Table of contents
2. State of Research
3. Theoretical background
3.1 Common Sense and Vicious Circle
3.2 Ritual Scapegoating
4. Econometric analysis based on J.L. Fizel & P. D’itri
4.1 Analytical procedures and data
4.2 Analysis and Interpretation
5. Additional econometric studies
5.1 Analysis of J. Pfeffer and A. Davis-Blake
5.2 Analysis of D. Jacobs and L. Singell
“It’ll be another challenge now for all the lads to impress the new manager () even if he knows what you can do, you’ll still have to convince him you should be in his plans.”1 (Michael Owen, player of Manchester United, after the dismissal of Kevin Keegan as England’s team manager) Michael Owen’s statement above shows the point of view of a player after managerial succession. With a new manager coming, the atmosphere in a team is tense. The player’s skills are reassessed and their position in the team is insecure. It becomes necessary to demonstrate some strength and impress the new manager. A strained situation for everyone involved, not just the players. Owen’s remark then naturally does not take into account the manager’s point of view and how he might perceive a team and react to the disruptive effects of succession.
In sports, managers perform several functions which are often deemed critical to the performance of organizations. Therefore, when teams perform poorly, there is a common notion that managerial succession and replacing the manager will lead to improved performance. In spite of numerous studies and ongoing attention to this interesting phenomenon, the effect of managerial successions on team performances remains a debated issue. Related to this issue is the investigation of the impact of a manager’s attributes, such as ability or experience. Do managerial skills affect team performance, and if so, how can these attributes be assessed? The results of such studies might solidify an evaluation of a manager’s work when carefully distinguishing between the manager’s contribution to team success or failure and the team’s own performance. As such, investigations like those studied in this paper might help to break the today often criticized habit of hiring and firing a manager solely based on won-loss balances. Obviously, there is still a need to investigate this phenomenon in greater detail in a theoretical and empirical way.
The whole paper is set up as follows: After the introduction, chapter two reviews re- searches which deal with the phenomena of managerial succession, team perfor- mance and also the role of manager attributes. In the following chapter, different theories of the effectiveness of managerial changes are described. These three theo- ries mainly refer to Grusky’s paper (1963) and also to the paper of Gamson and Scotch (1964). Based on the theoretical background chapter four basically deals with Fizel and D’Itri paper (1997). Their paper is about the correlation between managerial efficiency, managerial succession and organizational performance. In the first subchapter, data and the analytical procedures of the study are summarized. The following two subchapters investigate the analysis, interpretation and also the results of Fizel and D’Itri’s empirical study in greater detail.
In order to offer an alternative view on this topic, chapter five outlines two additional econometric studies: the papers of Pfeffer and Davis-Blake and Jacobs and Singell. Both papers focus on the role of manager attributes and their abilities. Pfeffer and Davis-Blake investigate the effects of succession and analyze the effect of variation in ability on the consequences of succession. The study by Jacobs and Singell has a similar point of departure. But they criticize that most prior research conflated the manager’s and the team’s contribution on the team’s performance and was thus not sensitive to a manager’s skills, something they want to improve on with their study. The last chapter of this paper draws a conclusion of all mentioned findings and gives an outlook on future research that might help close the existent gaps.
2. State of research
The relationship between managerial succession and team performance has been discussed for more than 50 years. So the effect of managerial succession on team performance remains a debated issue with a number of studies and alertness to this problem continues. Many of these studies focused on the sports sector for multifa- ceted reasons. For example sports data sets about team performance and the dis- missal of managers2 are large, reliable and also publicly available. Besides, in gener- al sport teams have similar organizational structures and industry constraints. Due to these similarities quite a few authors recognized the advantages of using sports data to estimate the effect of managerial succession on team performance.
Related to this question is the investigation of the impact of a manager’s attributes, such as ability or experience. Do managerial skills affect team performance, and if so, how can these attributes be assessed?
Basically the investigation of managerial succession on team performance began with Grusky (1963, 1964). Grusky’s (1963) Major League Baseball (MLB) study ap- pears to have been the first to consider the possibility of a bi-directional link between managerial succession and team performance in professional sports. Grusky identi- fied a backwards relationship between the number of managerial changes and the average performance of teams in MLB. He also found out that managerial succession was more likely to occur with poorly performing teams and that once the new manager had taken over, the team performance tended to deteriorate further during a specified period. This disruptive hypothesis obtains additional support from Carroll’s study (1984) and also from Brown’s study (1982) of professional football managers. Each of these studies supports the theory which suggests that managerial turnover is disruptive to the organization (cf. Fizel & D’Itri, 1997, p. 296).
A second theory argues that managerial succession has no effect on team perfor- mance. This thesis has its roots in Aldrich’s (1979) population ecology theory. This position sees organizational success as exclusively the result of environmental forces. Aldrich outlines that managers may lose their jobs because of poor team per- formance. This phenomenon is regarded as a scapegoating process3. For Gamson and Scotch (1964) succession is an example of scapegoating, too. They note in their study of baseball managers that fired managers frequently receive attractive job of- fers with other teams. This behavior implies that team owners recognize that ending a manager’s contract is often a ritualistic step to demonstrate concern to lower-level employees and says little about a manager’s abilities (cf. Fizel & D’Itri, 1997, p. 296). Likewise Bruinshoofd and ter Weel (2003) found out in their study about the division soccer in the Netherlands that forced resignation of managers did not lead to an im- proved team performance. According to their study the upgrade in team performance after having engaged a new manager did not even exceed the seasonal average of the predecessor. The results of Bruinshoofd and ter Weel underline the theory that boards just fired the manager as a scapegoat as well.
At last, at third theory suggests that managerial succession has a positive effect on the team performance. Guest (1962) hypothesizes that a new manager will improve the team performance. Guest’s hypothesis supposes that there is a ‘recentness’ ef- fect associated with the new manager or that the new manager is more competent than the previous. Others studies have dismissed manager competence from man- ager succession per se to address each single component of this hypothesis. Smith (1984) and also Pfeffer and Davis-Blake (1986) in their studies of professional bas- ketball managers detected a positive relationship between the ability of a new man- ager and team performance4. Pfeffer and Davis-Blake found evidence that a team’s performance improved under a new manager who had successfully proven his abili- ties before with another team. A similar result is outlined by Virany (1992) who estab- lished that both succession per se and the ability of new manager improved the team performance.
In addition to this Weiner and Mahoney (1981) state that in order to estimate a manager’s effect ability has to be further characterized and defined. One example of this is Smith’s study (1984) in which he and his colleagues examined the effects of managerial ability on organizational performance following succession. Looking at 50 Methodist ministers and their respective salaries they found out that ministers who received salaries more than one standard deviation above the mean eight or more times were labeled as effective. This study raised many problems, above all the question whether salary is the best indicator of ability.
In connection with these theories and arguments, there are further studies which investigate different sports in order to analyze the effect of managerial succession on team performance as well. For example Fabianic (1994) analyzed the Major League Baseball (MLB) in the 1980s. In this study he matched a fourteen-day prereplacement interval and the fourteen day post-replacement performance. By repeating the same procedures with a respective thirty-day interval he obtained evidence that manager successions were followed by team performance improvement for both periods and both inside and outside replacements.
The study of Audas, Dobson and Goddard (1997) investigated the relation between managerial succession with regard to change and team performance in English foot- ball. Their data set includes the results of all Football League matches played during the period 1972-1993, including 42,624 single match results and 821 managerial terminations. The authors came to the conclusion that “managerial change appears to have a harmful effect on team performance immediately following a termination” (cf. Audras, Dobson & Goddard, 1997, p. 35f.). This correlation would be in line with Grusky’s theory which hypothesizes a decline of team performance based on a dis- ruption of a team.5
Considering the state of research it is obvious that there is hardly any agreement about the effects of managerial succession on team performance, not to mention the difficulty of assessing a manager’s abilities and the extent of his influence on team performance. However, there are certain key words and established theories that are continuously discussed in this context, namely the common sense, vicious circle and scapegoating theory.Especially Grusky and also Gamson and Scotch discuss these three important theories of managerial turnover. The following chapter will therefore describe and explain these theories in greater detail as theoretical background for this essay.
3. Theoretical background
As a result of their research on the effect of managerial succession on team perfor- mance Grusky (1963), and Gamson and Scotch (1964) identify three conflicting hy- potheses - namely the so-called common sense, vicious circle and ritual scapegoat- ing theories.
The common sense theory assumes that in general the manager has great influence on his team and he is also accountable for the team performance. Because of this close relation managerial efficiency and managerial succession are positively related to team performance. In case a team is under-performing the current manager is held responsible for the team performance and so he is likely to be replaced. After dismissing the manager, a more effective replacement will be hired and can ideally avoid his predecessor’s errors.According to the common sense theory the team performance should improve post-succession.
In contrast to the common sense theory, the vicious circle theory suggests that en- gaging a new manager disrupts the team and also affects the whole situation nega- tively. This theory contends that overall managerial succession and team perfor- mance have a negative correlation. According to the vicious circle theory the result of dismissing a manager is the continuing decrease in team performance (cf. Grusky, 1963).
Finally, the third theory is about the ritual scapegoating. The firing of a manager is a classic example of ritual scapegoating. This explanation states that the engagemen- tof a new manager makes no difference to team performance on average or it has only a small effect on team performance in the future. All in all the team performance depends ultimately on the quality of playing talent. According to Gamson and Scotch dismissing the manager is a sign aimed at pacifying fans, or perhaps moving atten- tion away from shortcomings in the team owner’s personal contribution (cf. Gamson & Scotch, 1964).
All three theories will be described in greater detailin the following subchapters.
3.1 Common Sense and Vicious Circle
According to Oskar Grusky and his study “Managerial succession and organizational effectiveness”, conducted in the year 1963, there are two related assumptions which were tested by Grusky. The first hypothesis states “that rates of administrative suc- cession and degree of organizational effectiveness are negatively correlated and the second asserts that a change in the rate of administrative succession is negatively correlated with a change in organizational effectiveness” (cf. Grusky, 1963, p. 21). Furthermore he assumes on the one hand that there are reciprocal effects between the variables “effectiveness” and “rate of succession” and on the other hand there is no causality between both variables. In order to receive an adequate field test of these hypotheses Grusky needed a number of formal organizations which are iden- tical in goals, size and authority structures. Having these required structural characte- ristics, professional sports clubs are suitable objects for Grusky’s study. Because of these structural resemblances he selected for his investigation sixteen professional baseball teams. Professional baseball teams are especially apt because “the struc- ture of baseball organizations is such that ultimate responsibility for the performance of the team is almost always fixed on one position” - namely that of a field manager (cf. Grusky, 1963, p. 22). Moreover, the rate of succession is the result of a number of managerial changes for each time period or average length of managerial tenure for each team, with the organizational effectiveness described by the team standing. A team’s standing is of course directly related to its profitability - the better a team performs, the more profitable it is -, which constitutes another criterion for measuring effectiveness.
By analyzing data of two time periods, 1921-1941 and 1951-1958, Grusky found evidence for his first hypothesis. That means that the data of the two time periods illustrate a negative correlation between the variables rates of managerial succession and organizational effectiveness. According to Grusky’s empirical analysis the “rates of succession and team standing correlated -.40 in the first period and -.60 in the second period” (cf. Grusky, 1963, p. 22).
Also Grusky found a clear proof for his second hypothesis. He compared the tenure of managers with the team standing of both periods in order to point out that those teams with more successions in the period between 1951 and 1958 in relation to the first period (1921-1941) were less effective later. He came to the conclusion that “all eight teams that increased considerably their rates of managerial succession over that of the earlier period experienced a decline in average team standing” (cf. Grusky, 1963, p. 23). All in all Grusky’s data demonstrate only that an association exists, but do not point to a possible cause. According to his empirical analysis there is no specific reason for ruling out that a specific variable, such as rate of succession, can be both a cause and a result of effectiveness.
Overall there are two explanations for Grusky’s results - first the common sense theory. This theory focuses on effectiveness as the only cause of succession. That means that the manager is fired as a direct consequence of bad team performance, and only because of this. “Not only is the simplicity of this explanation appealing, but the negative correlation between succession and effectiveness is fully consistent with it” (cf. Grusky, 1963, p. 25). However, for Grusky this explanation is too straightforward and not scientific enough and so he dismissed it completely.
The vicious circle theory is quite an alternative explanation for Grusky’s major findings. To illustrate the relation between rates of succession and organizational effectiveness he developed a conceptual scheme with ten variables6
Figure 1 illustrates the schematic interrelations of these ten variables. The arrows show the direction of influence (cf. Grusky, 1963, p. 26).
illustration not visible in this excerpt
With regard to organizational effectiveness, a manager’s expectation of replacement and the rate of succession, Grusky concentrated basically on managerial role strain and clientele support. “The magnitude of managerial role strain7 is a general factor conditioning the nature of the relationship between succession and effectiveness” (Grusky, 1963, p. 26). Organizational effectiveness is inversely related to managerial role strain (1 and 3); that is, the higher the effectiveness, the lower the strain and vice versa . As far as succession is concerned, role strain is also crucial (3 and 4). Under high role strain a manager may be inclined to look for a new employment. If the strain is low, which makes the job rather comfortable, the manager may be either keen to keep hiscurrent position or he may wish for a greater challenge, perhaps with a new team.
With professional sport teams effectiveness is also strongly influenced by clientele support. Grusky observed that fans are not only very committed to their team but also very knowledgeable about their sport. That means that they can estimate their team’s effectiveness and decide whether they increase or withdraw their support based on this evaluation. A decrease in support may affect the team’s morale and profitability in a negative way (8 and 7; 8 and 1) (cf. Grusky, 1964, 28f.). All of these factors may contribute to a team’s continued decline in performance, even post-succession.
According to the vicious circle theory Grusky indicated a reciprocal relationship between managerial succession and effectiveness. By the means of this conceptual scheme he points out that managerial succession leads to discontinuing effects on the organization which results in a decrease in team performance. Furthermore Grusky’s results show a negative correlation between rates of succession and effectiveness and also a positive correlation between clientele support and effectiveness, which are two of the relations in figure 1.
3.2 Ritual Scapegoating
In addition to the common sense and vicious circle theory there is a third conflicting theory based on a study by Gamson and Scotch (1964). In their ritual scapegoating no-way causality theory the authors criticize Grusky´s findings. They point out the ritual scapegoating as a third theory which assumes that “the effect of the field man- ager on team performance is relatively unimportant” (cf. Gamson & Scotch, 1964, p.70). In their study they distinguish between long run and short run effects regarding to the team performance. In contrast to Grusky, according to Gamson and Scotch the policies of the general manager and other front office personnel together with syste- managerial and team performance to the organization’s clientele and higher levels of authority (Grusky, 1964, p. 27).
1 cf. Höffler &Sliwka, 2003, p. 878
2 The term manager is a synonym for coach and will be used throughout the whole analysis.
3 Cf. chapter 3.2
4 Cf. chapter 5.1
5 Cf. chapter 3.1
6 These variables are: organizational effectiveness, manager’s expectation of replacement, managerial role strain, rate of succession, style of supervision, internal stability, morale, clientele support, availa- bility of objective assessment of effectiveness and discrepancy between authority and responsibility.
7 The term “role strain” is a conception that illustrates the stress and the tension with which a person is confronted in an occupied organizational position. Grusky identified two main sources of strain: the discrepancy between official responsibility and authority and the availability of objective assessment of managerial and team performance to the organization’s clientele and higher levels of authority (Grusky, 1964, p. 27).
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