Journal of Management Inquiry21(2) 217 –234© The Author(s) 2012Reprints and permission: sagepub.com/journalsPermissions.navDOI: 10.1177/1056492611411906http://jmi.sagepub.com

Non-Traditional Research

General, what shall I do? The people are impatient; [Treasury Secretary] Chase has no money; . . . the General of the Army has typhoid fever. The bottom is out of the tub. What shall I do?

President Lincoln’s question to his Quartermaster General in 1862 (Basler, 1954-1955, p. 95)

IntroductionOrganizational turnaround represents a critical process whereby managers seek to reverse an organization’s severe performance decline and attempt to restore its economic viability (e.g., Filatotchev & Toms, 2006; Hofer, 1980; Pearce & Robbins, 1993). Although substantial research has focused on the effi-cacy of specific turnaround strategies, such as whether a firm should implement a “retrenchment” strategy as a critical step toward recovery (Barker & Mone, 1994; Morrow, Johnson, & Busenitz, 2004; Robbins & Pearce, 1992; Winn, 1997), much is still not known about key contingencies in the turnaround process (Pajunen, 2006).

Not only do substantive gaps remain in turnaround research but various contradictory findings also exist (Lohrke, Bedeian, & Palmer, 2004). For example, although some studies have found that firms that successfully implemented turnarounds generally began the process by hiring outside managers

(O’Neill, 1986), others have found that incumbent manag-ers were more likely to lead successful turnaround efforts (Zimmerman, 1989). In addition, some studies have concluded that implementing conservative, efficiency-oriented strategies aided turnaround efforts (Hambrick & Schecter, 1983), whereas others found them a hindrance (Barker & Mone, 1998). Such conflicting findings may result from extant studies’ failing to formulate theory-based research questions a priori or relate findings ex post to extant theory (Pandit, 2000). Although some notable exceptions exist (e.g., Barker, Patterson, & Mueller, 2001; Bruton, Ahlstrom, & Wan, 2003; Pajunen, 2006), it has long been recognized that turnaround research may be “a long way up the empirical creek without a theoreti-cal paddle” (Meyer, 1988, p. 413).

Examining topics in fresh and insightful ways and in new research sites is critical to further develop the theoretical base in management (Christensen, 2006; Gibbert, Ruigrok, & Wicki, 2008; Globerman, Peng, & Shapiro, 2011; Van Maanen, 1979).

411906 JMIXXX10.1177/1056492611411906Lohrke et al.Journal of Management Inquiry

1Samford University, Birmingham, AL2The Chinese University of Hong Kong, Shatin, Hong Kong3Texas Christian University, Fort Worth

Corresponding Author:Franz T. Lohrke, Brock School of Business, Samford University, 301 Dwight Beeson Hall, 800 Lakeshore Drive, Birmingham, AL 35229, USA Email:ftlohrke@samford.edu

Extending Turnaround Process Research: Important Lessons From the U.S. Civil War

Franz T. Lohrke1, David Ahlstrom2, and Garry D. Bruton3

Abstract

Although research has made progress in building our understanding of effective turnaround strategies, significant gaps remain in our knowledge about the strategic processes managers can employ to formulate and implement these strategies. Using a historical case of organizational turnaround employed by the U.S. government during the U.S. Civil War, the authors generate new insights into the turnaround process while confirming some previous findings. Through the turnaround actions of President Lincoln and his administration, the U.S. (Union) forces surmounted threats to the country’s survival, turned around the war effort, and ultimately reunited the country while ending the institution of chattel slavery in the United States. The authors’ review of extant turnaround research in tandem with results from this rich case history provides the basis for reexamining existing models of the turnaround process as well as developing propositions to guide future turnaround research, particularly in the areas of crisis reaction, organizational learning, and transformational leadership.

Keywords

organizational turnaround, leadership, management history, Abraham Lincoln, Civil War (United States)

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Accordingly, Mintzberg and others have argued that scholars need to examine models of strategic and organizational change outside traditional organizational research sites if we are to expand our theoretical understanding of organizations and their activities (e.g., Christensen & Raynor, 2003; Mintzberg, Lampel, & Ahlstrand, 1998; Mintzberg, Lampel, Quinn, & Ghoshal, 2003). One means by which scholars can acquire knowledge about organizations is via idiographic case studies (Tsoukas, 1989). Case studies are effective tools to identify key variables early in a research program (Lakotos, 1980; Yin, 2003) or determine when the variables and their relationships may need reexamination, clarification, and/or reclassification (Christensen, 2006; Eisenhardt, 1989; Eisenhardt & Graebner, 2007).

Historical cases, in particular, have proven a rich source for theory development in strategic management and related orga-nizational topics (e.g., Ahlstrom, Lamond, & Ding, 2009; Ahlstrom & Wang, 2009; Allison, 1971; Cooke, 2003; Grattan, 2009; Janis, 1982; Murray & Sinnreich, 2006; Schelling, 1966). Prior use of cases has produced fresh insights by devel-oping a rich understanding of organizational life, which researchers can employ to inductively build theory by asking “What is going on here?” “What is the process?” and “How can it be applied?” (George & Bennett, 2004; Nair & Ahlstrom, 2008). Through this process, scholars draw on a well-documented and detailed historical case to expand and refine a research model by generating causal schemes, con-ditions, and implementation suggestions that can enrich our understanding of contemporary organizational phenomena and contexts (Ahlstrom et al., 2009; Hamel, 2007; Schelling, 1966).

Decision-making research illustrates the use and insights from historical cases based on detailed secondary accounts and archival transcripts. For example, Allison’s (1971) use of the Cuban Missile Crisis is widely recognized for its insights into managerial decision making. By carefully exam-ining the crisis initially through the theoretical lens of the “rational actor” model, Allison was able to generate hypoth-eses about why the Soviet Union decided to send nuclear missiles to Cuba. In contrast, after examining transcripts of White House meetings on the Missile Crisis, he concluded that the commonly invoked rational actor model failed to account for other equally important considerations in the decision process. These results, in turn, led to a subsequent refinement of decision-making theory and the application of alternative models to make sense of organizational decision-making complexities.

In addition, other management and social science schol-ars have drawn on the rich and detailed case histories of both the First and Second World Wars as a source of both poten-tial theory and supporting evidence (Ahlstrom & Wang, 2009; Grattan, 2009; Schelling, 1966). The First World War, in particular, provides numerous examples of confused choices, absentee and unethical leadership, and decision making based on overly rigid standard operating procedures

(Craig, 1964; Mintzberg, 1994; Mintzberg et al., 2003; Schelling, 1966). For example, Nobel Laureate Thomas Schelling (1966) formulated some of his most influential views on game theory partly based on his understanding of the First World War’s origins and how military schedules seemed to have touched off the conflagration irrespective of the wishes of a country’s leaders.

Accordingly, we employ an in-depth, historically based case study to gain further insight into the organizational turn-around process. Specifically, we will examine efforts under-taken by President Abraham Lincoln and his administration during the U.S. Civil War from 1861 to 1865. Despite having superior resources, the United States (“Union” or “North”) almost lost the war to the Confederacy (“Rebels” or “South”), which would have divided the United States into rival powers (with a militarized border) as well as probably enabled the continuation and spread of chattel slavery to Central and South America (Hyman, 1973). Ultimately, the Union leaders were able to marshal the North’s extensive military resources, build an effective leadership team, and manage both public opinion and sensitive diplomatic relationships to turn around the war effort, in spite of numerous setbacks and divisions within their ranks that almost produced a Confederate victory (Goodwin, 2005; McPherson, 1990, 2008).

We begin this study by briefly reviewing current organi-zational turnaround research. Then, employing an historical case study research design (Gaddis, 2004; Howell & Prevenier, 2001; Stake, 1995), we examine the turnaround processes used in the Union’s defeat of the Confederacy in the U.S. Civil War. Our review of existing turnaround research in tan-dem with results from this case study provides the basis for revising extant turnaround models and suggesting proposi-tions to guide future research. A further benefit of using the case approach in this context is that extensive primary archi-val and secondary documentary material exists on the war’s events, including day-to-day deliberations, communications, and decisions of the leadership on both sides (Freehling, 2002; Goodwin, 2005; McPherson & Cooper, 1998; Williams, 1952), which may help shed light on potential lessons for the turnaround process. This study, thus, addresses Jones and Khanna’s (2006, p. 453) recent general concern that although history matters for organizational research, “there is still a search for how it matters” and provides additional support for the careful use of historicism in organizational research.

Current Understanding of Organizational TurnaroundA firm is considered to be in decline when it suffers the loss of significant resources and faces related difficulties suffi-cient to threaten its survival (Cameron, Kim, & Whetton, 1987). In contrast, a turnaround occurs when managers reverse this performance decline adequately to resolve the crisis situa-tion and, in turn, restore the organization’s ability to function

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normally (Barker & Duhaime, 1997; Pearce & Robbins, 1993). Given the deleterious effects organizational decline and failure have on internal (e.g., employees) and external (e.g., local community) stakeholders, scholars have long focused on improving understanding of the turnaround process.

Scholarly examination of organizational turnaround largely began with Schendel and his colleagues’ work (e.g., Schendel, Patton, & Riggs, 1976) and has since been studied by numer-ous other authors in a range of settings (e.g., Bruton et al., 2003; Hofer, 1980; O’Neill, 1986; Pandit, 2000; Robbins & Pearce, 1992). Although some debate still exists about certain steps in the turnaround process, researchers generally agree that there are several important issues that managers must address. First, they must identify the problems causing decline and, in turn, take initial actions to stabilize the firm’s declining performance (Filatotchev & Toms, 2006; Pearce & Robbins, 1993). Second, they must take long-term actions, including enlisting both internal and external stakeholders’ support for the turnaround (Arogyaswamy, Barker, & Yasai-Ardekani, 1995; Pajunen, 2006). In addition, two crucial contingencies can also affect the turnaround process—a firm’s leadership and its decline severity (Lohrke et al., 2004). We briefly review each of these, in turn.

Step 1—Initial ActionsThe initial actions that managers must undertake during a turn-around include properly diagnosing the problem and then stabilizing the firm. The first of these may seem obvious—before the turnaround process can begin, managers must recognize that a firm is facing a severe, nonroutine problem requiring significant action, rather than just a temporary downturn (Weitzel & Jonsson, 1989). Sometimes, however, especially if a firm declines slowly, managers may refuse to acknowledge that the firm is confronting a threatening situ-ation (Barr, Stimpert, & Huff, 1992).

Once a manager recognizes the problem, the managers typically either perceive the decline causes to be (a) tempo-rary or permanent and (b) controllable or uncontrollable (Milliken & Lant, 1991; Mone, McKinley, & Barker, 1998). If the managers attribute the decline to temporary or cyclical causes (e.g., economic recession), they often respond by implementing incremental, short-term changes (e.g., laying off employees) rather than making strategic, long-term changes (Meyer, Brooks, & Goes, 1990). These actions may be effective in temporary downturns, given their focus on increasing efficiency, but they do little remedy to problems requiring major strategic reorientations (Pfeffer, 1998; Staw, Sanderlands, & Dutton, 1981). In contrast, attributing decline to more permanent shifts often prompts managers to imple-ment a more innovative strategy given that they perceive that the current one no longer fits with the firm’s environment (Zammuto & Cameron, 1985).

Second, whether managers perceive they have control over decline causes can also impact their crisis reaction. When confronting what they perceive to be an increasingly uncontrollable environment, they are less likely to imple-ment innovative strategies (Chattopadhyay, Glick, & Huber, 2001) and may actually escalate commitment to a failing one, even when facing major environmental changes (Milliken & Lant, 1991). This risk-adverse decision making results in a “threat-rigidity response” where centralized deci-sion making and heavy reliance on well-known decision routines dominate. Thus, at a time when a firm may need innovative actions to recover, managers may escalate com-mitment to an inadequate strategy, and, thus, fail to imple-ment major strategic and operational changes needed to turn around the firm (Staw et al., 1981).

Step 2—Managing Internal and External StakeholdersOnce managers have diagnosed a firm’s problems and stabi-lized its operations, they must identify and address the long-term, strategic issues that caused the decline. Two issues of particular concern are managing the firm’s internal climate and outside stakeholders’ opinions to secure needed support and resources. The firm’s internal climate during decline often includes falling morale, intrafirm conflict, resistance to change, and loss of leadership credibility (Arogyaswamy et al., 1995). These problems may prompt a firm’s most valuable employees to leave (Hambrick & D’Aveni, 1992) and, as noted, lead man-agers to adopt risk-averse decision making because they increasingly start framing issues as threats rather than opportu-nities (Ferrier, Fhionnlaoich, Smith, & Grimm, 2002).

Managers must also maintain, and sometimes renew, sup-port from key resource providers—the outside stakeholders (Pajunen, 2006). As a firm declines, its image with these exter-nal stakeholders can erode, causing some to disengage with the organization to protect vital self-interests (Arogyaswamy et al., 1995). For example, after recognizing the firm’s problems, stakeholders may not be willing to place themselves at risk by extending the firm additional credit, which can create major cash flow problems for a firm. Managers must also address key financial stakeholders’ (e.g., equity investors, bankers, and bondholders) concerns about rates of return or repay-ment given that a firm’s financial governance arrangements (e.g., bond covenants) may constrain management’s flexibility in implementing a turnaround (Filatotchev & Toms, 2006).

Contingency 1—LeadershipLeadership represents a crucial contingency for firms attempt-ing a turnaround (Bruton & Rubanik, 1997; Lohrke et al., 2004). Researchers in related streams, including upper-echelons theory and firm rejuvenation have found that that a firm’s top management can significantly affect strategic choices, strategy

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implementation and, ultimately, firm performance (Flynn & Staw, 2004; Mackey, 2008; McCall, 1998).

As noted above, one critical debate in turnaround research involves whether incumbent or new managers should lead the firm’s recovery efforts (Castrogiovanni, Baliga, & Kidwell, 1992; Collins, 2001). On one hand, those positing the need to replace top managers stress that because incumbent leadership implemented policies contributing to the decline in the first place, they will often have trouble reversing such policies (Staw, 1976). In addition, changing top management can sig-nal to both internal and external stakeholders that a firm needs radical change to recover, which can be helpful in focusing efforts on the turnaround process (Barker et al., 2001; Collins, 2001; Starbuck, Greve, & Hedburg, 1978).

On the other hand, replacing incumbent managers may prove disruptive to an organization’s operations, causing additional problems in a firm already facing severe difficul-ties (Castrogiovanni et al., 1992). It also may be difficult to replace top management because of organizational, institu-tional, and cultural factors ( Bruton et al., 2003 ; Castrogiovanni & Bruton, 2000). Moreover, incumbent managers, especially those with long tenures, often possess significant industry knowledge and social networks, which could aid a firm’s recovery (D’Aveni, 1989b). Thus, leadership remains a criti-cal contingency in turnaround, and the top management skills required for recovery may depend on the significance of stra-tegic change needed by the firm.

Contingency 2—Decline Speed and SeverityAnother important contingency is the nature of the firm’s decline because an appropriate response often depends on both decline speed and severity. In general, the longer man-agers delay in initiating turnaround actions, the greater the potential damage done to the firm. Particularly in firms expe-riencing severe and rapid decline, managers must quickly identify key threats and weaknesses and, in turn, rapidly initi-ate needed actions to promote recovery.

Decline severity can also influence the amount of strate-gic change necessary to turn around a firm. Those facing less severe declines may be able to implement incremental, tactical changes whereas those experiencing severe decline often require significant, rapid changes in a firm’s mission and/or strategy to be successful (Arogyaswamy et al., 1995). However, managers who make changes that are too timid in either circumstance are unlikely to be successful. Instead, they will often have to make multiple rounds of retrench-ments, which can harm the firm’s financial condition, its reputation, and ability to access critical resources.

SummaryAlthough the discussion above illustrates that scholars have built a solid foundation investigating effective turnaround

strategies, several important aspects of the process have yet to be well understood. Consequently, after providing back-ground information, we detail our case study to provide a “thick description” of crucial aspects of the turnaround pro-cess (Geertz, 1973; Tjosvold & Weicker, 1993). Employing the topics detailed above, we seek additional insight on the contingencies and implementation issues surrounding the Lincoln administration’s efforts in bringing the Union back from a rebellion threatening its existence and managing the internal infighting that almost derailed those efforts (Goodwin, 2005; McPherson, 2008). The results provide additional evi-dence and clarification for extant turnaround models and help us develop propositions to guide future turnaround research.

Turnaround and the U.S. Civil WarBackground

In the mid-19th century, the United States faced the most difficult and demanding challenge in its short history. Not long after Abraham Lincoln was elected U.S. President in November 1860, seven southern states where slavery was legal seceded from the Union. Four more states joined them the following spring in the new Confederate States of America (C.S.A. or “Confederacy”). Concurrently, the European powers stood poised to intervene in the conflict and perhaps even reestablish colonies in the Americas. Thus, less than 100 years after winning its independence, the United States was to face its severest test up to that time (McPherson, 1988; Stampp, 1981).

Lincoln’s efforts to contain the revolt in its first few months proved largely unsuccessful and, in some cases, even appeared to worsen the situation.1 Growing from a rebellion of seven southern states, the United States eventually found itself in a war with one third of its former states and facing the danger of European intervention (McPherson, 1988). In spite of Lincoln’s best efforts to avoid provoking radical elements on both sides, the United States was to suffer a devastating Civil War eventually fought across much of its territory and on two oceans.

The 11-state Confederacy would prove a formidable opponent for the Union. Although both sides thought that they could win a quick victory, the subsequent war would prove very costly and difficult to prosecute. For example, at the battle of Antietam, fought on a single late summer day in 1862, combined casualties were four times those suffered by U.S. forces during the Normandy invasion in June 1944 (McPherson, 2002). In total, more than 620,000 soldiers per-ished in the Civil War, a figure far exceeding U.S. casualties in any other war. The war particularly devastated the South: one quarter of all military age, White men in the Confederacy died in battle (Gallagher, 1999)—a percentage comparable with those killed in Central and Eastern Europe during World War II (Snyder, 2010).

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At first glance, the war’s length and severity may seem some-what surprising because when it began, the Union had a much larger population and much better developed industrial base than the Confederacy. However, such important resource advantages would not automatically translate into an easy Union victory, particularly given the large size of the Confederate territory that needed to be conquered and occupied (Hattaway & Jones, 1991). Instead, several early Southern victories coupled with growing European support, established the Confederacy as a military and political foe that would not easily be defeated. Indeed, by 1862, about 1 year into the war, it seemed that the South would win, as the Union leadership’s methodical and limited efforts to end the rebellion were proving inadequate (Hattaway & Jones, 1991). Lincoln and his cabinet eventually realized that the Civil War was turning out to be much more than a limited revolt by slave-holders and other radicals in Southern capitals; thus, more dras-tic measures would be needed to defeat the Confederacy (Holzer, 2009; McPherson, 2008).

The StudyTo study the Lincoln administration’s turnaround efforts, we employed multiple data sources, including primary archival material (e.g., Basler, 1954-1955; Hyman, 1973; Sears, 1989), historical narratives (Goodwin, 2005), longer historical stud-ies (Gallagher, 1999; Holzer, 2009; McPherson, 1988, 2008; Woodworth, 1990; Williams, 1949), military histories (Beringer, Hattaway, Jones, & Still, 1986; Hattaway & Jones, 1991; Keegan, 2009; Perret, 2004), biographies (Ambrose, 1962; Donald, 1995), and historiographies (Chambers, 2000; Eicher, 1996; McPherson & Cooper, 1998) about the U.S. Civil War. From these detailed studies, regularities in the data could be identified and turnaround processes established (George & Bennett, 2004; Howell & Prevenier, 2001; Stake, 1995). Thus, the research involved multiple researchers and data sources from a range of authors and multiple academic genres to ensure a variety of perspectives as well as to triangulate the data (Ahlstrom, 2010; Eisenhardt, 1989; Eisenhardt & Graebner, 2007; Stake, 1995). As the phenomenon under study is complex, represents a confluence of factors, and includes exploratory elements, this methodology is an useful analytical method to theory building and specification (Christensen & Raynor, 2003; George & Bennett, 2004; Gibbert et al., 2008).

We employed a four-step process in this research. First, we located principal data sources from both primary and second-ary historical sources (Howell & Prevenier, 2001). We then identified key research in this area with the help of two prom-inent U.S. Civil War historians as well as histographies on the war (e.g., McPherson & Cooper, 1998) and supporting work from two volumes of the Oxford History of the U.S. series (e.g., Howe, 2007; McPherson, 1988). We then added several additional sources as the need arose to clarify certain topics and events (e.g., Gallagher, 1999; Holzer, 2009; Keegan, 2009).

Second, we established data categories for the investiga-tion through a priori defining select baseline concepts in the study, a step that is consistent with a grounded theory approach to data gathering and basic concept verification and modifica-tion (Strauss & Corbin, 1998). Concepts identified by at least two of the researchers were employed if they appeared in at least two of the sources. If there was any significant scholarly dispute about a concept within our sources, such as a question about the effectiveness of certain major actions or policy of the Lincoln administration, we omitted that example (cf. Ahlstrom, Bruton, & Yeh, 2008).

Third, after developing categories and receiving some additional verification (or discarding some because of con-flicting information), we gathered additional data and exam-ples based on the categories and conditions that were specified or emerged in Step 2. We then developed a hierarchy of cat-egories in terms of likely causes, effects, and conditions asso-ciated with the turnaround process (Strauss & Corbin, 1998). Finally, we analyzed the findings by building on or modify-ing these categories, including triangulating the analysis with other information. This step is particularly important in rec-onciling any differences or explaining disparities across dif-ferent sources (Stake, 1995; Strauss & Corbin, 1998).

The Decline Situation Facing the UnionWhen Southern states seceded from the United States in 1860 and 1861, the North’s population was three times larger than the Confederacy’s with new immigrants arriving nearly every week from Europe in Northern ports. The North also had 10 times the cannons, much greater productive capacity, and 50 times the heavy warships—enough to blockade all major Southern ports and establish control over vital river traffic (Hattaway & Jones, 1991). Given the superior resources at their disposal, it would seem that the Union should have been able to put down the rebellion quickly.

This assessment, however, neglects the difficulty the Union had in projecting its power into the South and exer-cising control over that extensive territory and distances given the communication, transportation, and weaponry available in the 1860s (Keegan, 2009). First, both the Union and Confederacy spanned very large geographic areas. For example, the staging point for the Union’s western armies in Cairo, Illinois was nearly a thousand miles from the North’s industrial centers in the east, whereas the distance from the Confederacy’s key southern port, New Orleans, to its north-ern border in Virginia exceeds the distance from the Franco-German boarder to Ukraine. Considering that Napoleon’s army required 8 years (1799-1807) to traverse this distance to reach the frontiers of Czarist Russia, the difficulties that the Union faced just a few decades later in projecting power into the Confederacy, putting down the rebellion, and con-trolling the countryside become more apparent (Beringer et al., 1986).

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Second, simply mobilizing and preparing the large Union army was another daunting organizational problem that went very haltingly at first. When the war started, the regular U.S. army was little more than 15,000 troops garrisoned across the western and southern frontiers to monitor Native American tribes and chase various outlaws (McPherson, 1988). The army was not prepared for large-scale military operations requiring the occupation of an area greater in size than Western Europe with only a small number of militarily-significant tar-gets that could be profitably taken and held (Keegan, 2009). In addition, few good roads existed in the South, and railroads were limited. Union troops and supply lines were also subject to regular attack from raiders and a generally hostile Southern population.

Adding to the Union’s difficulties was that for the South to gain independence, it did not have to win; rather, it simply had to avoid losing (Hattaway & Jones, 1991). Specifically, if the South could prolong the war enough, the Union might end its efforts to put down the rebellion and let the Confederacy go its own way. In contrast, the Union had to defeat the Confederacy militarily, and as it turned out, quite thoroughly, to end the rebellion (Keegan, 2009). These important issues were not well understood by the Lincoln administration when the war began as the Union prepared for a limited conflict against what they thought was a rogue secessionist element that had taken over some southern state capitals (McPherson, 1988). However, these issues would become crucial in fram-ing the military (and later political) strategies necessary to win the war (McPherson, 1990, 2008).

In addition, President Lincoln and his administration faced the intricate political task of harmonizing the views of several different stakeholder groups in the North, each of which had radically different points of view about the nature of the Union, the authority of the U.S. Federal government, and the institution of slavery (Goodwin, 2005; McPherson, 1988). These ranged from the radicals, who favored treating the South harshly and freeing all slaves immediately, to conser-vatives, who preferred a simple restoration of the old Union and a return to antebellum America, to “Copperheads,” who wanted to bring in foreign mediation to seek an immediate peace or, in some cases, even let the South go unconditionally (Weber, 2006). Lincoln, therefore, had the enormously diffi-cult job of convincing these fundamentally different factions to continue to support the war effort or at least to not actively oppose it (McPherson, 2008).

Public support in the Union became increasingly difficult to maintain as the military situation worsened during the first 2 years of the war. People in the North became discouraged when initial battles did not produce easy Union victories. Overzealous generals and military provosts also sometimes impinged on civil liberties by arresting local agitators and confiscating property, and financial problems associated with funding the war worsened.

For example, egged on by Northern newspapers proclaim-ing headlines like “On to Richmond,” Union troops made several early and unsuccessful moves into Virginia, expecting to arrest Confederate leaders and occupy the Rebel capital in nearby Richmond. The Union’s initial confidence in brushing aside opposition and carrying out what at first seemed to be more of a police action was such that at the first major battle of the Civil War at Bull Run (First Manassas) in July, 1861, many spectators made the 2-hr carriage ride from Washington, D.C., to the Virginia countryside, bringing along families and picnic lunches to watch the Union armies overrun the Confederates and march southward to Richmond. However, the Confederates surprised the onlookers and the Union army by decisively winning the battle, chasing soldiers and specta-tors alike all the way back to Washington and capturing a U.S. Congressman in the process (Hattaway & Jones, 1991).

This major Union defeat was followed by several subse-quent setbacks, both on and off the battlefield. Confederate forces won some small engagements in the months following Bull Run and had some diplomatic success in gaining sympa-thy in various European countries for their cause. Thus, the 1st year of the war had gone from bad to worse for the Union. The Lincoln administration’s daunting military, social, and diplomatic problems were steadily growing with little statu-tory and Constitutional law or even procedural precedent to guide decision making (Holzer, 2009; Hyman, 1973). Most of President Lincoln’s handpicked generals had also failed him through defeat or by refusing repeated orders to advance against the Confederates (Sears, 2010; Williams, 1952). Indeed, by early 1862, Lincoln despondently visited his Quartermaster General to ask, “[t]he bottom is out of the tub. What shall I do?” (Basler, 1954-1955, p. 95).

Given the situation’s severity, Lincoln and his Administration had to find a way to reverse this downward spiral or quite pos-sibly face the country’s demise. Efforts in the war’s 1st year had not led to the expected easy victory but instead to several military, political, and diplomatic setbacks (McPherson, 1988). Thus, President Lincoln and his administration desperately needed to formulate a new action plan; convince key politi-cians, government officials, and the judiciary to support the war effort; and especially find generals who would success-fully implement that plan to turn around the Union’s declining fortunes (Hyman, 1973; McPherson, 2008; Williams, 1952).

Step 1—Initial Actions: Problem IdentificationAs noted, the first action needed in dealing with a turnaround situation is recognizing that a significant and nonroutine prob-lem exists. Initially, however, Lincoln and his top advisors did not view the strategic situation as a major rebellion requiring significant armed conflict but rather as a domestic insurrec-tion by “certain lawless citizens, not a war between nations” (McPherson, 1990, p. 75).

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Two mistaken assumptions undergirded this initial incor-rect analysis of the problem and its treatment as primarily a “law enforcement” issue, similar to others that U.S. adminis-trations had encountered previously. First, Lincoln’s early plans had proceeded from the assumption that the South had been taken over by small bands of radical slaveholders (McPherson, 1990). Thus, he and many others assumed that if these insurrectionist leaders could somehow be placated or arrested, Southerners loyal to the Union would convince the “hot-headed secessionists” among them to end their fight. Lincoln gave assurances to the “Southern Unionists” that they would be allowed to form new state governments and reenter the Union if they would pledge loyalty to the United States. Second, Lincoln assumed that a limited war based on a few quick Union victories would be enough to stop the South militarily and reestablish the federal government’s authority, so loyal state governments could be reinstated (McPherson, 1988).

A key outcome of these initial assumptions was that Lincoln and his administration originally set a mission for the war with a very narrow objective, that is, to reestablish order and restore the antebellum Union. Soldiers were signed on to fight only for limited periods of time, and many generals leading the Army in that 1st year, such as George McClellan, viewed the rebellion in similar terms. McClellan and a num-ber of other generals even voiced support for slavery and a return to antebellum America (McPherson, 1988; Sears, 1988). Dissenting voices among Lincoln’s cabinet and gen-erals, who thought the war could be a long and difficult one, were not initially heeded (Goodwin, 2005). Another conse-quence of this incorrect understanding was that Northern generals established their strategic objectives as capturing Southern territory, laying siege to rebel state capitals and inflict-ing one or two Napoleonic-style defeats on the Confederate army (Hattaway & Jones, 1991). Many, including General McClellan and his close associates, believed this would quickly lead to the collapse of the rebellion, and they pushed this vision on Lincoln and the Union leadership (McPherson, 1996, Sears, 1988).

Yet, the Union leadership was to learn over the 1st year of the war that these two assumptions were incorrect. Only a limited number of Confederate citizens in 1861, regardless of whether they were slave owners, were secretly loyal to the Union, and most strongly disliked the Lincoln administration and the antislavery elements in the North with whom they were certain Lincoln was allied (Dew, 2002; Gallagher, 1999). Even those with little to gain and much to lose from separating from the Union widely supported secession (Dew, 2002). This, in turn, would render the strategy of limited warfare ineffective because if the Confederacy could main-tain its support among the Southern populace, it would con-tinue to field an effective fighting force (Beringer et al., 1986). Thus, as the war entered its 2nd year in 1862, Lincoln

and the Union leadership discovered that they would need to fight a near total war and severely damage Southern produc-tive capacity to defeat such a formidable enemy (McPherson, 1988). Lincoln also soon realized that he would need new generals to implement this revised strategy (McPherson, 2008; Williams, 1952).

Step 1—Initial Actions: StabilizationBefore coming to this realization, the Lincoln administration first had to contend with initial stabilization strategies to stop the breakup of the Union and prevent things from worsening. After the first few Southern states succeeded, Lincoln had unsuccessfully tried to keep the situation from escalating. For example, when Confederate forces shelled Fort Sumter in Charleston, South Carolina in April 1861, Lincoln responded with a call for 75,000 volunteers to put down the rebellion and safeguard U.S. assets such as forts and armories. This action energized additional secession movements and galva-nized opinion against the Federal government in the South. Four more southern states, including Virginia seceded after Fort Sumter, enlarging the Confederacy to eleven states. At the same time, about one third of the regular army’s officers resigned, including the brilliant Virginia tactician, Robert E. Lee (Current, 1963).

Because Congress was not in session when the crisis began in spring 1861, Lincoln acted quickly to try to contain the situation by himself. Using the somewhat vague War Powers clause in the U.S. Constitution and carefully justifying his actions in writing, Lincoln established federal control over the “border states”—states where slavery was legal but had not seceded from the Union (Hyman, 1973). Missouri was heavily garrisoned, Unionists were placed in control of key military and strategic locations in Maryland and Delaware, and Union troops poured into Kentucky and parts of Tennessee, the latter of which still seceded in June of 1861.2 Lincoln also suspended certain civil rights along the rail route between the northeast United States and Washington, D.C., to put down agitation for additional secession and back up generals who wanted to arrest those interfering with army recruitment (Weber, 2006). These actions, though unpopular with many at the time, sta-bilized the situation and curtailed the outflow of resources and soldiers to the Confederacy.

It was in those first few months of the war that Lincoln sought out the young and talented General George McClellan and placed him in charge of the eastern theatre of the war to prepare the green army to fight the Confederacy. It was said of McClellan that there “is an indefinable air of success about him” (Sears, 1988, p. 95). McClellan accomplished his task effectively, developing a powerful army in the process. Thus, when faced with a strong threat and potential failure, Lincoln did not delay; he was willing to test out certain actions and dispense with those that were not working (Holzer, 2009). He

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also sought out those who could aid him to turn around the war effort, both inside and outside the government and even in the South (particularly among certain fiercely independent mountain counties of Tennessee and Virginia). Although the proper strategy had not yet been found, those early stabiliza-tion actions signaled to both Northern citizens and European governments that the North would not give up in the face of its early military defeats and, in turn, temporarily stabilized the initial situation.

Step 2—Stakeholder ManagementSignaling Union commitment was also important because a critical early issue in the Civil War was how Great Britain, France, and other European powers would respond to fighting in North America. Great Britain in particular, had reasons to support the South because it was the source of cotton so vital to British textile and garment industries. In addition, the Union had angered Britain early in the war by arresting two Southern diplomats who were traveling on a British ship. The Union Navy stopped the ship at sea, and the British saw this action as a direct challenge and quickly deployed an expeditionary force of 11,000 soldiers to Canada (McPherson, 1988). Lincoln quickly offered an apology and his personal assur-ances to defuse what could have become a dangerous situa-tion (Goodwin, 2005).

However, Britain also relied on grain from the North. In addition, Lincoln had a skilled diplomat, Charles Francis Adams, son and grandson of former U.S. Presidents John Quincy Adams and John Adams, respectively, serving as U.S. Ambassador to England. Adams eventually convinced the British that their best course was to remain neutral. The Emancipation Proclamation (discussed below), which legally freed slaves in territories in rebellion against the U.S. govern-ment, also encouraged the European powers to remain neutral because they did not want to be seen as helping a slave power, and by implication slavery itself, which the European powers had recently outlawed (McPherson, 1988).

Contingency 1—LeadershipIn terms of filling key leadership positions to fit the evolving strategy, Lincoln faced a critical problem in finding generals who could manage the war effort (Williams, 1952). As noted, early Union leadership subscribed to the belief that success would result from securing rebel territory, winning a few deci-sive battles against Southern armies, and capturing Richmond through an extended siege, thereby restoring the antebellum Union (with slavery intact).

General George McClellan was one such Union leader (Sears, 1988). He had successfully reorganized the army and proven quite effective in developing and supplying the large numbers of fresh recruits arriving in Washington in the summer and fall of 1861. From this success, he was next

placed in overall command of the army of the Potomac in the east. However, it was in this last capacity that he would prove to be largely ineffective (Sears, 1988). McClellan spent sev-eral months developing Napoleonic-style plans to outmaneu-ver the Rebel army and draw them into a single battle or a siege by which he would compel their surrender. As a result, after extensive training, Union troops settled into quarters around Washington and sat out the fall and winter of 1861. It was not until the spring of 1862, some 8 months after the first Battle of Bull Run, that McClellan moved his army by ship south to the Virginia peninsula in an attempt to move on Richmond from the Atlantic coast.

As McClellan landed and inched westward along the Virginia peninsula, popular support in the North for the war, the new Republican Party, and the Lincoln administration began to wane as the drawn out nature of the war and its inef-fective prosecution became increasingly evident. As the war moved into its 2nd year and McClellan became stalled east of Richmond, Lincoln realized that his original assumptions about the nature and scope of the problem facing the Union, as well as the leadership he had selected, were wrong (McPherson, 2008). The rebellion was not limited to a few sectors of the South but was widespread. It became obvious that one big vic-tory in the field and a police action to arrest Confederate lead-ers would not be enough—the Confederacy would have to be decisively beaten and its war-making capacity destroyed to end the rebellion (McPherson, 1988). In addition, several Union generals and officers, including McClellan, acted as if they did not really want to fight the Confederacy and risk the antebel-lum Union, which they cherished (Cohen, 2002; Donald, 1995; Sears, 1988). Lincoln realized this when McClellan had finally reached Richmond’s outskirts in his Peninsula offensive, only to be driven back to his ships by a Confederate army that he outnumbered two to one (Hattaway & Jones, 1991). At the same time, the Lincoln administration and many in the North began to see that fighting only to restore the Union had become a too limited a mission for the war. Instead, they thought its scope should be broadened to include ending slavery com-pletely within the borders of the United States and its territo-ries (McPherson, 1988, 1990).

Thus, finding new leaders to fight in the field and support the war effort in Washington became essential to carrying out the new, evolving strategy. General McClellan had done a fine job in building the Union Army of the Potomac in the east, but had installed a number of officers who shared his political views about limited warfare and simply restoring the old Union. Like McClellan, Generals Don Carlos Buell and Fitz John Porter were wartime Democrats—loyal to the Union but staunchly against emancipating the slaves. They believed that a harsh war would simply make the South angrier and make the restoration of the Union more difficult. Owing to his views on the mission of the war, McClellan and his generals were unwilling to use the aggressive tactics nec-essary to win the war. McClellan only launched two major

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offensives against the Confederate army, and one—the Battle of Antietam in 1862—was reluctantly started only after he learned the enemy’s plans (Sears, 2010).

Lincoln, thus, realized that this type of tentative action would not suffice. Instead, he would need fresh leadership to implement a new strategy to take total war to South (Williams, 1952). In 1862, he started by replacing his hesitant Secretary of War Simon Cameron with the gruff, but highly competent, Edwin Stanton. Lincoln also brought General Henry Halleck to Washington from the West as General-in-Chief, and then appointed him Chief of Staff, thus creating a prototype civilian–military organization and staff officer system to direct the war effort, a system still in use in the United States and subse-quently adopted by many countries (Ambrose, 1962). Several other successful generals from the Western theatre that also shared Lincoln’s evolving view of the war were promoted, including Generals Ulysses S. Grant, William T. Sherman, and Philip H. Sheridan, all of whom would be instrumental in changing the war’s initial limited aims to a strategy of exhaust-ing the South’s ability to wage war. Lincoln, Grant, and Sherman formulated a plan to attack the Confederacy simul-taneously across a thousand mile front and damage the hinter-land supplying the Southern armies. They started to implement this plan in 1863 and carried it out through the end of the war, culminating in General Sherman’s devastating march through the Confederacy’s heartland of Georgia and the Carolinas, General Sheridan’s burning of farms across Virginia’s fertile Shenandoah valley, and General Grant’s year-long attack and siege of the Confederate Army around the major Virginia cit-ies of Richmond and Petersburg. These simultaneous actions combined with other operations in the West as well as success-ful increases in the Union’s deployment of men and materiel, led to the collapse of Confederate resistance in 1865 (Marszalek, 2004; McPherson, 1988).

Contingency 2—Decline Speed and SeverityThe ability to act quickly is an important factor in the suc-cess of a turnaround, especially following a rapid, severe decline, which may require changing an organization’s mis-sion and strategy (Zammuto & Cameron, 1985). In the case of the Civil War, Lincoln realized by 1862 that a change in military strategy to total war with much broader objectives would be necessary. Resistance in the South was more wide-spread and Confederate armies were more formidable than many in his administration had initially believed. In addi-tion, the Union’s military and population needed greater motivation to fight a long war beyond simply returning to how things existed before the war. This need for a different mission, particularly with respect to ending slavery, was complicated by the fact that Lincoln was trying to maintain a fragile coalition of the Republican Party, northern Democrats, Western settlers and immigrants, and the four slave states of the upper South that remained in the Union,

all of which had much different interests and concerns about the war, slavery, and numerous other issues.

As noted, changing the mission required new leadership, laws, and aggressive precedent-setting executive action on Lincoln’s part. His most revolutionary action involved issu-ing the Emancipation Proclamation in the fall of 1862—a War Powers Act that legally freed the slaves in regions still in rebellion against the U.S. government as of January 1, 1863. Not long after the public announcement of the Emancipation Proclamation in 1862, Lincoln removed General McClellan, partly because he opposed the new strategy, including the emancipation of the slaves, as demonstrated by his failure to follow up on his strategic victory at the Battle of Antietam (McPherson, 2008). Lincoln’s bold steps, though unpopular with certain segments of the Northern population and army, reframed the war’s mission as restoring of the ideals of the U.S. Founding Fathers and gradually came to be widely accepted (Davis, 2000; McPherson, 1990).

The ability to change the war’s mission and how it was implemented involved a major shift, which required substan-tive effort. For example, Union soldiers, at first, were very skeptical of the Proclamation and fighting a war to free slaves. Yet, partly based on Lincoln’s efforts to communicate directly with them, they realized that emancipated slaves could be recruited to support Union troops and even to fight alongside them in the field (Davis, 2000). A little more than a year after Lincoln issued the Emancipation Proclamation, McClellan, relieved of his command and out of the army, was tapped by the Democratic Party to run against Lincoln in the election of 1864 on the platform of suing for peace immediately and restoring the antebellum Union, including slavery (Flood, 2010). However, by that time, the Union soldiers’ and public opinion had swung so strongly against this restoration strategy that they voted overwhelmingly for Lincoln’s reelection and the total defeat of the Confederacy. Thus, Lincoln and others around him had accomplished the very important task of con-vincing Union soldiers (and the Union populace) that the war should have a higher cause (i.e., the extinction of slavery), and that a simple restoration of the old Union would be a betrayal of their immense sacrifices in the war (Davis, 2000). Helped by General Sherman’s capture of Atlanta that September, Lincoln handily defeated McClellan in the 1864 presidential election. This remarkable turn of events can be directly attrib-uted to Lincoln and his administration’s changing the war’s mission, installing new military leadership, and then doggedly executing that mission (Flood, 2010; McPherson, 2008).

New InsightsThe preceding discussion employed existing understanding of turnaround to frame the focal case. However, closely examining the case of the U.S. Civil War also produces new insights that do not fit neatly into extant models of turn-around. For example, the fact that Lincoln’s 1864 reelection

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was far from certain just 1 year after he issued the Emancipation Proclamation and changed his top military leadership indicates that the turnaround that the North experienced was not a seamless progression. Instead, from late 1862 and early 1863, even though there were some notable successes (e.g., the Union’s major victories at Gettysburg and Vicksburg in July of 1863), not all the news during late 1863 and early 1864 was good. For example, the widespread war weariness in the North combined with some inconclusive Union campaigns in 1864 (e.g., the Confederates were successful in parrying Grant’s overland campaign south toward Richmond and Petersburg in the summer) imperiled Lincoln’s turnaround efforts (Flood, 2010). This general pessimism can be seen in the dollar/gold conversion rate, a general indicator of how U.S. financial markets viewed the war’s future prospects, which reached its lowest level of the war in summer of 1864 (Willard, Guinnane, & Rosen, 1996). These results suggest that an organization’s turnaround pro-cess may actually include multiple turnarounds (e.g., two steps forward and one step back) rather than being a one-time turn-ing point as suggested by some current conceptual models and most empirical studies. Thus, our current view of turn-around may need to be modified to account for the possibil-ity that myriad turnaround paths (including multiple declines and turnarounds) may be possible. We examine these and other issues in greater detail below.

Discussion and Future Turnaround ResearchThe case analysis supports and further clarifies many find-ings in extant turnaround research, which we summarize in Table 1. Although this method does have some limitations

(e.g., motivations for actions must often be inferred based on outcomes, and idiosyncratic contexts may limit generaliz-ability of findings3), case analyses can help generate new theoretical insights that will help direct future research and inform practice. In particular, the present case study suggests several potentially fruitful avenues for future turnaround research on critical issues, including crisis reaction, organi-zational learning as well as charismatic and transformational leadership. It also suggests a revised view of how scholars should investigate the turnaround process, in general. We next discuss each of these, in detail.

Crisis Reaction and TurnaroundBecause Lincoln and his administration viewed the crisis as temporary and controllable when it began, their initial “threat-rigidity” responses focusing on employing established legal precedent and simply restoring the antebellum Union corre-spond directly to current turnaround research. In turn, Lincoln’s shift from implementing a failing strategy to an innovative (and more risky) one both on the battlefield (e.g., changing to total war) and in the political arena (e.g., issuing the Emancipation Proclamation) when these initial assumptions proved false also matches current understanding.

However, what is less explainable and, thus, presents a sig-nificant opportunity for future turnaround research, is what factors might have contributed to Lincoln and his adminis-tration members’ change in the perceived novelty and con-trollability of the situation. Specifically, although turnaround research (e.g., Slatter & Lovett, 1999) widely acknowledges that different managers may interpret the same situation differ-ently (e.g., attribute different levels of controllability), to date, few studies have examined how and when the same managers’

Table 1. Critical Factors in the Turnaround Process

Factors in the turnaround process U.S. Civil War issues facing President Lincoln

Problem identification The administration’s initial assumptions regarding Southern motivations, capabilities, and scope of the rebellion proved incorrect. By learning from a number of military and policy failures, Lincoln was able to better assess the situation and develop a new mission and strategy better suited to defeat the Confederacy.

Internal stabilization Control had to be asserted over strategic resources and additional secession of states had to be prevented before any other major action could be taken.

Internal and external stakeholder management

Lincoln had to manage divergent beliefs of key internal stakeholders (e.g., generals and the Northern population), at the same time, he had to convince key external stakeholders (e.g., Great Britain and France) not to interfere.

Leadership Competent generals needed to be selected who bought into the new mission and strategy and were willing to implement both.

Decline speed and severity

The sudden division of the country required rapid decision making. The decline’s severity necessitated eventually changing the war’s mission to one of emancipating the slaves to isolate the Confederacy and provide a new rallying point for the Northern populace.

Recovery Despite innovative changes in the war’s mission and strategy in 1863, continued and multiple attempts were needed during the process to ensure turnaround.

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interpretations might shift from uncontrollable to controllable or vice versa in a turnaround context.

Until the grievous series of Union setbacks in 1862, including Lee’s defeat of McClellan in the Peninsula cam-paign near Richmond, his subsequent thrashing of General Pope at the Second Battle of Bull Run, and the Confederate invasions of the Northern states, the consensus among Union leadership was that applying steady military force would convince the rebellious states to return to the Union, especially if slavery were permitted to continue in those states. However, evidence from the detailed historical record suggests that Lincoln quickly recognized that the restoration strategy was futile and a more aggressive approach to prosecuting the war and addressing the slavery question was needed, as soon as it was politically viable (Foner, 2010; Perret, 2004). Thus, examining why Lincoln and his administration’s understanding changed allowing a dramatically different strategy may provide important insights for future turnaround research (see Carwardine, 2003).

The case suggests a number of factors contributing to this change. First, a series of military defeats and setbacks in the Congressional midterm elections of 1862 convinced Lincoln and his administration that the initial strategy for dealing with the rebellion would not be successful nor generate support much longer from the Northern public and military (Goodwin, 2005). Second, problems with many of his generals convinced Lincoln that he needed major changes in military leadership. As noted, General McClellan had multiple chances early in the war to inflict a serious defeat on the Confederacy but was slow to go on the offensive, even defying Lincoln’s direct orders to do so, such as after the Battle of Antietam (Williams, 1952). The current consensus among historians is not that McClellan was incompetent or frightened, as has been argued; rather, he and several of his like-minded officers disagreed with Lincoln’s policies and were dragging their feet in imple-menting the increasingly drastic measures called for by the Lincoln Administration (McPherson, 1988). Thus, McClellan and his staff, in effect, pursued their own strategy; one that they hoped would end in a negotiated peace and a return to the antebellum Union. This posture eventually compelled Lincoln to remove him from command.

Consequently, the case suggests that examining environmental-, firm-, and managerial-level factors impacting the stability of managers’ perceptions over time represents a key future research avenue, one that can move research beyond its cur-rent focus on whether a firm’s turnaround should be led by incumbent versus replacement managers. To guide this research, we offer the following general proposition:

Proposition 1: Managerial perceptions of situation controllability can change over time, which, in turn, may prompt a transition from a threat-rigidity

(innovative) to more innovative (threat-rigidity) response to organizational decline.

Organizational Learning and TurnaroundResearch has also long noted the need for many organizations to “unlearn yesterday” as a critical step in the turnaround process (Nystrom & Starbuck, 1984). Even organizations with significant competitive strengths may see heretofore valuable core competencies transform into detrimental “core rigidities” following a major environmental change (Leonard-Barton, 1992). Thus, to enhance an organization’s turnaround chances, managers often must learn to either implement the current strategy better or formulate and implement a new one.

Some turnaround studies have examined concepts related to organizational learning in this regard. For example, Barker and colleagues (2001) found that top management turnover following decline positively related to whether a firm imple-mented an innovative turnaround strategy. In addition, Elliott and Smith (2006) noted that a crisis might not prompt learn-ing if an organization lacks the absorptive capacity needed to detect, process, and apply information from the experience. Thus, learning capacity represents a critical variable affecting how managers respond to declining performance (Milliken & Lant, 1991). However, for the most part extant turnaround research has rarely employed findings from the organizational learning literature.

Existing learning research has conceptualized learning in different ways (Fiol & Lyles, 1985; Huber, 1991); however, the most interesting underlying phenomenon, particularly for turnaround research, may be its role in an organization’s strategic renewal (cf. Crossan, Lane, & White, 1999). In gen-eral, studies have emphasized the processes through which such learning occurs and often focused on how managers balance exploiting current versus exploring new capabilities so as to enhance an organization’s survival chances (March, 1991).

First, research has studied the learning process employing several analysis levels ranging from individuals to groups to organization (Easterby-Smith, Crossan, & Nicolini, 2000). Crossan and colleagues (1999) employed all these levels, positing that learning involves an iterative process beginning at the individual level with pattern recognition (“intuiting”) followed by interpretation. Outputs from this process may then feed upward to the group level as members converge on a shared interpretation of possibilities. Findings may then proceed to the organizational level where they can become institutionalized in routines and rules, which, in turn, serve as feedback to both the group and individual levels.

Second, investigating the value of exploitation versus exploration parallels the turnaround research focus on whether a threat-rigidity strategy, which focuses on current capabili-ties, or an innovation strategy, which requires developing new

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capabilities, is more efficacious in turning around a firm. Consequently, results from learning studies about how man-agers balance tension between these competing demands may inform future turnaround research. For example, employing March’s (1991) original model, Miller, Zhoa, and Calantone (2006) tested how personnel turnover can affect organiza-tional learning. Although they found that turnover may reduce an organization’s tacit knowledge, they suggested that when an organization faced a turbulent environment (a common condition for many firms in need of turnaround), turnover could actually improve learning by bringing in new, diverse perspectives.

Evidence from this case study on the U.S. Civil War illus-trates how learning occurred within the Union’s leadership, prompting Lincoln and his administration to realize that they needed more drastic measures and new, unprecedented solu-tions to turn the tide of the war. However, the administration’s ultimately successful response did not suddenly emerge; instead, it evolved over time both by learning through trial and error once the depth of the problem was recognized. For example, at the individual level, several members of the Lincoln administration demonstrated the ability to learn, and, thus, played major roles in formulating the innovative strate-gies that ultimately won the war (Goodwin, 2005). Lincoln himself was quite intelligent (e.g., he is the only U.S. President to hold a patent) with an uncanny ability to learn new things on his own. In addition, Lincoln did not limit his actions by refusing to acknowledge previous failed initiatives or judg-ments (Carwardine, 2003). For example, when General Grant completed his successful operations against the Southern for-tress city of Vicksburg, Mississippi, Lincoln wrote Grant to tell him of initial misgivings about the plan but admitted that those misgivings had been incorrect (McPherson, 2008). Thus, at the group level, Lincoln and several of his generals were able to unite their individual interpretations into a common under-standing of both the war’s nature and mission.

In contrast, historians often characterize Confederate President, Jefferson Davis, as an inflexible micromanager, particularly in formulating the Confederacy’s cordon defense of its borders and the “Virginia-First” strategy, which reduced flexibility in responding to Union attacks (McPherson, 1988). Davis also sought to directly manage the war by controlling his generals’ actions. Therefore, in terms of ability to acknowl-edge a mistake and try something different, Davis was far less flexible than Lincoln, an inflexibility encouraged by the fact that at the organizational level, the Confederacy was effec-tively a one-party entity (Woodworth, 1990). Thus, there was no one to challenge Davis or encourage him to compromise. This leadership style can be seen in Davis’s appointment of six different Secretaries of War during the 4.5 years of the Confederacy—many of whom felt that they were serving as clerks (Woodworth, 1990). The Confederacy also did not develop the important civilian–military communication

cooperation that Lincoln established by elevating General Henry Halleck to Chief of Staff. Improved group decision making stemmed from the civilian–military partnership within the Lincoln administration that linked important political objectives with military actions, consistent with a Clausewitzian view of warfare (Clausewitz, 1956; Goodwin, 2005). Davis’s inflexibility and his insistence on making all major military and nonmilitary decisions contrasts with Lincoln’s ability to defer to others, experiment, learn what worked, and apply the lessons (Commager et al., 1996; Donald, 1962; Woodworth, 1990).

In sum, the case suggests that the application organiza-tional learning represents a key future avenue for turnaround research. To guide this research, we offer the following gen-eral proposition:

Proposition 2: An organization’s learning capacity will be positively related to its probability of a successful turnaround.

Charismatic and Transformational Leadership and TurnaroundManagerial and academic research alike has frequently high-lighted the critical role leaders play in the turnaround process. Indeed, at times, both have bestowed an almost “hero” status on those individuals having the business and motivational skills to take control in a crisis and revive organizational per-formance (Lublin, 2000). This research suggests that these leaders not only find ways to realign an organization with its environment but also often inspire employees to contribute to the turnaround effort by articulating an inspirational vision.

Despite this popular view of turnaround managers, extant research has primarily focused on top managers’ characteristics rather than leadership abilities (e.g., Huang & Snell, 2003; Jas & Skelcher, 2005). For example, studies have often investi-gated either managers’ functional (e.g., marketing vs. finance) background (e.g., Hambrick & D’Aveni, 1992) or whether they worked inside or outside the organization prior to leading the turnaround effort (Barker & Duhaime, 1997). However, for the most part, empirical turnaround research has only sporadically employed findings from the leadership literature.

Research has conceptualized leadership in many ways; however, the research that seems most applicable, given the popular view of turnaround managers as inspirational leaders emerging in crisis situations, focuses on the similarities and differences among charismatic, transformational, and trans-actional leadership (see Bass, 1990). Charismatic leadership, exemplified in Weber’s (1947) conceptualization, character-izes leaders as confident and having the ability to articulate goals, both of which inspire followers. Similarly, transfor-mational leaders inspire followers by challenging, mentor-ing, coaching, and empowering them (Avolio, Bass, & Jung,

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1999; Rowold & Heinitz, 2007). In contrast, transactional leaders maintain relationships with followers through actions such as promising rewards based on accomplishing assigned tasks (Bass, 1998).

Leadership research has investigated all three of these major leadership styles across a wide range of situations (Judge & Piccolo, 2004), including crises (Pillai & Meindl, 1998). Evidence, to date, suggests that (a) crisis may enhance the fol-lowers’ perceptions of a leader’s charisma and (b) charismatic and transformational are more effective than transactional leadership during crises. For example, Halverson, Holladay, Kazama, and Quinones (2004) found that followers attributed greater charisma to leaders exhibiting self-sacrificing behav-iors (e.g., foregoing legitimate privileges, including CEO bonuses) in crisis situations. In addition, employing case stud-ies of three Chinese state-owned enterprises, Huang and Snell (2003) found the manager, who employed transformational leadership, achieved a successful organizational turnaround.

Although similar, charismatic and transformational lead-ership differ in some key respects. For example, transforma-tional leadership is often measured at a discrete point in time (Rowold & Heinitz, 2007), whereas charismatic leadership has been studied as a multistep process (Conger & Kanungo, 1998). In addition, these two leadership styles may also pro-duce different outcomes. For example, Rowold and Heinitz (2007) found that both transformational and charismatic lead-ership augmented transactional leadership’s contribution to subjective performance (e.g., employee satisfaction), but transformational leadership was also significantly related to firm profitability, whereas charismatic leadership was not.

Evidence from the case shows that Lincoln exhibited decisive leadership in turning around the Union’s efforts, and in tandem with transformational and charismatic leader-ship research reviewed above, also suggests the potential importance of both leadership styles in a turnaround situation. As U.S. Commander-in-Chief, Lincoln had formal authority over generals, and, as such, could order them to implement specific strategies as well as reward or punish them (e.g., via promotion or demotion), contingent on their performance. However, as noted, Lincoln exceeded this transactional role by providing inspirational leadership via actions such as issu-ing the Emancipation Proclamation, which changed the war’s mission from restoring the antebellum Union to one mirroring the ideals of the U.S. Declaration of Independence. (Davis, 2000; Manning, 2008; McPherson, 1990). Later in the war, Lincoln also empowered Generals Grant and Sherman by issu-ing broad directives and then giving them substantial leeway to operate in terms of campaign strategy and battlefield tactics in contrast to Confederate President Davis’s micromanagement of his generals (McPherson, 2008; Woodworth, 1990).

Thus, the case suggests that examining leadership repre-sents a key future research avenue in turnaround research. As noted, recent research indicates that transformational has a

greater impact than charismatic leadership on key performance measures (e.g., profit); however, both may be valuable in a crisis situation. Thus, to guide future turnaround research, we offer the following general proposition:

Proposition 3: Declining organizations led by charis-matic and transformational leaders will turn around more often than those led by transactional leaders.

Other Turnaround Research IssuesThe case also suggests other ways to modify turnaround mod-els to account for different turnaround processes. Specifically, extant studies have often investigated the turnaround process as a linear or nearly linear progression from halting decline to achieving recovery. However, as illustrated by the Union’s experience and several recent corporate turnarounds, this pro-gression may be far from seamless.

Although some scholars acknowledge that firms may need to implement multiple turnaround attempts to recover suc-cessfully, most empirical studies investigate the turnaround process as starting from a discrete inflection point followed by an upward progression toward turnaround (or downward toward bankruptcy) over a set time interval. For example, one common research design is to classify a firm having 2 (or 3) years of decreasing profitability followed by an identical number of years of increasing profitability as a firm that suf-fered decline and then successfully turned around.

However, to unpack this process further, future research may need to investigate different turnaround trajectories similar to those posited in organizational decline studies. For example, D’Aveni (1989a) suggested that scholars could classify declining firms as “lingerers,” “gradual decliners,” and “sudden decliners,” each of which would have different organizational characteristics, would follow very different decline paths toward bankruptcy, and, as a result, could have different managerial reactions to the decline. In addition, entrepreneurship research has employed the concept, “living dead,” to describe firms in venture capitalists’ investment portfolios that remain on the organizational equivalent of life support (Ruhnka, Feldman, & Dean, 1992). As a con-ceptual counterpart to these models, we suggest that future turnaround research examine alternate turnaround trajecto-ries (e.g., single versus multiple turnaround attempts) and timing (e.g., rapid versus protracted processes) that may not conform to a set number of years.

In addition, the case suggests how important using emer-gent strategies may be in a turnaround situation. Mintzberg and Waters (1985) note that for a strategy to be planned and exe-cuted as intended (i.e., a “deliberate” strategy), managers must be able to articulate concrete future goals for, create a united vision within, and control environmental interference from out-side the firm. Although managers in turnaround situations may

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implement strategies that have deliberate characteristics, such as when Lincoln and his generals reformulated and imple-mented a new “total war strategy” beginning in 1864, few can shield the firm from environmental forces. Thus, future turn-around research could also draw from insights based on Mintzberg and Waters work on the “deliberate-emergent” strategy contin-uum, including examining both the frequency and efficacy of different strategies (e.g., entrepreneurial, ideological, and those imposed by external stakeholders) under different organiza-tional decline conditions (cf. Ismail & Ford, 2010).

Finally, from a methodological standpoint, future turn-around research should employ some of the well-developed scales available from the research areas reviewed above. For example, to investigate the relative contributions of charis-matic and transformational leadership to successful turn-arounds, scholars could use the Conger and Kanungo Scale (Conger & Kanungo, 1998) and Multifactor Leadership Questionnaire (Bass, 1990), respectively. In addition, com-bining or contrasting findings from these three research streams may also be useful. For example, Vera and Crossan (2004) recently suggested that the commonly held belief that transformational rather than transactional leadership leads to greater organizational learning may need to be reexamined because, in some cases, learning may actually be higher for transactional leadership.

ConclusionThe victory of the Union over the Confederacy in the U.S. Civil War represents what is, in essence, a significant (and well documented) turnaround of a complex organization fac-ing a severe crisis. With the dual threats of the potential dissolution of the country and the possibility of European armies again on U.S. soil, President Lincoln and his cabinet faced a crisis that challenged the country’s very existence. In addition, many of Lincoln’s early efforts to end the rebellion failed and, at times, seemed to be worsening divisions in the country and hastening defeat. Yet, through dramatic actions, the Lincoln administration significantly changed course and made significant, almost revolutionary, changes to the mis-sion, military leadership, wartime authority of the U.S. presi-dency, and prosecution of the Civil War (Belz, 2006; Hyman, 1973; McPherson, 1988, 1990). In doing so, threats from abroad were blunted, the country was reunited, and the large and well-entrenched system of chattel slavery in the South was permanently destroyed (Perret, 2004).

From this rich historical case, our analysis suggests includ-ing three critical future research avenues based on crisis response, organizational learning, and leadership studies to advance turnaround research. All three research areas provide rich theoretical perspectives, valuable empirical findings, and well-developed scales that researchers can apply in studying turnaround. By doing so, scholars may be able to resolve some of the contradictory findings that currently exist within

turnaround research (e.g., whether incumbent or replacement managers should lead the turnaround effort).

In sum, organizational turnaround is a complex, difficult process. By examining turnaround based on the historical example of the U.S. Civil War and the subsequent reuniting of the country—a process fraught with enormous challenge and numerous delicate and difficult decisions—we gener-ated lessons that can provide additional guidance for future research into key success factors related to organizational turnaround.

Acknowledgment

The authors would like to thank Professors James M. McPherson and Herman Belz as well as Wayne Porritt of the Bank of America Workout team and Marc Ahlstrom of Burlington County College for their helpful comments and discussions on previous versions of this manuscript.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Notes

1. Lincoln, as president-elect, faced numerous hurdles in trying to dissuade Southern leadership from secession (Holzer, 2009). He went to work right after his election, but found Southern secessionists to be strongly in favor of establishing (and expanding) the Confederacy (Dew, 2002). Although Lincoln sought conciliation, he would not compromise on his view that slavery must not be expanded into any new territo-ries or states joining the United States (Holzer, 2009; Stampp, 2006). During his several months as president-elect, Lincoln was able to start laying the groundwork for executive action that was to characterize his administration, particularly after 1862 (Holzer, 2009).

2. Although Lincoln was eventually unable to keep Tennessee from seceding, prompt Federal action kept a good part of the state in Union hands. The mountainous eastern region of the state remained largely loyal to the Union, including the only Southern senator not to resign on secession, Andrew Johnson, who later became Lincoln’s vice president and succeeded Lincoln as presi-dent following the latter’s assassination in 1865.

3. We thank an anonymous reviewer for this insight.

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Bios

Franz T. Lohrke (PhD, Louisiana State University) holds the Brock family chair in entrepreneurship and is chair of the

Entrepreneurship, Management, and Marketing Department, Brock School of Business, Samford University. His research interests include liabilities of newness, strategic alliances, organizational slack, social entrepreneurship, and management history. He has published in leading journals including Entrepreneurship Theory & Practice, International Small Business Journal, Journal of International Management, Journal of Business Research, and Organizational Research Methods. He has two books, Historical Foundations of Entrepreneurship Research (2010) and Intellectual Roots of Entrepreneurship Research (forthcoming), coedited with Hans Landström, and published by Edward Elgar Publishing. He also led the development of the Brock School’s entrepreneurship program from single course in 2007 to being chosen by USASBE in 2010 as the best new entrepreneurship program in the United States.

David Ahlstrom (PhD, New York University) is a professor at The Chinese University of Hong Kong. His research interests include management in Asia, innovation and entrepreneurship, and man-agement and organizational history. He has published more than 70 peer-reviewed articles in journals such as the Strategic Management Journal, Academy of Management Review, Journal of International Business Studies, Academy of Management Perspectives, Journal of Management Inquiry, and Asia Pacific Journal of Management (APJM). He also coauthored International Management: Strategy and Culture in the Emerging World as well as guest edited two Special Issues of Entrepreneurship: Theory & Practice and two Special Issues of Asia Pacific Journal of Management (APJM). He served as a senior editor of APJM during 2007-2009, and its editor-in-chief during 2010-2012.

Garry D. Bruton (PhD, Oklahoma State University) is a professor of entrepreneurship at the Neeley School of Business at Texas Christian University (TCU) where he holds Fehmi Zeko Faculty Fellowship. He was one of the founders of the entrepreneurship program at TCU, which was recently selected as the top model program for undergraduate entrepreneurhip by USASBE and was ranked as one of the top 20 entrepreneurship programs in the United States by US News & World Report–2009. His research focuses on entrepreneurship in emerging economies, and he has published or has forthcoming more than 75 academic articles in leading journals such as the Academy of Management Journal, Strategic Management Journal, Journal of Business Venturing, Journal of International Business Studies, and Entrepreneurship Theory & Practice. In addition, he has coauthored three text books, Small Business Management (McGraw-Hill), Technology and Innovation Management (Cengage), and International Management (Cengage). In 2005, he was the first holder of the Hall Chair in Entrepreneurship in Emerging Markets offered by the Fulbright Foundation. He is immediate past president of the Asia Academy of Management and is currently editor of the Academy of Management Perspectives. He in addition serves on the editorial board of five other academic journals.

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