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Introduction
The article by Michael Beer and Nitin Nohria covers the complexities of the change process in businesses experiencing a downfall. Analyzing different types of corporate change, they identified two distinctive pure forms: theory E (economic) and theory O (organizational). Although the overwhelming majority of corporate change combines elements of both theories, a theoretical discussion of this distinction has helped formulate the proper ways of applying them. The major thesis of the article is that if a company wants to adapt and survive, the pure implementation of E or A is not enough, a CEO must formulate a cohesive policy to include them both. In this paper, the comprehensive summary of the article will be followed by a personal analysis of the authors argument.
Definition of Key Terms
Theory E is built around a hierarchical approach of imposing economic incentives and restructuring from above. The basic principle is that the CEO considers only the interests of shareholders who want to increase the value of their assets (Beer & Nohria, 2000). For example, decisions may be aimed at reducing the number of employees, liquidating branches, or leaving least profitable regions. It is clear that ordinary employees are often extremely dissatisfied with such a predatory management policy. On the other hand, Theory O is based on a softer approach regarding the development of corporate culture and listening to the employees opinions (Beer & Nohria, 2000). These two theories are inherently contradictory: harsh economic measures almost always cause rejection and suspicion of attitudes among workers, which puts an end to building an adequate corporate culture. Therefore, the authors main task was to create an optimal solution to this problem.
Possible Solutions
Sequential Implementation
One obvious way to overcome the contradiction between E and O is the sequential implementation of both approaches. Beer and Nohria (2000) emphasize that the only feasible solution is economic change followed by an organizational adjustment. The reason is that in the opposite way, the warming and calm corporate culture will be destroyed by layoffs. The handbook example of a sequential path is General Electric, which began by closing unprofitable subordinate enterprises, and after redundancy was eliminated, it embarked on organizational initiatives. However, the greatest problem related to sequencing is that it may take a very long time to finally restructure. Thus, the fierce competition demands to move faster and more efficiently.
Simultaneous Approach
One of the allegedly beneficial ways of restructuring is to engage employees in an E-type of reorganization. Beer and Nohria (2000) summarized this principle as set directions from the top and engaged people below (p. 560). In addition, using examples of ASDA, the UK grocery chain, the authors showed why it might be useful to eliminate hierarchies and put forward a more egalitarian style (Beer & Nohria, 2000). By doing that, the bottom part of the company stays almost intact, while the top levels of the hierarchy are imposed to economic scrutiny. Finally, a leader should have a transformational style of leadership in order to encourage employees to learn and develop. In such an environment, employees will be able to express their uniqueness by offering innovative ideas for change or expansion.
Conclusion
To sum up, the article is useful for experts in corporate management because it shows innovative ways of conducting corporate change. The authors filled the gap of uncertainty about the usefulness of the O and E combination, their article seems relevant even after 22 years. However, in the era of technologies and the Internet, the sequential implementation may not be long in time. Thus, further studies may discuss in more detail how the sequential strategy of corporate change has evolved since 2000.
Reference
Beer, M., & Nohria, N. (2000). Cracking the code of change. Harvard Business Review. Web.
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