Why many firms run into crises, and why some survive

Many firms run into crises that threaten their existence. These crises result partly from properties of the firms themselves and partly from properties of the firms' environments. The crises arise and grow stronger partly because top managers hold incorrect beliefs. To make crises rarer, top managers should listen to dissenters and to forthright subordinates, convert happenstance events into learning opportunities, and use experimentation as a frame of reference. Do firms or their environments cause crises? Bill and our Swedish colleague, Bo Hedberg, were living in Berlin.1 Bo returned to Berlin after a visit home, and said he had received a research grant from the Swedish government to study stagnating industries. He said that he wanted to find out why some industries stagnate and drive firms out of business and put people out of work. Bill's background and orientation are social-psychological, so he tended to place responsibility on the firms rather than their environments. Bill said something tactful like: "Bo you're got this thing all screwed up! The important question is not why some industries stagnate. Technologies are always developing, populations are always migrating, prices are always shifting -things always change, and some of these changes will render some industries obsolete. The relevant question is: why do intelligent people who are running a firm choose to remain in a stagnating industry even though they recognize that it's stagnating? Why don't firms move into more promising industries when their current ones start to stagnate?" With equal tact, Bo responded, approximately: "You're spinning an academic fantasy. A firm that knows how to make and sell something can't just pick up their product line and their engineers and plunge into another industry. Their specialized skills and business connections make them captives of their environment. The firms in an industry have to evolve together. It's a societal problem to create incentives that keep industries vital, that keep them evolving in line with social needs and economic and technological opportunities." Obviously they had an argument: Bill was saying industrial stagnation posed problems for the managers of distinct firms, whereas Bo was saying industrial stagnation posed problems for the setters of governmental policies. They decided to resolve this argument by doing research together. When they moved to Milwaukee, Paul joined the project as well. After listening to his friends' debate, Paul spotted a key assumption and questioned its validity. "Do we know whether top managers see what's happening? Maybe top managers sometimes fail to notice a changing environment until it becomes too late to mobilize and move their firms." One result was a dozen case studies of firms facing crises. We chose to make case studies because we thought we were looking for rare and unusual events. We believed that nearly all firms and industries go along happy, healthy, wealthy, and wise most of the time; but that once in a while, a disease, much like a virus or a bacterium, infects a firm or an industry and makes it ill. When the disease is very serious, the afflicted firm or industry suddenly faces a crisis that it cannot survive, and it goes out of business. We saw ourselves as organizational pathologists; a pathologist is a doctor who cuts up a dead body to see what caused its death. We went looking for firms that were facing very serious crises so that we could see what caused them to get into so much trouble and what they did once they were in it. Of course, our argument meant that we did not look specifically for firms that got into trouble because of changes in their environments. We did not exclude such cases, but environmental change was not a criterion for choosing cases to study. We just looked for signs of serious trouble, and we looked for different kinds of stories. We use the case of Facit AB as a primary example. Although the events occurred during the 1970s, they include nearly all the elements we observed in other cases. Similar processes are taking place today. A Swedish firm, Facit AB, formed in 1920 to make mechanical calculators and it then operated with great success for almost 50 years. Besides mechanical calculators, it made typewriters and office equipment like desks and chairs, and a few of its personnel had dreamed of someday making electronic equipment. In the mid sixties, Facit had borrowed large sums in order to build new factories; and by the late sixties, Facit's personnel were taking great pride that they could build better mechanical calculators for lower costs than any other firm in the world. By 1969, Facit operated 20 factories in five countries and sales offices in fifteen countries, and it employed 14,000 people. Employment had gone up by 70 percent and sales and profits had doubled in the six years preceding 1969. But 1969 was a peak year. Suddenly, electronic calculators appeared on Facit's horizon. The immediate reaction of Facit's top managers was that these funny little plastic boxes with little red lights on them had to be a passing fad. It was obvious to Facit's top managers that no one would trade in a nice solid machine that went thumpity, thumpity, thump for a silly little box with little red lights on it! Facit would move into electronics gradually over the next decade or two, but it would do so in a careful, orderly way while maintaining high product quality. Three years of layoffs, declining sales, and negative profits followed. The price of Facit's stock dropped rapidly. Facit closed several factories. These were typewriter and office-equipment factories because Facit's top managers, knowing that eventually mechanical calculators would come back into favor with customers, were raising cash in order to subsidize the sale of mechanical calculators. The only problem was to retain loyal customers until the demand for mechanical calculators recovered. The Board appointed a new Managing Director -several times. (The Managing Director is the chief executive.) Indeed, the Board appointed a new Managing Director every six months. Each new Managing Director announced that the firm's situation was actually much worse than his predecessor had publicly admitted; but the new management team knew what to do, and so the future looked rosy. Meanwhile, the losses continued. In 1971, only one division of Facit made a profit -the typewriter division. In February 1972, the head of this division quit in protest because his colleagues were planning to close yet more typewriter factories. By the summer of 1972, employment had gone down 36 percent, and Facit's top managers had reached a state of utter despair. They realized that they did not know what they should do or how they could save their firm. Whereas they had assumed at first that Facit could shift to electronics gradually, it now appeared that a technological revolution had passed them by and there was no way that they could ever catch up with it. Facit was a mechanical-calculator firm in an electronic-calculator age. They hired a leading consulting firm to tell them what to do. McKinsey & Company basically agreed with the depressing analysis of Facit's top managers, and recommended that Facit fire 2400 more employees and close yet another plant. This happened to be the plant in the firm's small hometown, meaning that the closing would kill the town. In early October 1972, Facit's Board of Directors met for three days and nights while discussing McKinsey's advice, but they could not reach a decision. On the one hand, they saw the sense of what McKinsey was proposing: the only hope for Facit was to retrench, and Facit needed cash to meet immediate obligations. On the other hand, destroying one's hometown is very, very painful. Unable to reach a decision, Facit's Board contacted a top manager in another firm, asked him to come in as their newest Managing Director and to make this decision. He said he would have nothing to do with it! That is exactly the kind of story we sought. We studied specific cases and tried to draw inferences from them. We ultimately looked at twelve diverse cases. Although we think we learned some useful lessons, we must warn readers how difficult it is to draw meaningful inferences from data. Researchers bring biases to their readings of events; and spontaneous events allow many explanations. We learned this lesson from a story told by Kenneth Pelletier, a doctor from Berkeley, California. Pelletier wanted to investigate how it is that people live to be 140 years old, so he applied for a Federal government grant for this purpose. To generate hypotheses for his grant application, he identified four societies in which it was supposedly quite common for people to live to 140 years of age, and then he looked for the common properties of these societies. He could quickly rule out climate because the societies are in very different climates. He could also rule out medical care because none of them have any of that. Still, he did spot five properties that the four societies share. First, they are vegetarian -although not necessarily by choice. They have little access to meat. Second, in all of these societies, everyone works hard throughout their lives. No one can retire. If people quit working, they quit eating. Third, these societies exhibit a great deal of social solidarity. If a husband and wife live together in a hut at the edge of a village and one of them dies, neighbors make the survivor a part of their family. Fourth, about once a week in these societies, everybody in a village gets together and gets roaring drunk. Pelletier speculated that this lessens stress and fosters solidarity, while the social context and periodicity prevent alcoholism. Last, people in these societies continue to have sexual intercourse at least to the age of 120. We suggest that the last condition is sufficient! To satisfy it, one has to satisfy the other four. Learning to fail while learning to succeed One risk is that research will mainly strengthen beliefs the researchers held before they started. We certainly brought prejudices to our studies, but what we found was not what we had initially expected to find. Perhaps this is because we had initially disagreed with each other, and so we forced each other to consider other readings of events. Indeed, several of the key lessons only came to us after some years of study and over our resistance. For example, we began with the idea that we were looking for abnormality -a rare disease that happens to infect a few firms or industries. Then we found multitude examples! Crises appeared wherever we looked. Indeed, we did not even have to look for them. They infested our newspapers and magazines; our colleagues pointed them out to us; skeptics in our audiences brought us examples. It gradually dawned on us that we were seeing normality: Failures and real threats of them are common. Every firm confronts a crisis at some point, and some firms survive several crises. Thus, once we started looking for crises, we had no trouble seeing them. Furthermore, although it is sometimes alleged that people avoid talking about their failures, we had little difficulty finding out what happened before and during crises. People are very eager to talk about major dramas in their lives, such as threats to their continued employment, or their struggles against adversity and triumphs over it. People are even happy to talk about failures -their own failures, but especially those of their colleagues. Only after years of struggling with these phenomena did we see that one reason crises are so prevalent is that failures have precisely the same causes as do successes (Miller, 1990). Crises result from too much of a good thing, in the sense that the very processes that enable firms to achieve success also lead them into error (Pauchant and Mitroff, 1992). When a firm succeeds by specializing and refining its methods, success promotes rigidity, resistance to change, and habitual responses. Specializing and refining raise efficiency, heighten expertise, and strengthen connections between the firm and its environments. But such a firm adheres to its methods after they grow obsolete. When a firm succeeds by experimenting and innovating, success promotes persistent change. Experimentation and innovation keep the firm's methods flexible and sharpen its awareness of environmental threats and opportunities. But such a firm continues experimenting and changing during periods when specializing and refining would pay off. Successful companies benefit from coherence (Meyer and Starbuck, 1993). They can make their strategies, structures, and ideologies mutually reinforcing. However, such coherence proves dangerous when strategies, structures, or beliefs are wrong (Nystrom, 1990). Mutual reinforcement makes errors harder to detect and correct. Consider the means by which firms learn. Powerful tools are mostly two-edged swords that can produce harm as well as good. Organizational learning mechanisms show this duality. While they foster autonomy, efficiency, and consistency, they also promote blindness, rigidity, and self-deception. Firms have three basic learning mechanisms. One of these is buffering. A firm builds buffers between itself and sources of random variation in its environments. A good example is a finished-goods inventory. This inventory allows a firm to run its production processes at stable rates, pretty much independent of the shifts from day-to-day in customers' orders. Inventories will soak up those shifts if the firm attains a rough, long-run match between the rates of production of its various products and their rates of sales. Buffers embody knowledge about the ranges of variation in environmental demands and how to satisfy such demands at low cost to the firm itself. Slack resources afford a second learning mechanism. Managers hide slack resources behind excessive reserves or spending such as new curtains or new carpets or walnut paneling in offices. Such spending may yield short-run benefits -make employees more comfortable, for example -but when times call for stringent economies, it is easy to cut such spending and thereby to gain resources. Slack resources resemble buffers in that they allow a firm to satisfy environmental demands at low cost; and by lowering what would otherwise be peak profits, slack resources also make a firm's performance appear smoother. The third, and most important, learning mechanism is programming (Hedberg et al., 1976). Programs enable firms to repeat the same actions over and over again. People figure out how to solve some problem or how to perform some task effectively, and so they create a program that enables them to do it over and over again the same way. Most firms write many programs down as standard operating procedures; many big companies hand new employees books filled with procedures to follow. One industrial-relations manager explained that he had made a point of becoming the keeper of the procedure manuals because this gave him much power: he knew what everyone should do and how they should do it. Programs afford the main means by which firms accumulate experience, coordinate actions, and control actions from above. We find action generators especially intriguing. Action generators are programs activated by things like calendars and clocks and job descriptions rather than by information-bearing stimuli (Starbuck, 1983). People may get up in the morning and go to work and carry out certain job duties even if nobody else has need for their help on that day. An accountant compiles a monthly report, not because someone explicitly requests it, but because the accountant compiles this report at the same time every month; the accountant may have no assurance that anyone is actually going to read the report this month. A quality-control inspector pulls a sample and conducts a test even if no explicit question about product quality has arisen, because it is the inspector's assignment to monitor product quality and the firm has set up procedures for testing quality and it has provided a budget and floor space for quality testing. Likewise, firms fabricate products, produce budgets, conduct research, and advertise without regard for whether these actions can solve visible problems or meet any immediate needs. Most firms make prolific use of action generators and assign them important functions; but more successful firms probably depend more strongly on action generators, because successes breed complacency whereas failures and problems encourage reflection. These learning mechanisms -buffers, slack resources, and programs -offer many advantages. They preserve some of the fruits of success, and they make success more likely in the future. They stabilize behaviors and enable firms to operate to a great extent on the basis of habits and expectations instead of analyses and data. They reduce the complexity of social relations and keep people from disobeying or behaving unpredictably. They minimize needs to talk or to reflect, and they conserve analytic resources. They also give firms discretion and autonomy with respect to their environments. Firms do not have to pay close attention to many of the demands currently arising from their environments, and they do not have to formulate explicit or unique responses to most such demands. Thus, firms gain human resources that they can devote to influencing their environments and creating conditions that will sustain their successes in the future. These learning mechanisms also carry disadvantages. In fact, each advantage has a harmful aspect. People who are acting on the basis of habits and obedience are not reflecting on the assumptions underlying their actions. People who are behaving simply and predictably are not improving their behaviors or validating their behaviors' suitability. Firms that do not pay careful attention to their environments' immediate demands tend to lose track of what is going on in those environments. Firms that have discretion and autonomy with respect to their environments tend not to adapt to environmental changes; and successful firms want to keep their worlds as they are, so they try to stop social and technological changes. Indeed, buffers, slack resources, and programs make stable behaviors, current strategies, and existing policies appear realistic by keeping people from seeing problems, threats, or opportunities that would justify changes. The firms we studied, and almost all firms, develop views of themselves and their environments that diverge greatly from what an outsider might call realistic. In extreme cases, firms' perceptions become as unrealistic as the perceptions of schizophrenic people. Consider, for example, some perceptions of Facit's top managers. The top managers defined their firm solely as a mechanical-calculator firm. They did not define it as an office-equipment firm in a broad sense, or even as a calculator firm in a broad sense. Because of this narrow and specific definition of their firm's product line, they thought of typewriters and office equipment as peripheral by-products of their core technology, mechanical calculators; and they thought of electronic engineering as peripheral expertise, largely irrelevant to their product line. Faced with a serious threat, they decided that they had to protect their core technology; and to obtain funds to do this, they felt that they should sell off the peripheral product lines, typewriters and office equipment. An outsider might have remarked that mechanical calculators constituted only a third of Facit's sales volume before electronic calculators appeared, and that electronic calculators did not directly threaten Facit's markets for typewriters and office equipment. An outsider might also have seen electronic calculators less as a threat than as a natural addition of Facit's product line. Indeed, an outsider might have noted that back in the 1960s Facit had started a joint venture with the Sharp Corporation of Japan, and this subsidiary had designed electronic calculators and computer terminals. During the late 1960s, this subsidiary had proposed that Facit start making and selling these products, but Facit's Board of Directors had rejected this proposal. Thus Facit had actually had access to a whole set of electronic products throughout its crisis. Facit's top managers also looked upon technological change in their industry as a slow, step-by-step process. This fitted their experience, for mechanical-calculator technology had been evolving in small logical steps for fifty years. The gears had gotten a little bit smaller each year, the motors had gotten a little bit faster each year, and the boxes had gotten a little bit smaller each year -but product changes had been small steps that extended history. Because they had not been monitoring electronic technology closely, the advent of electronic calculators took Facit's top managers largely by surprise. Because they had grown used to slow technological change, their perceptual frameworks gave them no bases for dealing with the sudden emergence of a totally different technology. Their first reaction to electronic calculators was to fall back on their experience and to assume that electronics would enter their product line in a slowly. Two years later, Facit's top managers concluded that the world had passed them by. They saw Facit as a ponderous machine that could only change slowly and marginally, yet it was now apparent that Facit had to compete with a rapidly evolving new technology for which it had no aptitude. Facit could not move into electronics as quickly as market pressures demanded. The second conclusion was just as unrealistic as the first had been . . . as readers will see. Who is to blame, firms or their environments? Bo and Bill eventually resolved their argument by concluding that both of them had been partly right. Of course, such an outcome may also have been an inevitable result of their friendship, which grew much stronger over years of cooperation. Paul's mediation may have helped as well. Crises do indeed come from firms' environments, although not exactly in the way that Bo had conceived initially. Bo had rightly seen that environments change so as to obsolete some markets, products, and technologies, but he had not seen that environments also make it hard for firms to adapt to these changes. Environments propound ideas about how to organize, and then the environments behave in ways that make these ideas unrealistic. Environments tell firms to predict the future and to develop formal strategies fitting these predictions; yet environments themselves make unpredictable changes. Environments instruct firms to use hierarchical controls that make subordinates obey their superiors; and yet environments make profound changes in shop-floor production technologies, consumers' tastes, and economic opportunities that are more visible to lower-level personnel than to top managers. Environments teach firms that their decisions and strategies should be explicit and backed up by logical arguments even though explicit, justified decisions and strategies are harder to change than ad hoc ones. Environmental revolutions confound firms by emitting misleading signals and using unknown causal relations. Revolutions often appear to begin very suddenly and to spring from tiny causes, so people have to act before they understand what is happening. Those who advocate long-range predictions, explicit strategies, hierarchical controls, and rational decisions might well be right if they could assure that decisions, predictions, and strategies were correct, and that top managers were up-to-date and realistic. But managers with distorted, obsolete perceptions may make incorrect predictions and faulty decisions, and may formulate strategies that yield very bad results (Weick, 1988). In the presence of errors and mistakes, explicating strategies and justifying decisions may simply make mistakes harder to correct. Grinyer and Norburn (1975) found that high-profit firms are about as likely to plan informally as formally, and the same is true of low-profit firms. Similarly, profits correlate erratically and nonsensically with the degrees to which top managers' agree about their firms' goals or their own duties and roles. Thus, formalized plans seem to be inferior to informal plans nearly as often as they are superior, and consensus can be as harmful as beneficial when there is no way to assure that the objects of consensus are good. Crises also arise from firms themselves, but somewhat differently than Bill had thought at first. Although Bill had seen that firms make mistakes, Bill had not appreciated the pervasiveness of successful firms' efforts to stabilize their environments. These efforts are logical. A successful firm knows how to succeed in its current environments, and it is not sure it would be equally successful in altered environments, so it wants its environments to remain unchanged. Unluckily, this logical idea is not very realistic. Any single firm can do practically nothing to prevent technologies from evolving, people from moving around, or prices from changing. Our studies show that top managers, acting as a group, have the power to stabilize events inside their firm; they can prevent their firm from adopting new technologies or from entering new markets. Yet top managers have very little influence on events occurring outside their firm, so their firm's environments go right ahead and create new markets and technologies. The top managers' stabilization efforts only undermine their firm's match to its environments and keep the firm from migrating to more fruitful environments as they develop. Firms also blind themselves to environmental events that deviate from their beliefs and expectations. Thinking that certain markets, prices, and areas of expertise deserve attention, managers assign personnel to monitor them. But no firm can monitor everything. By not assigning personnel to monitor other markets, prices, and areas of expertise, the managers are implicitly shoving these into the background (Normann, 1971). Moreover, a firm finds it much cheaper and easier to monitor environmental events that tie into its current programs and practices. The resulting blind spots have the interesting ability to transform beliefs into realities. For example, when Facit's top managers wanted to assess the demand for electronic calculators, they asked their salesmen to find out whether their customers were going to buy electronic calculators. With near unanimity, the salesmen reported back that Facit's customers said they were not going to buy electronic calculators because they preferred mechanical ones. That was probably factually a correct statement, but the number of customers who were able to make that statement plummeted. Blind spots that alter realities occurred in all of the cases we studied. For instance, Kalmar Verkstad had long defined its market as the Swedish railroad industry. Because this industry had lost subsidies from the government, Kalmar Verkstad was frantically searching for new sources of revenue. Through eight years of efforts to develop new products, some of which aimed at international markets, Kalmar Verkstad never attempted to sell railroad equipment outside Sweden, and so they made no sales of railroad equipment to other countries. Similarly, Handelstidningen was a hard-pressed Swedish newspaper that was searching for cost savings. During a strategic-planning meeting, one member of the Board remarked that no one read Handelstidningen in order to read the sports news. The Board inferred from that remark that they should eliminate the sports news from the newspaper to save money. After they had eliminated the sports news, it was factually correct that no one read Handelstidningen to get the sports news. Handelstidningen, however, had lost more than half of its subscribers. Bo summarized the overall thrust of our findings with a metaphor: "Once upon a time there was a tribe that lived in the grassland. They hunted deer, drank from the brook, and set up their tents when evening embraced them with darkness. One morning, after a gorgeous night in a pleasant campsite, some tribesmen went hunting at daybreak. They came back with deer for another day or two. Let us stay, they suggested. This is a good site to be at. So the tribe stayed one more day, and one more, and one more. . . . "Soon the hunters learned to breed their cattle, farm the land, and dam the water. As they grew wealthier and more secure, they turned their tents into houses, and then into palaces. And they fenced themselves against their enemies. "The latter were known as Uncertainty, Conflict, and Ambiguity. There were enemies. Oh, yes! But the fence was sufficient. And the tribesmen bettered the defense after each attack. "Pilgrims came by and told tales about better campsites and different deer. But the tribesmen paid little attention. The last hunter was dead. One summer there was less water in the brook than there used to be. No one noticed the change at first, but as the brook continued to dry out, the water manager notified the tribe council. The council fired the manager, and decided that there was water in the brook. The vote was eight to one. The tribe added to the fence, which had become so dense that one could no longer see the surrounding grassland. How firms react to crises Among our surprises was finding that normal problem-solving methods will not lead firms out of crises, and that they actually tend to make crises worse. For example, delay is often an effective problem-solving technique. Many problems disappear or solve themselves if one only waits, or else waiting clarifies what the problems really are and what options exist. Some apparent crises also disappear after a time, but real crises grow worse over time and so waiting to deal with them makes them more serious. Similarly, the managers who are running a firm in a crisis cannot by themselves lead their firm out of it. If these managers did know how to escape from the crisis, their firm would not be facing the crisis. A firm that runs into a crisis goes through two or three phases of reaction -two if it does not survive, three if it does. Weathering the storm The first reaction we call 'weathering the storm.' During this phase, a threatened firm assumes that its problems are temporary and arise in its environments. The market is adapting to a new entrant; the currency has lost value and prices will take a while to adjust; the temporary drop in applications is a random event. These aberrations present challenges, but surmountable ones that will correct themselves with time. Meanwhile, employees of the firm must tighten their belts and intensify their efforts. Still, slack resources do exist that can give breathing room. The firm can pare its budget, and it can shed peripheral, unnecessary activities. To assure sound management, the top managers will take direct control. We wonder at the simplicity of threatened firms' analyses. Handelstidningen did not discover that it faced serious trouble until the bank called up and reported that its payroll checks were bouncing. The top managers' analysis of the situation was that the firm lacked cash, so they got cash by selling its printing equipment. This solved the problem for only a very short time, because the firm had done nothing to stop the losses that were draining its funds; and having to rent printing equipment actually increased its losses. Several of our cases involved this idea of selling assets to raise cash for short-run needs. Facit, for instance, sold its typewriter and office-equipment factories. Such actions not only postpone critical appraisals of the firms' central strategies and allow pressures to build up, they also deprive firms of resources that they could use to reorient their strategies. Another widespread response was cooking the books -distorting the accounting statements to make situations look better (Hambrick and D'Aveni, 1988). For example, some firms portrayed asset sales as product sales; some suspended depreciation charges; some changed their reporting periods. Ironically, these same firms depended on their distorted accounting reports to identify the causes of problems, and they focused on accounting data virtually to the exclusion of other information. Three universal responses were budget trimming, shedding peripheral activities, and centralizing control. Top managers act as if they themselves are the most expert judges of what to do, and they focus their firms' efforts on what they themselves regard as the most important activities. One result is that the firms lose diversity and put more of their eggs into a few baskets. A second result is that ambitious younger managers either get fired or depart voluntarily for firms that offer more promise. A third result is that out-of-date people take control and push their firms backward in time. Top managers, on the whole, turn out to be the wrong people to steer firms out of crises -both because they cannot and because they will not. Especially in large firms, top managers get much information from second-hand reports that avoid displeasing them, and it may have been twenty years since they last talked regularly to customers, or it may have been twenty years since they last worked in factories and dealt with technologies. Top managers interpret their high positions as evidence that they have more expertise than their subordinates, and they talk and listen mainly to other top managers, who are as out of touch as themselves. Because top managers feel answerable for the policies and strategies that are now in place, they are very reluctant to admit that anything is wrong with these. They know that if their firms' serious troubles appear to result from their policies and strategies, they are going to become scapegoats. Top managers also recognize that strategic reorientations would imply changes in who has control, and they do not want to lose power. Hence they have very strong vested interests in not admitting that anything is wrong and in not changing anything. Consider, for example, what Facit's top managers must have been thinking around 1970. Only a few years before electronic calculators swept into the market, the top managers had incurred massive debt so that their firm could build modern and efficient factories for making mechanical calculators, and Facit had not yet repaid this debt. What would their reputations be worth if it turned out that they had mortgaged their firm's future to maximize its ability to produce obsolete products? If the firm shifted to electronic calculators, what use would Facit have for top managers who do not understand electronics or rapid reorientations? Facit would need different people in charge. What other companies would hire aging top managers who had made serious strategic errors?