The logic of shutdown decisions

Niina Erkama, Eero Vaara

Research output: Chapter in Book/Report/Conference proceedingConference contributionScientificpeer-review

Abstract

International/global industrial restructuring is radically changing the
contemporary economic, industrial and organizational structures. It is
well-known that this restructuring is in many ways problematic. For
example, the power of multinational corporations seems to be increasing
vis-à-vis other stakeholders such as nation states, labor unions or local
organizations. Shareholder value seems to have become the overriding logic
leaving little room for alternative ideas and ideologies. New corporate
elites are created while people at the shopfloor are pushed harder and
harder.

Shutdowns are particularly dramatic events. In very concrete terms, they
have huge ramifications for the lives of the specific people who are to
lose their jobs or otherwise suffer from the consequences. They are also
events where the logic of restructuring is contested and resistance forces
emerge. Against this background, it is surprising that very few studies
have examined in detail the decision-making processes and the related
discursive processes in concrete shutdown cases.

To partially fill this gap, this study focuses on the sensemaking
processes around one controversial shutdown decision. In this case, the
Swedish Volvo Buses acquired a small Finnish complement product producer
called Carrus in 1997. Carrus had three units operating in different
locations in Finland. Relatively quickly after the acquisition, the
corporate management decided to shut down one of the newly acquired Finnish
units and to move its production to a recently established large-scale
production unit in Poland. The closure decision provoked strong resistance
in Finland where people found it very difficult to understand why a
profitable unit was to be shut down. Influenced by this resistance, the
shutdown decision was postponed several times. However, the unit was
eventually shut down in May 2001.

The core of our empirical material consists of thirty in-depth interviews
with people holding various positions and roles in the head office in
Sweden and in the three Finnish units. In the interviews, we followed a
longitudinal approach; most of them were conducted during a time period
following the initial shutdown decision when the local people were still
trying to make top management change their minds. The interviews were
characterized by a story telling approach; the interviews were encouraged
to describe their experiences with their own words in semi-structured
interview settings. We also analyzed and made use of other material such as
internal documents and the media coverage around this case.

As a result of our analysis, we could distinguish two inherently
different sensemaking logics: global rationality and local rationality.
According to the logic of global rationality, the corporate management
justified its decision on the basis of global efficiency, economies of
scale and inexpensive labor. The employees instead framed the shutdown
issue according to a local rationality - including different types of
discursive elements. In brief, when resisting the decisions they put
forward classical arguments such as the problematic human consequences in
the form of job losses but also tried to emphasize the competence and
profitability of the unit. The local management, in turn, was in a
difficult position as a middleman. It was caught between these two ways of
framing the shutdown issue. Its actions could thus, dependent on the social
context, either echo the groups overall strategy or manifest loyalty to
the old organization and workforce. However, one can also understand this
as a specific pragmatist logic that tries to reconcile between the two
groups of people and the two contradictory sensemaking logics.

In conclusion, this analysis points to the (structurally determined)
discourses or sensemaking logics as major social forces in decision-making
and organizational action around industrial restructuring. On the basis of
our analysis, we can argue that a revelation and critical scrutiny of the
actual justifications for shutdown decisions (often simply taken for
granted) provides a way towards better decisions for all parties. However,
it seems that despite well intentions it is very difficult for any
particular decision-makers to really fight against the overwhelming power
of the logic of global capitalism pushing forward industrial restructuring.



Original languageEnglish
Title of host publicationCMS International Critical Management Studies Conference, Lancaster, UK, 7-9 July, 2003
Publication statusPublished - 1 Jul 2003
MoE publication typeA4 Article in a conference publication
EventInternational Critical Management Studies Conference - Lancaster, United Kingdom
Duration: 7 Jul 20039 Jul 2003

Conference

ConferenceInternational Critical Management Studies Conference
Abbreviated titleCMS
CountryUnited Kingdom
CityLancaster
Period07/07/200309/07/2003

Keywords

  • shutdowns

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