of inspectors and external agencies. Thus, once the engagement process eased, as a result of improvements in performance, many managers felt a high degree of relief (34, 28).

Both Protopsaltis et al. (25) and Fulop et al. (26) reported conflicts between new incoming managers and clinicians because of the type and level of changes introduced by managers in reorganizing clinical practice and procedures. Middle managers felt frustrated, as they were continuously being asked to meet targets without the time to stand back and plan to improve the processes.

Some positive (mobilizing and motivating the staff workplace and changing attitudes of staff towards patients) and negative (staff frustrating) impacts of turnaround strategies have also been reported (30), implying that the effects of different turnaround strategies can differ across performance dimensions (12).

Unintended and Dysfunctional Consequences of Turnaround Interventions

Some of the included studies noted that turnaround interventions might induce a range of unintended, adverse, and dysfunctional consequences for organizations, their staff and consumers (2, 26, 28, 34). Turner and Whiteman (34) argued that achieving a better CPA score became the most important priority for some local authorities. Two negative consequences were identified: first, the local authorities were unwilling to criticize the government (Compliance); and second, local authorities focused on meeting centrally set targets (heavily oriented to the CPA score possibly incompatible with the requirements of their local communities). In addition, organizations might be distracted from the focus on sustainable performance improvement. The tension between external criteria-based assessment and internal culture and the process of performance management were highlighted here. It was shown that some organizations were willing to perform activities that were likely to result in positive responses from inspectors or auditors. Some leading participants attributed speedy improvement to deal with inspection and audit processes rather than turnaround strategies. They indicated an improvement in the level of cognition, capability, and capacity in dealing with audit processes. Further investigation is needed to explore whether the improvement is attributable to the turnaround strategies or to gaining more capabilities and capacities to deal with central targets and audit processes. They also reported that the organizations needed to consider financial costs due to changes in both management and organizational restructuring and those 2 local authorities reported changes in their current budget priorities during turnaround.

Ravaghi (28) also recognized 2 unintended and adverse consequences of implementing turnaround interventions believed to have had a negative effect on the hospital trust and service delivery to patients. These consequences were pressure and stress perceived by staff due to high level of workload, tunnel vision, and impact on quality of patient care.

Discussion

To the best of our knowledge, this was the first comprehensive literature review exploring both organizational failure and turnaround processes in public sector organizations. It has distilled the available evidence within the public sector and compared it with the existing literature derived from the for-profit sector. We have highlighted key issues with regards to the theoretical framework and methods used in the studies and have summarized the results of the included studies on the symptoms and causes of failure, triggers for change, and turnaround interventions. These are each discussed in turn below.

Symptoms of Failure

As in the for-profit sector, 4 different types of markers of failure (financial, physical, behavioral, and managerial) were found in the public sector. The most common markers of failure in the public sector were an inability to hit core targets, poor working relationships with external stakeholders, high management turnover, employee distrust/internal conflict, and low staff morale. In the health sector, poor financial balance, the high level of staff turnover, and/or recruitment problems, and poor public/media image were evident markers of failure. Financial issues were not a crucial marker in the school sector, although there were some examples indicating the inability of schools to achieve a financial balance. Only 2 studies (26, 33) identified a link between markers and primary and secondary causes of failure (dysfunction in organizational learning).

Secondary and Primary Causes of Failure

Findings of this review revealed that internal and/or external secondary factors, similar to those in the for-profit sector, contribute to the organizational failure process in the public sector; 5 different secondary internal causes were found: managerial, financial, organizational, cultural, and political factors. It should be borne in mind that, except in very special circumstances (eg, the occurrence of a disaster), a single factor can lead to a failure, whereas in other situations, several different factors contribute to a decline in performance.

The most common internal secondary causes of failure were as follow: poor managerial leadership; poor operational management; poor performance management (not evident in school settings); cultural problems; insularity (poor relationships with other stakeholders); poor internal relationships; lack of staff engagement; and inattention to external warnings. Poor political leadership was an important cause of failure in local government settings. As a result of the political context of the public sector, particularly in local governments, political issues (eg, poor political leadership and poor political-managerial relationships) were key contributing factors to organizational failure, although this was not a cause of failure in the for-profit sector.

There were some differences between the symptoms and causes of failure between the 2 sectors, owing to the nature of the services provided and the context of provision. For example, decline in demand was not a contributory issue in performance decline in the public sector, although it was an important cause of failure in the for-profit sector. On the other hand, Walshe et al. (18) argued that the inability of a public sector organization to meet customer demand and create satisfaction for its stakeholders are indeed issues that can contribute to failure.

Policy change, diverse service needs, and a poor socioeconomic situation (high level of poverty and deprivation) were the most important external factors contributing to performance decline and failure within public services. In the health sector, policy change was perceived as the most evident external contributor to organizational failure, but the impact of contextual factors (eg, socioeconomic factors) has less been considered in the health sector. More studies need to be conducted in this area.

Triggers for Change

This review found that both internal and external factors have made a contribution in initiating processes of change (triggers) within the public sector. Replacement of senior management was the most common internal trigger in all the included studies, and reports provided by external agents and concerns expressed by external stakeholders were the most common external triggers. Reaction of organizations to the announcement of poor performance was also an important trigger. The findings of this review were comparable with the literature from the for-profit sector, although the role of external agents in diagnosing and triggering change was more common and of greater importance in the public sector than the for-profit sector due to the nature of public sector. Harvey et al. (27) identified the valuable role of the PDT as an external agent in diagnosing problems of NHS organizations and serving as agents of change. It is vital to note that in all included studies, multiple factors rather than a single factor played a crucial role in the initiation of the process of change.

Turnaround Interventions

To organize and report the interventions used in the included studies in this review, the “3Rs” strategy (44), derived from the literature in the for-profit sector, was used. We found that 3 generic turnaround strategies (reorganization, retrenchment, and repositioning), used in the for-profit sector, have been also used in the public sector, although the feasibility, frequency, and extent of use of these strategies have not been similar across the 2 sectors. Reorganization strategies were the most common form of intervention used in the public sector, however, greater use of reorganization in public organizations did not result in better performance (36). Although retrenchment strategies have been used in the public sector, particularly in health care trusts facing financial difficulties, their effectiveness has not been proven and it was the least used strategy in school settings. The use of repositioning strategies to change the activities of the organization or expand its services by entering into new markets is often impossible for public service organizations, as providing objective services is mandatory due to the statutory obligations. However, in some cases we found that the responsibility for service provision of an organization was transferred to other organizations. The evidence in this area within the public sector is still limited, and existing studies are not comprehensive, so it is difficult to reach a firm conclusion on the effectiveness of these strategies. However, the limited evidence may provide important information for policymakers and managers charged with turning around poorly performing organizations.

Limitations

Limitations of this review: As outlined in the methods section above, a broad search strategy following consultation with 2 librarians from the NHS Centre for Reviews and Dissemination (CRD) was used to ensure that the maximum number of eligible studies was included. However, owing to the diversity of the topic (organizational failure and turnaround processes) and the presence of under-developed search strategies for nonexperimental studies, some studies might have been missed. To minimize this problem, some additional exploratory pathways were employed, eg, searching using the authors’ names of relevant papers as a search term.

Limitations of included studies: As noted above, the principal research method used to study organizational failure and turnaround was the qualitative case study design, although the number of quantitative studies has increased since 2005. In some case studies, data were collected by interviewing only 1 informant, and so might not have provided a rounded view of the issue under question, and thus the potential for bias should be considered. In addition, some studies used a retrospective approach, making recall bias (selective recall) a cause for concern. It should, however, be noted that Paton and Mordaunt (42) tried to use document analysis to support interviews in 2 out of 4 of their cases.

Conclusion

This review highlights difficulties regarding the methodology of review of nonexperimental studies: searching (particularly electronic databases); quality assessment; and data synthesis. Considering all these issues, it seems that more methodological development is required.

The gap in linkage between symptoms and secondary and primary causes of failure in public sector organizations is also apparent from this review. So far it is not clear how the identification of the symptoms of failure can result in the diagnosis of secondary and ultimately primary causes of failure. Similarly, it is unclear how diagnosis of symptoms and causes of failure can result in the selection and implementation of appropriate turnaround strategies. We also found that the existing literature on this topic lacks robust longitudinal studies, tracking over the time how organizations sustain their hard won improvements in performance.

With respect to the effectiveness of the turnaround strategies, there remain gaps in the literature and evidence base. There is currently insufficient evidence about which turnaround strategy of the 3 broad generic types (reorganization, retrenchment, and repositioning) is the most appropriate to use, and in what contexts and circumstances the different strategies would achieve the best outcomes. Moreover, how these turnaround interventions can be combined in different contexts is an important issue that is not explored fully in the public sector literature.

This review also revealed a lacuna in the literature with regards to the role of external organizations in dealing with poorly performing organizations, as related to the initiation of the turnaround process, and supported both during the process and while the organization improves and attempts to sustain its improvement. The type of strategies used by external organizations and the duration of these interventions with regards to the type of poorly performing organization (self-initiating and permanently poor performing) were insufficiently covered by empirical studies, although 3 different kinds of relationship between external supporting organizations and poorly performing organizations have been defined by Jas and Skelcher (45), using principal-agent theory. No sufficient empirical evidence was found to differentiate ‘permanently failing’ from ‘self-initiating’ organizations, which could have helped policymakers to focus more on ‘permanently failing’ organizations.

It is clear from the review that several research studies in this area were not underpinned by sound theoretical frameworks. For example, most of the studies conducted in a school setting had not used or reported a theoretical framework or conceptual model. Moreover, the gap in the literature regarding the impact of contextual factors on organizational failure and the probability of success or failure of turnaround interventions within the public sector has been highlighted.

Conflict of Interests

The authors declare that they have no competing interests.

Cite this article as: Ravaghi H, Mannion R, Sajadi HS. Organizational failure and turnaround in public sector organizations: A systematic review of the evidence ch. Med J Islam Repub Iran. 2017 (11 Dec);31:76. https://doi.org/10.14196/mjiri.31.76

References

  • 1. Pollitt C, Bouckaert G. Public Management Reform: A Comparative Analysis-New Public Management, Governance, and the Neo-Weberian State. Oxford: Oxford University Press; 2011.
  • 2.Rutherford A. Organizational turnaround and educational performance: The impact of performance-based monitoring analysis systems. AM Rev Public Adm. 2014;44(4):440–458. [Google Scholar]
  • 3. Micheli P, Neely A, Kennerley M. The roles of performance measurement in the English public sector. Proceedings of EGPA Conference, Bern, Switzerland; 2005.
  • 4. Beeri I. Recovering Failing local authorities-Is There a Need for Turnaround Management Strategies. Annual conference of the Political Studies, Ireland; 2007.
  • 5.Verbeeten FHM. Performance management practices in public sector organizations: Impact on performance. Account Audit Accoun. 2008;2(13):427–454. [Google Scholar]
  • 6.Boyne GA. What is Public Service Improvement? Public Admin. 2003;81(2):211–228. [Google Scholar]
  • 7.Gutiérrez-Romero R, Haubrich  D, McLean I. The limits of performance assessments of public bodies: external constraints in English local government. Government and Policy. 2008;26(4):Government and Policy 2008;26(4). [Google Scholar]
  • 8.Andrews R, Boyne G, Enticott G. Performance Failure in the Public Sector: misfortune or mismanagement? Public Manag Rev. 2006;8(2):273–296. [Google Scholar]
  • 9. Mordaunt J, Otto S. Crisis, failure and recovery and the governance of public and nonprofit organizations: the effects of participation, Paper for the International Society for Third Sector Research; 2004.
  • 10.Boyne G. Strategies for public service turnaround: lessons from the private sector. Admin Soc. 2006;38(3):365–88. [Google Scholar]
  • 11.Beeri I. Turnaround Management Strategies in Local Authorities: Not Only for Poor Performers. Local Gov Stud. 2011;iFirst:1–23. [Google Scholar]
  • 12.Favero N, Rutherford A. Organizational turnaround in New York City schools. Public Manag Rev. 2016;18(3):437–455. [Google Scholar]
  • 13. Cameron KA, Sutton RI, Whetten AD. Readings in Organizational Decline: Framworks, Research, and Prescriptions. Cambridge, MA: Ballinger; 1998.
  • 14. Ketchen D. Turnaround Research: Past Accomplishments and Future Challenges. London: JAI Press; 1998.
  • 15.Barker VL, Patterson JrPW, Mueller GC. Organizational causes and strategic consequences of the extent of top management team replacement during turnaround attempts. J Manage Stud. 2001;38(2):237–269. [Google Scholar]
  • 16.Bruton G, Ahlstrom D, Wan J. Turnaround in East Asian Firms: Evidence from Ethnic Overseas Chinese Communities. Strategic Manage J. 2003;24:519–40. [Google Scholar]
  • 17. Borins s. Innovating with Integrity: How Local Heroes are Transforming American Government. Washington: Georgetown University Press; 1998.
  • 18.Walshe K, Harvey G, Hyde P, Pandit N R. Organizational failure and turnaround: Lessons for public services from the for-profit sector. Public Money Manage. 1998;24(4):201–208. [Google Scholar]
  • 19.Meier K, Bohte J. Not with a Bang but a Whimper: Explaining Organizational Failures. Admin Soc. 2003;35:11–18. [Google Scholar]
  • 20.Pajunen K. Comparative Causal Analysis in Processual Strategy Research: A Study of Causal Mechanisms in Organizational Decline and Turnarounds. Adv Strateg Manage. 2005;22:419–461. [Google Scholar]
  • 21. McKiernan P, Turnarounds In, Faulkner D, Campbell A. The Oxford Handbook of Strategy Oxford. Oxford University Press; 2002.
  • 22.Boynton PM, Greenhalgh T. Selecting, designing and developing your questionnaire. Brit Med J. 2004;328:1312–1315. doi: 10.1136/bmj.328.7451.1312. [DOI] [PMC free article] [PubMed] [Google Scholar]
  • 23. Gray J. Causing Concern but Improving: A Review of Schools' Experiences on Special Measures. London: Department for Education and Employment Research Series; 2000.
  • 24.Boyne GA, Meier KJ. Environmental change, human resources and organizational turnaround. J Manage Stud. 2009;46(5):835–63. [Google Scholar]
  • 25. Protopsaltis G, Fulop N, Meara R, Edwards N. Turning around failing hospitals. London: The NHS Confederation; 2002.
  • 26. Fulo N, Scheibl F, Edwards N. Turnaround in Health Care Providers. London: London School of Hygiene and Tropical Medicine; 2004.
  • 27. Harvey G, Hyde P, Walshe K. Investigating ‘turnaround’ in NHS organizations supported by the Performance Development Team (PDT) of the Modernization agency. Final research report. Centre for public policy and management. Manchester Business Scholl: University of Manchester; 2005.
  • 28. Ravaghi H. Organizational failure and turnaround process in NHS hospital Trusts. Unpublished thesis. University of York, UK; 2006.
  • 29.Stafrace S, Lilly StA. Turnaround in an aged persons’ mental health service in crisis: a case study of organizational renewal. Aust Health Rev. 2008;32(3):577–582. doi: 10.1071/ah080577. [DOI] [PubMed] [Google Scholar]
  • 30.Marchal B, Dedzo M, Kegels G. Turning around an ailing district hospital: a realist evaluation of strategic changes at Ho Municipal Hospital (Ghana) BMC Pub Health. 2010;10(1):787–803. doi: 10.1186/1471-2458-10-787. [DOI] [PMC free article] [PubMed] [Google Scholar]
  • 31.Ravaghi H, Mannion R, Sajadi HS. Organizational failure in an NHS hospital Trust: A qualitative study. Health Care Manag (Frederick) 2015;34(4):367–75. doi: 10.1097/HCM.0000000000000087. [DOI] [PubMed] [Google Scholar]
  • 32.Joyce P. The Role of Leadership in the Turnaround of a local Authority. Public Money Manage. 2004;24(4):235–242. [Google Scholar]
  • 33.Eitel DF. The dynamics of chronic failure: A longitudinal study. Public Money Manage. 2004;24(4):243–250. [Google Scholar]
  • 34.Turner D, Whiteman P. Learning from the experience of recovery: the turnaround of poorly performing local authorities. Local Gov Stud. 2005;31(5):627–654. [Google Scholar]
  • 35.Beeri I. The measurement of turnaround management strategies in local authorities. Public Money Manage. 2009;29(2):131–136. [Google Scholar]
  • 36.Beeri I. Turnaround management strategies in public systems: the impact on group-level organizational citizenship behavior. Int Rev Adm Sci. 2012;78(1):158–179. [Google Scholar]
  • 37. Willmott R. Structure, agency and school effectiveness: researching a ‘failing’ school. Educational; 1999.
  • 38. Harris A. Chapman C. Leadership in schools facing challenging circumstances. Nottingham: National College for School Leadership; 2002.
  • 39. Harris A, Muijs M, Chapman C, Stoll L, Russ J. Raising attainment in schools in the former coalfields areas. London; 2003.
  • 40. Boyne G, Meier KJ. Good luck, good Management and organizational turnaround in the public sector. Working paper. Cardiff Business School; 2005.
  • 41.Deeds V, Pattillo M. Organizational failure and institutional pluralism: A case study of an urban school closure. Urban Educ. 2014:1–31. [Google Scholar]
  • 42.Paton R, Mordaunt J. What's different about public and non-profit "turnaround"? Public Money Manage. 2004;24(4):209–216. [Google Scholar]
  • 43. Pawson R, Tilley N. Realistic Evaluation. London: Sage; 1998.
  • 44. Boyne G. A ‘3Rs’ strategy for public service turnaround: retrenchment, repositioning and reorganization. Public Money Manage. 2004a;24(2):97-103.
  • 45. Jas P, Skelcher C. Performance Failure and Turnaround in Public Sector Organizations: A theoretical and empirical analysis. Birmingham: University of Birmingham, Institute of Local Government Studies; 2004.

Articles from Medical Journal of the Islamic Republic of Iran are provided here courtesy of Iran University of Medical Sciences

RESOURCES