The Broad vs. the Pointed Brush: Status Change, Stigma and Blame Following Fast Organizational Failure

This paper explores labor market mechanisms of intra-professional status change following fast organizational failure. We undertake a case study of a collapsed high-profile bunker oil company, selected on account of its failure’s scale, speed, and organizational and geographical heterogeneity. Using unique hand-collected qualitative and quantitative data, we examine the careers of the organization’s displaced employees. At odds with extant theory on stigma, we do not find any general status loss. We explain this by the fast decline and aftermath after bankruptcy of this particular organization, allowing insufficient time for a stigmatization mechanism. We find that displaced employees most prone to status loss are those having worked organizationally and geographically proximately to the locus of the organization’s failure. We suggest that in lieu of stigma, status change is driven by a mechanism of blame, i.e. perceived culpability of those displaced employees with comparatively strong association to organizational failure. Comparing this new theoretical notion with the extant notion of stigma, we suggest that while both are mechanisms compensating for imperfect information, stigma entails weaker association to failure and hence "taints with a broader brush" compared to blame’s "pointed brush".