Exploring the critical incident technique to inform distress causality and sensemaking

Abstract

Orientation: Before a business in distress can be turned around, it requires the accurate identification of the distress causality. Recognition and sensemaking of distress remains a significant factor to inform actions.

Research purpose: This study investigated and explored the application of the critical incident technique (CIT) to inform venture distress causality for sensemaking.

Motivation of the study: Often decision makers are faced with causal ambiguity and rationalism when attributing distress causality. Critical incident technique method has been extensively applied in health sciences as a diagnostic decision-making process to investigate causality. This study applied CIT method as a diagnostic tool to inform causality and origin of business venture distress.

Research design, approach and method: A qualitative study was conducted with a total of 25 participants who included business rescue practitioners (BRPs), creditors and managers. The data were collected through both semi-structured interviews and a card sorting activity. Thematic analysis indicated the core incidents.

Main findings: The application of CIT method in causal attribution revealed a range of causes, distress origin and severity indicators of distressed ventures and the force that impels and propels management to act when faced with distress situations.

Practical/managerial implications: Understanding distress causality and its associated origin is the first step for a successful turnaround. Management always faces challenges, critical incidents and crises that they fail to understand. Critical incident technique method may assist decision making.

Contribution/value-adds: The study introduces CIT method to venture distress context, offering valuable insights into how decision makers can successfully attribute distress causality.