Truce Breaking and Remaking: The CEO's Role in Changing Organizational Routines

Advances in Strategic Management, 2015 Forthcoming

Rotman School of Management Working Paper No. 2558461

45 Pages Posted: 1 Feb 2015

See all articles by Sarah Kaplan

Sarah Kaplan

University of Toronto - Rotman School of Management

Date Written: January 31, 2015

Abstract

This paper reports on the “CEO’s-eye-view” of the 1990 commercial real estate crisis at Citibank using unique data from CEO John Reed’s private archives. This qualitative analysis sheds light on questions that have perennially plagued executives and intrigued scholars: How do organizations change routines in order to overcome inertia in the face of radical change in the environment? And, specifically, what is the role of the CEO in this process? Inertial behavior in such circumstances has been attributed to ingrained routines that are based on cognitive and motivational truces. Routines are performed because organizational participants find them to cohere to a particular cognitive frame about what should be done (the cognitive dimension) and to resolve conflicts about what gets rewarded or sanctioned (the motivational dimension). The notion of a “truce” explains how routines are “routinely” activated. Routines are inertial because the dissolution of the truce would be inconsistent with frames held by organizational participants and fraught with the risk of unleashing unmanageable conflict among interests in the organization. Thus, the challenge for the CEO in making intended change is both to break the existing truce and to remake a new one. In this study, I uncover how the existing organizational truce led to the crisis at Citibank, why Reed’s initial attempts to respond failed, and how he ultimately found ways to break out of the old truce and establish new routines that helped the bank survive. These findings offer insight into the cognitive and motivational microfoundations of macro theories about organizational response to radical change.

Keywords: CEO, routines, truces, cognition, motivation, incentives, organizational change, microfoundations

JEL Classification: L20, L21, L23, M1, M14, M54

Suggested Citation

Kaplan, Sarah, Truce Breaking and Remaking: The CEO's Role in Changing Organizational Routines (January 31, 2015). Advances in Strategic Management, 2015 Forthcoming, Rotman School of Management Working Paper No. 2558461, Available at SSRN: https://ssrn.com/abstract=2558461

Sarah Kaplan (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
133
Abstract Views
1,180
rank
238,064
PlumX Metrics