Professional Documents
Culture Documents
Sören Salomo
Kai Teichmann
24098 Kiel
Germany
Introduction
Prior research and common sense suggest that team performance is negatively
related to management turnover (Allen et. al., 1979 / Eitzen/Yetman, 1972). The
directors of the board intend to maximize team performance. Aspiration level theory
suggests that the current performance of a team is compared to a reference
performance (Greve, 1998 / Lant, 1992)). The reference performance is established
e.g. by the performance record of the nearest competitors or in relation to previously
set goals dependent on e.g. past performance history. Managers coaching teams
which experience a period of realized performance below the aspiration level should
be in danger of being dismissed. This turnover of the current team manager or coach
is seen as a measure to improve the team standing in such a period of dissatisfying
performance (Pfeffer/Davis-Blake, 1986).
3
The investigation of the process of managerial succession should not only focus on
the reason for turnover but as well discuss the effects of management turnover.
Although the change of the management obviously is intended as a measure of
performance improvement, succession does not necessarily fulfill these expectations.
Management turnover can result both in functional as well as in dysfunctional effects.
Dependent on the relative strength of each of these effects succession implies
positive, negative or even indifferent effects on performance. Apart from this rational,
succession might exert no influence at all on team performance. If the team manager
is completely irrelevant in determining organizational results a change in his position
4
should not cause any performance variation at all. His change in times of poor team
performance can thus be interpreted as a mere scapegoating process
(Gamson/Scotch, 1964).
Empirical results based on sport teams do not give a clear hint which succession
effect dominates (Brown, 1982). While e.g. Allen et al. (1979) in an empirical
examination of management turnover in baseball teams found a negative relationship
between „during season” turnover and performance, Scully (1992) reports a positive
turnover effect. But indifferent effects of turnover are reported as well. Both
Eitzen/Yetman (1972) and Pfeffer/Davis-Blake (1986) can not detect any positive or
negative effects at all. Obviously these conflicting results of empirical research need
some further attention (Allen et al., 1979). The relationship between succession and
following performance might be moderated by further variables (Pfeffer/Davis-Blake,
1986). Different turnover situations might result in a different performance
development following the turnover event. Again different types of managers might
be considered, as e.g. an internal successor could have a different impact on
performance than an outsider (Allen et al., 1979 / Guthrie/Datta, 1998). Coming from
inside the organization a successor is already informed in detail about strength and
weaknesses of a team and is able to draw on a wide range of previously established
personal ties. His knowledge of the organization should ease the process of
succession and reduce dysfunctional effects critical to the performance. On the other
hand an insider might be committed to much to past decisions and thereby causing
organizational rigidities in times were change and disruption is called for. Apart from
the knowledge about the organization successors can differ additionally in their
reputation and competency. This might as well contribute to a different evolution of
the performance following a change in the management position.
Both Eitzen/Yetman (1972) and Pfeffer/Davis-Blake (1986) point out, that previous
performance is a strong predictor of current performance. How far this relationship is
characterized by a so called „regression to the mean” effect or by a generally positive
relation, still remains to be investigated. The latter (positive) relationship could point
towards certain turnover-independent effects which determine performance in the
sense of structural stability, i. e. a team with a good reputation and a sound financial
5
basis will always come up with rather good results more or less independent of the
managerial succession.
Again different factors based in the external or internal environment might have some
influence on the central turnover performance relationship. At least the influence of
these variables like intensity of media coverage, board experience and rate of
personnel turnover should be controlled for.
With the exception of only few prior empirical studies (Allen et al., 1979 / Audas et al.,
1997) most empirical research employed rather limited data sets in terms of size and
periods of investigation. Although sport teams provide the researcher with highly
comparable and possibly complex measures of organizational performance, most
prior studies limited their research to rather simple performance measures. As an
example, Allan et al. (1979) measure team performance as a dichotomous variable
separating high performing teams from teams having losing seasons by using a
team-winning percentage. Teams with a percentage over 0.5 are considered as
winning teams in this study. Moderating variables influencing the hypothesized
relationship between performance and turnover were only to a limited extend subject
of investigation. Keeping this in mind our analysis is both a replication and an
extension of the prior research on the performance turnover relationship among
professional sport teams. By using a relatively large data set over a period of 19
years we are able to perform a detailed investigation of the determinants and effects
of managerial succession in team sports.
Sample
In order to examine the different research questions we use time series data on all
German premier soccer league („Bundesliga“) teams between 1979 and 1998.
During this period 5.888 matches took place.
beginning of each season and similar ranking at the time of management change
(accumulated points from game one to the game of the management change).
Measures
The central measure of this analysis is concerned with the performance of the teams.
Generally two types of team performance can be distinguished: (a) Performance in
the regular national league, and (b) Performance in the national and European cup
competitions. We choose to focus on performance in the regular national league
because it is the most important competition, and more data points being dispersed
equally during the season are available. The measures of national league
performance can be characterized by the underlying time frame and the measure of
reference. Time frame refers to the evaluation of performance which is either
performance of the entire season or the performance of the last matches preceding
or following a change of the management. Differing between measures of reference
the performance of a soccer team can be expressed in relation to other teams
(objective performance) or in relation to intended performance at the beginning of the
season (subjective performance). Combining these two measures we can consider
four possibilities to express the team performance in the league matches of the
current season (Figure 2).
m easure of reference
objective perform ance subjective perform ance
entire
tim e fram e
last
m atches
ppga k pari k
(F igure 2)
8
Based on the convention that a team gets two points for a victory, one point for a tie
and zero points for a defeat we can compute a performance measure for each team
and each match (variable „pag”).i The average points of a team at any time of the
season is defined as:
n
∑ pag
i =1
i
(1) ppga = with „n“ as the number of matches played in the current season.
n
The variable „ppga“ represents the objective performance of the entire season. The
variable „ppgak“ represents the objective performance of the last „k” matches:
n
∑ pag
n − k +1
i
(2) ppga k = with k as an indicator how many matches are considered.
k
To define the subjective team performance we have to consider the different goals of
each team proclaimed before the season starts. Generally we can differentiate
between four goals measured on an ordinal scale: (1) the German championship, (2)
the qualifying for a European cup competition, (3) a place in the midfield of the
ranking, and (4) the avoiding of relegation. In order to identify individual goals at the
beginning of a season the German sport press was screened for interviews and
analysis containing information on this subject. A total of 349 articles made a
classification of individual goals possible. Since each of these goals depend on the
final ranking in the national league, the relationship between the ranking and the
aims can be presented as in figure 3.
F in a l
r a n k in g 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1
in n a tio n a l
le a g u e
Q u a l i f y i n ga Ef ourr o p e a n
c u p c o m p e titio n
C h a m p io n s h ip
A v o id in g o f
G o a ls
re le g a tio n
M id fie ld
p r o c la im e d
( F ig u re 3 )
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Based on the results historically needed to reach each of the proclaimed goals it is
possible to determine the average number points to be reached in order to realize
each goal (variable „ppgi”). The subjective performance of the entire season is then
measured as:
ppga
(3) pari =
ppgi
ppga k
(4) pari k = with k as an indicator how many matches are considered.
ppgi
Performance may not only be measured as the performance of the current season
but as well as performance of the prior season. Consequently an additional
performance variable „pps” can be introduced which measures prior season
performance by average points per match.
an inside successor it is coded with the value 1, in case of an outside successor with
the value 2. Data on this variable is only available for teams changing their manager.
To measure the personal turnover of the players we use the variable „turno“ which
expresses the relation between the number of active players of the own team to the
number of active players of all teams at any time of the season. To examine the
intensity of local media coverage we sent a questionnaire to 60 prominent soccer
sport journalists in Germany. Their perception of local media intensity was
aggregated to the variable „media”, which rates each club individually on a three
point ordinal scale.
In order to test the above stated research questions we employ both bivariate and
multivariate statistical analysis. To investigate the determinants of management
change the dependent variable is dichotomous while the potentially important
independent variables show all different kinds of scales. Consequently a logistic
regression is an appropriate tool for a multivariate analysis in order to evaluate the
probability of management turnover contingent on different covariates. The second
main research question deals with the effects of management change on team
performance. In this case the dependent variable changes from being a dichotomous
to a cardinal scaled variable. Consequently a multivariate regression analysis is
employed.
m easure o f referen ce
o bjectiv e p erfo rm an ce su b jectiv e p erfo rm ance
entire
tim e fra m e
(F igu re 4)
As figure 4 shows, teams changing their manager differ significantly from the control-
teams in two of four performance measures. Only short term performance seems to
influence managerial succession. We chose to employ a parallel design of analysis
determining a control team as a team without a management change but on a similar
ranking position as the changing team. Consequently the long term performance can
not vary between the two groups of change and no change teams. In this sense the
insignificant results in the long term performance validates our selection of control
teams. All performance differences are of the expected direction. In order to control
for other possibly intervening variables – apart from the performance effect – the
results of a logistic regression analysis (the covariates, their regression coefficients
and the level of significance along with the Wald statistic) are presented in the
following table 1. Since the different performance measures are highly correlated only
one of these measures („points achieved in relation to points intended last four
matches”) is introduced into the regression in order to avoid problems of
multicollinearity.
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Before the relevance of each covariate can be interpreted the model’s goodness of fit
needs to be assessed. With a chi-square of 69.06 (7 df) the model is highly
significant. Using all covariates 76.06% of all cases can be classified correctly. This
sufficient goodness of fit allows to interpret each coefficient of the regression.
Three out of the seven analyzed independent variables show a significant influence
on management change. The performance variable measuring the subjective
average performance within the four matches preceding the change shows a
negative coefficient which is highly significant. Teams with a managerial succession
performed worse before changing, in general, than the corresponding teams
experiencing no change in their top position. The two other variables with a
significant influence on managerial succession concern recent fluctuation within the
board and intensity of local media coverage. Both coefficients show a positive
relation to management change: the probability of management change increases
significantly in case a new president of the board has been appointed recently and in
case the whole team is exposed to intensive monitoring by the local press media.
Neither personnel turnover, other characteristics of the dismissed manager (former
success or experience) nor the development of the number of visitors show any
significant effect on managerial succession.
The second issue under investigation is the impact of management turnover on team
performance. This research question is adequately assessed by employing a
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model 1 model 2
2
R 0,179 0,181
2
Adjusted R 0,153 0,129
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Only two of the six variables show significant coefficients. Both the performance of the
prior season and the management change are significant factors determining team
performance. The performance of the prior season is positively related to current
performance, indicating that teams who experienced a poor performance in the previous
season continue to perform badly in the current season and vice versa. In this sense this
coefficient can be interpreted as an indicator of stability. Although this effect is controlled
for, the management change still influences performance negatively. Teams changing
their management during the season perform worse after the change, in general, than
teams who do not change. This negative effect on performance of management change
remains true even with control teams who exhibit a similar poor performance level before
the change.
To assess the effect of different types of succession model 2 in table 2 presents the
results of a multiple regression analysis which introduces the insider/outsider distinction as
another independent variable in order to explain the performance after the change. As
control teams do not experience a management change by definition, data on these
teams can not be used in model 2. Contrary to the negative effect of a management
change in general, the type of successor – coming from inside or outside the organization
– does not influence the performance development following the turnover significantly. The
only important variable is „performance of the prior season” which again determines
current performance. Both performance measures exhibit a positive relationship.
In order to asses whether teams with an insider or outsider successor differ significantly
from no change control teams an analysis of variance is employed. The following table 3
presents the results of this analysis.
It can be seen that there is a general performance difference between control teams,
insider-, and outsider teams. With an F-value of 5.541 this difference is highly
significant. A rather conservative Scheffé-test is used as a post-hoc test to evaluate
which groups differ individually from each other. While there seems to be no
significant difference between teams with an insider succession and control teams
nor between insider and outsider teams, the performance following an outsider
succession is obviously worse than the performance of the control teams. This might
be interpreted as a weak signal that outsider succession is the alternative with the
worst performance consequences.
Conclusion
This analysis provides some important insights into the relationship of performance
and management turnover among sport teams. As for the first research question,
whether performance determines the dismissal of the manager we can conclude that
consistent with expectations past performance constitutes the central determinant of
managerial succession in team sport. Especially the performance development within
the short term in relation to goals set at the beginning of the season seems to
influence the decision to replace the manager. Although performance is a central
variable two other factors – board turnover and media intensity – contribute as well to
an increase of the turnover probability. Managers are more prone to be dismissed in
case the president of the board has recently assumed his position. A new board
president obviously introduces more organizational turbulence in the sense of
reduced commitment to the status quo which together with weakened personal ties
creates a situation of increased instability in other leading positions of the
organization. Managerial succession is additionally enforced by intensive interest of
the local media in the doing of the sport team. In times of poor performance intensive
local media coverage might create substantial pressure on the supervising board to
take appropriate measures in order to improve the performance situation. The
supervising board assumes that a change in the team management helps to improve
the team performance. Consequently the probability of management turnover
increases.
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Although the dismissal of the manager is supposed to improve team performance this
effect does not seem to be supported by the data on the German premier soccer
league presented here. Dysfunctional effects obviously outweigh possible functional
consequences contributing to a deterioration of the performance following the
management change. This negative effect of succession is even true after controlling
for prior performance which shows a positive correlation with current performance.
The results presented here thereby not only support the early notion of Grusky
(1963), that managerial change has negative effects on team performance, but
enforces this result by controlling for several potentially important other intervening
variables. The distinction of different successor types helps additionally to support the
interpretation of increased dysfunctional effects of succession. Teams experiencing
an outsider succession – especially compared to no change teams – realize the
worst performance development following the turnover event. As an outsider can be
expected to have little or no knowledge of the organization nor to have well
developed personal ties to other members of the organization his succession
probably goes along with increased internal turbulence. Outsider succession can
consequently be characterized as mainly dysfunctional.
References
Allen, M. P., Panian, S. K., Lotz, R. E.: Managerial Succession and Organizational
Performance - A Recalcitrant Problem Revisited, in: Administrative Science Quarterly
24 (1979), pp. 167-180.
Audas, R., Dobson, S., Goddard, J.: Team Performance and Managerial Change in
the English Football League, in: Economic Affairs, 17 (1997), pp. 30-36.
Guthrie, J. P., Datta, D. K.: Corporate Strategy, Executive Selection and Firm
Performance, in: Human Resource Management 37, 2 (1998), pp. 101-115.
Abbreviatio Variable
n
mc management change
pag points actual game
ppga points per game achieved
ppgak points per game achieved last k games
ppgi points per game intended
pari points achieved in relation to points
intended
parik points achieved in relation to points
intended last k games
pps performance prior season
vis development of visitors (financial
performance)
board turnover of the president of the board
turno personnel turnover players
media intensity of media coverage
fexp former experience of the incumbent
manager
fsuc former success of the incumbent
manager
ios type of succession (insider/outsider)
i
Since 1995 the German premier soccer league awards a victory with three instead of two points. In order to
make the data comparable we re-coded these results to the former two-point rule.
ii
The assumptions of regression analysis – especially linearity of the problem, no multicollinearity and normal
distribution of residuals – are met by the data presented. Three influential outliers were eliminated before
starting regression analysis.