The strategic importance of top management resistance: Extending Alfred D. Chandler

Top management resistance in strategy process research

Strategy process research has long acknowledged that strategy development is a complex and contested process involving multiple parties (Bower, 1970; Mirabeau and Maguire, 2014). In his seminal work, Bower (1970) examines the budgeting process of firms to demonstrate how strategic actions do not necessarily follow a top-down path, rather they are influenced and shaped by bottom-up autonomous actions. Burgelman elucidates the conditions under which autonomous actions are more or less successful and how a firm’s strategic and structural context can determine which initiatives prevail (Burgelman, 1991, 1983a). While the strategic context describes a firm’s deliberate strategic intent, the structural context encompasses organizational processes and routines that influence the extent to which actors are able and incentivized to support these initiatives (Balogun et al., 2005). Such initiatives require either the mobilization of substantial political influence (Lechner and Floyd, 2012) or changes to the organization’s strategic and the structural context that would otherwise impede their development and implementation (Balogun and Floyd, 2010).

Studies on the role of autonomous initiatives in large organizations often use the term ‘corporate entrepreneurship’ to juxtapose initiative-driven change against development through induced strategy processes (Birkinshaw, 1997; Burgelman, 1983b; Hisrich and Kearney, 2012). Initiatives are conceived of as an ‘essentially … entrepreneurial process, beginning with the identification of an opportunity and culminating in the commitment of resources to that opportunity’ (Birkinshaw, 1997: 207). These studies demonstrate how initiatives often originate with middle managers and require vertical and horizontal influencing actions to be realized (Floyd and Wooldridge, 2000; Lechner and Floyd, 2012). Top management resistance to autonomous initiatives is also implicit in research on issue selling (Dutton, 1993; Dutton and Jackson, 1987). Howard-Grenville (2007), for instance, describes how issue sellers develop capabilities for issue selling and influencing top management teams such as:

formal approaches that match prevailing cultural norms (asserting decision processes), customize their moves to an audience (offering explanations), prepare carefully by educating themselves and assembling information on the issue (working within constraints, providing data), and move opportunistically to advance issues when they might be most salient… (p. 568)

These disparate perspectives highlight autonomous strategic initiatives as an important source of change. Extant research however, still tends to frame resistance as a primary factor behind the failure of change initiatives. Top management resistance, they argue, reduces the consideration of alternative strategic options, thereby creating or reinforcing a strategic path that a firm might find hard to deviate from (Garud et al., 2010; Leonard-Barton, 1992; Schreyogg and Sydow, 2011; Sydow et al., 2009).

The generative role of resistance: an emerging view

Organizational change research also makes an implicit case that employee resistance might actually be a catalyst for strategic change (Ford et al., 2008; Thomas and Davies, 2005). In focusing on change through the implementation of a top-down strategic intent, Ford et al. (2008) argue that resistance extends the process by facilitating conversations (even if negative), it also enables initiators of change (they refer to change agents) to ‘clarify and further legitimize the change […]’ (p. 368). While not explicitly referring to resistance per se, Amason (1996) shows that within top management teams, conflict and disagreement ‘appears to be important for high-quality decisions’ (p. 127) by enabling the synthesis of different perspectives. While these studies acknowledge that resistance does have generative effects, there is clearly an absence of theorization about these effects, leading us to ask: What are the consequences of top management resistance to strategic initiatives above and beyond maintaining the status quo of the organization? This question demands a closer examination of the evolution of strategic initiatives over time.

The initiative to transform DuPont

In the aftermath of World War I (WWI), DuPont evolved from a company focused primarily on explosives into a highly diversified conglomerate whose product range included soap, film, paint, varnish and dye stuffs. Despite this increasing complexity, the firm retained its increasingly problematic functional departmental structure, which exacerbated tensions and conflict for various functions such as sales, marketing, but also procurement. A series of projects staffed by the heads of the various functional departments, but carried out by some of their direct subordinates, were initiated in 1920 to investigate this problem. The objective was to study how DuPont should be organized based on a comparative analysis of similar American firms. The conclusion was clear: ‘the underlying problem was not one of selling but of organization’ (p. 95), as the committee thus proposed a fundamental reorganization to ‘make product rather than function the basis of the organization’ (p. 96).

Mechanism 1: resistance and the reframing of initiatives

This initial proposal to reorganize DuPont was rejected by the Executive Committee. President Irénée DuPont was uncomfortable with the idea that the firm should change the very principles of organization that had made it successful as it was a key factor in enabling the rapid scaling up of production capacity and the effective coordination of logistics across its gunpowder mills during WWI. The project team was tasked with improving the study for resubmission to the Executive Committee. This second attempt of persuading the executive team to agree to reorganization however, resulted in the same outcome: DuPont should remain as it was.

Departmental managers were disappointed as the current structure was increasingly dysfunctional at the operational level. Although the initiative to reorganize DuPont was officially cancelled, three managers from the Sales, Manufacturing and Development Departments, respectively, took initiative to ‘meet “unofficially and without portfolio” to consider ways of improving the company’s performance’ (p. 100). This ‘informal council’ discussed issues, particularly regarding the paint business, across departmental boundaries. Although the team’s ultimate intention was to eventually formalize this paint council as a de facto product division, they avoided the term ‘organization’ in any report to the executive committee. To deflect attention from their true motivations, they instead named their proposal: ‘A Plan to Make 10% on Our Paint and Varnish Net Sales’ (p. 100). The plan was immediately accepted by the Executive Committee, and soon after, the same group of managers submitted a further proposal to broaden the ad hoc ‘council’ structure to most other product lines. Again, they ‘did not raise the question of organization, but rather made their recommendations in a report on statistical controls’. By the start of 1921, most product lines were coordinated through these councils. Despite the Executive Committee’s rejection of the initial plan, the ‘DuPont Company was beginning to move towards a de facto structure based on product divisions rather than functional departments’ (p. 103).

Mechanism 2: resistance and the restructuring of initiatives

The reframing of this initiative as one of ‘profitability’ rather than ‘organization’ also went hand in hand with the restructuring of the group of actors taking it forward. The initial reorganization initiative involved a group of managers hand-picked by the top management team: the ‘heads of the Sales, Treasurer’s, Development Departments […] and A. Felix du Pont, General Manager of the Explosives Manufacturing Department’ plus a sub-committee of ‘one able representative from each department plus one of the President’s assistants’ (p. 94). Yet, after the rejection of the initial proposal to the executive team, this sub-committee ceased to formally exist.

As part of the reframing of this initiative however, the small group of actors expanded to include a small core of executives that had been involved with the initial proposal: Pickard (Head of the Sales Department), Carpenter (Head of the Development Department) and MacGregor (Representative of the Development Department). In addition to these three individuals, another two joined the ‘informal council’. This expanded group had a rather narrower focus than its predecessor. Rather than addressing the situation of DuPont as a whole, the ‘informal council’ now recruited managers with expertise in the paint business. Moreover, with the formalization of these councils, a growing group of managers across DuPont started to engage in cross-departmental coordination.

Mechanism 3: resistance and the recoupling of initiatives

While the idea of establishing councils was quickly embraced, the functional organizational structure remained in place. Rather than transforming the firm, the council was yet another management layer that required coordination across functional departments. It was soon apparent that the council solution did not go far enough, and it thus short-lived. As a way forward, and despite its previous rejection, the initial proposal for establishing product divisions was again discussed by the top management team. The he initiative that had continued below the gaze of top management had now re-emerged to recouple with the formal decision-making process at DuPont.

The deepening of the post-war recession compounded the pressure on DuPont to act. Although explosives still earned USD2.5 million in profits, all other products lost a total of USD3.8 million. The executive committee still waited to take any action until Irénée returned from a business trip. Fletcher Brown, a manager in the Smokeless Powder Division, took initiative and wrote directly to Irénée, proposing that:

The trouble with the Company is right here in Wilmington, and the failure is the failure of administration for which we, as Directors, are responsible. (p. 105)

In this letter, Brown referred to the initial proposal to the executive committee in the previous year recommending that the ‘centralized functionally departmentalized organization structure should be completely replaced’ (p. 105). Eventually, in a joint executive meeting in August 1921, Brown was asked to develop a detailed implementation plan. The original proposal of 1920 served as a blueprint for Brown’s plan, with only addition being measures to improve the structure and function of the Executive Committee itself. Although Irénée remained unconvinced of the necessity to abandon the functional organization that has served the company so well, ‘in deference’ to the opinion to the majority of the executive committee (p. 110), he voted in favour of the new structure and ‘[i]n September, 1921, the DuPont Company put into effect this new structure of autonomous, multi-departmental divisions […]’ (p. 111).

Strategic change at DuPont: resistance and the maturation of strategic initiatives

The initiative to reorganize DuPont into product divisions followed anything but a linear path of development and implementation. Rather, it emerged through iterative cycles of overt (and partly covert) proposals and initiatives triggered by the resistance of the executive committee and particularly through the resistance of DuPont’s President Irénée. Chandler saw the resistance of Irénée as instrumental to the process of maturation that sharpened the quality and practical adequacy of plans to implement the reorganization initiative.

Thus the manner in which the realization came of organizational inadequacies affected the nature of the resulting proposals. This, in turn, helped to determine the length of time involved in bringing the plan to fruition. (p. 305)

Indeed, as part of the general discussion of the four cases discussed in ‘Strategy and Structure’, Chandler explicitly juxtaposes the cases of DuPont case and General Motors. Similar to DuPont, the initiative for reorganization came from a middle manager; in this case, Alfred P. Sloan, Jr. He also did a study of competitors in order to make his case for change. In contrast with DuPont however, Sloan’s proposal was immediately and unconditionally accepted. Its implementation, however, was fraught with difficulty and took far longer to be fully realized as ‘[t]he final definition of a comparable structure took longer at General Motors, for Sloan, Brown, and Pratt [Executives at GM] had more creative work to do’ (Chandler, 1962: 306).

The generative dynamics of top-down resistance are still apparent today. For example, the development of numerous new product initiatives at Apple is directly attributable to resistance by Steve Jobs, Jonathan Ives and other senior executives who were known to push back on middle management proposals with demands for further iterations of elaboration and refinement (Brown, 2011; Lashinski, 2012). By contrast, the failures of Microsoft to successfully pivot to the mobile computing paradigm and Google’s problems new product initiatives such as Google Glass and Nest have been attributed to a lack of senior management oversight, or as we term here, generative resistance, which often led to the premature launch of underdeveloped technology platforms (Amadeo, 2016; Bilton, 2015; Eichenwald, 2012).

Generative mechanisms of top management resistance

Chandler’s cases demonstrate how initiatives are dynamic phenomena that transform over time when confronted with resistance. While the initial resistance of the Executive Committee halted formal activity, the first generative mechanism of reframing saw the initiative recast as one of improving ‘performance’, which allowed managers to ‘go underground’ and gradually recruit commitment upwards from the top management team and also downwards from other functional heads. This gradual expansion of the practice of ‘councils’ across the various product lines enabled the firm to gain capabilities for coordinating across the functional boundaries of the organization. The case indicates that actions and language used by middle managers are tailored to mitigate resistance, such as avoiding the term ‘reorganization’. Indeed, managers strategically used accepted practices such as ‘councils’ as well as the objective of ‘profitability’ in order to reframe the initiative as less risky and thus more legitimate (Canales and Vila, 2005). We consider such reframing to be a generative effect of top management resistance as it facilitated the transformation of the initiative. To better understand the ways by which initiatives are shaped by top management resistance therefore, we call for more research that follows strategic initiatives over time to capture their transformation and manifold representations. The growing literature on framing and framing contests, for example, could provide a theoretically nuanced entry point for such analysis (Kaplan, 2008; Pandza, 2011).

A second generative mechanism of top management resistance is the restructuring of the group of actors involved in taking the initiative forward, despite top management resistance. The initial committee tasked with a study of the ‘organization’ was staffed with the most senior managers, but as Pickard and Carpenter started to reframe the problem, they were joined by mid-level operational managers who had a strong expertise in their respective domains and were keen to remedy the dysfunctional functional structure. Thus, rather than remaining at a ‘corporate’ level, restructuring shifted the focus of the initiative downwards and closer to the firm’s operational level, whose managers were instrumental in quickly spreading the practice of informal councils across the firm. This insight relates directly to central concerns of recent strategy practice and process research, including the differential role of various actors in strategy work (Jarzabkowski et al., 2007; Paroutis et al., 2013; Vaara and Whittington, 2012; Whittington, 2006), the role of middle managers more specifically (Balogun and Johnson, 2004; Rouleau, 2005) and how strategy work is distributed across the organization (Garud and Karnøe, 2005; Pandza, 2011; Paroutis and Pettigrew, 2007). This insight also highlights that the distributed nature of strategy work has implications for performance, as shown in Martin and Eisenhardt’s (2010) study of cross-business unit collaboration.

Chandler’s account of DuPont also highlights a third generative mechanism, which is the recoupling of initiatives to the strategy process of the firm. Recoupling involves the formal allocation of resources to a strategic initiative. While the informal council created a more product-oriented organization, the firm’s assets remained within functional departments. It is the recoupling of the proposal to reorganize with the firm’s induced strategy process and the imperative to cope with the effects of the great depression, which won over the financial and political support of the executive committee (apart from Irénée). This extends Burgelman (2002) argument that it is these autonomous initiatives, rather than induced strategy that drives strategic change, and that commitment to a particular strategy might require structural changes before autonomous initiatives can be restarted (Burgelman, 2002; Mirabeau and Maguire, 2014).

The relationship between resistance and the generative mechanisms of reframing, restructuring and recoupling and its implications for the maturation of initiatives, also offers new insights into the antecedents of emergent strategy and strategic change. Arguably, Chandler’s analysis implies that top management resistance ultimately improved not only the quality of the initiative but also the ability of the organization to absorb radically new ideas. Indeed, the informal council at DuPont was an ad hoc attempt to bridge functional boundaries in the absence of a formal change in the organizational structure. As Chandler stressed, although the initiative to reorganize had the longest gestation period, the actual implementation of the M-form at DuPont was ultimately the most brief and smoothest of all the cases described.

Future research on the generative role of resistance for strategic change

While reframing, restructuring and recoupling helps to explain how and why the initiative the initiative at DuPont matured over time, we cannot claim an exhaustive listing of the generative mechanisms of resistance. Rather, our interpretation of Chandler’s case indicates a need for further research on the role of resistance and the effect of autonomous initiatives on organizational change (see Table 1).

The mechanisms identified in this article require further elaboration. Future studies could elaborate upon these mechanisms and identify additional mechanisms. Indeed, further effects regarding the work of individual managers might be uncovered, such as those related to identity. Moreover, future research could develop a typology of the generative mechanisms of resistance and theorize the processual dynamic of these mechanisms. We suggest that a more comprehensive picture of these generative mechanisms is needed to better account for the role of resistance. Resistance invariably emerges at different organizational levels (e.g. top management, middle management, etc.) during the formation and implementation phases of strategy, thus potentially resulting in radically divergent outcomes for strategic change. Such research, however, requires sensitivity to different governance contexts as firms with complex stakeholder dynamics such as large public companies or family firms might experience different forms of management resistance in comparison to, for instance, entrepreneurial ventures. Therefore, we propose the study of initiatives as an ideal empirical context and appropriate unit of analysis with which to study the dynamic interplay of downward and upward resistance.

The relationship between resistance and maturation also raises important questions about the temporal dimension of top management decision-making, a concept pointed out by Chandler (which he referred to as ‘delay’) and more recently addressed in Kaplan and Orlikowski’s (2013) study on temporal work. It emphasizes that strategic change is not only concerned with identifying potential futures for the organization, but is also influenced by the temporal situatedness of initiatives (Brown and Eisenhardt, 1997; Friesl and Silberzahn, 2012). Indeed, the DuPont case suggests that the ‘timing’ of initiatives and proposals to the top management team was crucial. Strategy research would benefit from greater insight into how decisions serve to postpone or expedite strategic change initiatives.

While we assert that resistance has generative effects, the absence of resistance does not preclude successful attempts at strategic change. Furthermore, resistance can and does have severe negative consequences as suggested by extant research. Thus, it is not only the presence and absence of resistance that is of interest for future research, but also their respective implications for organizational change. This raises the following questions: What are the sources of top management resistance and under what conditions can resistance serve as a catalyst for change and when does it promote inertia? Addressing these questions will require multiple theoretical entry points ranging from political to behavioural perspectives. They also pose research design challenges due to the time span involved in following initiatives within organizations. Detailed historical case studies such as Pettigrew’s (1985) study of Imperial Chemical Industries (ICI), Bartlett and Ghoshal’s (1998) analysis of the transformation of large multinationals such as Philips, Burgelman’s (2002) account of strategic evolution at Intel or indeed Chandler’s own cases can afford us the opportunity to capture the unfolding of initiatives over time. Therefore, illuminating the boundary conditions of generative mechanisms of resistance implies a need for greater familiarity with the method of the historian (Durand and Vaara, 2009; Kipping and Lamberg, 2016; Vaara and Lamberg, 2015). At the very least, it requires sensitivity to the broader historical organizational context (Vaara and Lamberg, 2015) in which the relationship between resistance and initiatives unfold.