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Change according to the current business arena has been embraced in various ways; because failure to embrace it is tantamount to ‘death’ in the company’s future survival. These theories of change that are being used include Theory E and Theory O. Theory E is termed as the ‘hard’ approach to change due to the strategies such as downsizing, layoffs, restructuring, and economic incentives that are often used. On the other hand theory, O is the ‘soft’ approach as it depends on organizational capabilities. Theory E aims at developing corporate culture and human capabilities through organizational learning. These strategies appeal to every CEO but not to the employees homogeneously. This has been a result of the inability of managers to faithfully utilize one strategy to the success of the organization. Instead, most companies have attempted to use a mix of the two and because the theories vary in many ways, they have ended up unsuccessful at most times. But on a rather inspiring note, all the managers that have successfully used the mix of both approaches to change have been assured of profitability and high productivity.
According to Hart (12) and Beer & Nohria (133), the two theories of change can be compared on a platform of various dimensions, including goals, leadership, use of consultants, processes, focus, and reward systems. The focus strategies of theory E ensures shareholder returns increase through downsizing, restructuring, and closing down of subsidiaries that are not performing. On the contrary, theory E ensures that the employee, unions, and managerial behaviors are up to the required standard. Concerning leadership aspects, the E theorist focuses on the ultimate goal of the shareholder without considering the opinion of the subordinates and low-level employees. However, as for theory O, participation geared towards change and employee commitment should be ultimate.
Outsourcing to corporate functions is characteristic of Theory E, while company culture, behavior, and employee attitudes are cultivated by Theory O believers. Employees in Theory E are expected to adhere to stipulated procedures and blueprints while responsibility and accountability is the practice for Theory O. The reward system being primarily financial for theory E, the compensation ought to be linked to the stockholders’ interests in Theory O. To ensure that they do not attach compensation to goals, a universally beneficial package for different levels can be created. Finally, consultants being the last dimension of change resulted in a lot of outsourcing for theory E. This was contrary to theory E where consultants analyzed problems and shaped solutions whenever the need arose; rarely did the managers depend on consultancy service, (Beer & Nohria, 134-135).
Despite the successful adoption of the aspects of change, disadvantages universally impact these strategies. Most are the times when the rush to adopt change strategies negatively impacts the other sectors of the manager’s responsibilities. For example, a drastic increase in profits without well-established foundations for competitive advantage is a strength for competitors. O theorists’ long-term commitment to their employees warns them from taking rash unplanned actions.
For any company whose aim is to adapt and succeed in the future, the combination of both strategies is supreme. However, precaution ought to be taken because the theories can both result in their worst. Sequencing allows the combining of the two theories of change. Theory E begins with strategies of restructuring, downsizing, and layoffs taking center stage. Upon successful implementation of the strategies, O strategies come into the equation. Thus, employee participation is welcome through open communication and the bureaucracy is dealt with. As a point of precaution, the sequencing formula seems feasible only when Theory E begins. The sequencing as illustrated ought to be improved in certain areas to ensure the combination of the two theories results in sustainable competitive advantage. The mix gives a competitive edge when used wisely with utmost care.
The leader should begin by declaring his desire to use both O and E strategies then ensure that securing shareholder value and developed a common-ideas culture is principal. New ideas like ‘every day low prices’ and delegation of authority should be welcome. On another level, there is a need to focus on the hard and soft sides of the organization through structural changes and the breakdown of hierarchy. Another aspect that caters for employee performance includes training programs and other change programs. As a matter of contention financial incentives should not drive change but instead, should reinforce it. Not only should executives get paid when they meet financial targets, but also when they perform exceptionally. Therefore, incentive packages should be varied in nature so that both employees and managers alike perform knowing that apart from being paid a salary, a motivational package awaits, (Beer & Nohria, 138-141).
According to Hart, (45), the use of consultants ought to aid managers to understand and be innovative rather than act spontaneously from readily-set procedures. The position and responsibilities of managers should never be affected by the presence of consultants and on the contrary, consultants should aid improve the leadership skills of managers. In my personal view, companies that opt for the mix of the two theories should first be looked into the costs of the theories at their different levels. Otherwise, the synergy from the mix can easily bring down a company that would have survived such costs had it initially opted for either theory.
References
Beer, M. and N. Nohria. Cracking the code of change. Published by Harvard Business Review: pg. 133-141. (2000).
Hart, C. Master of Accountancy Program. Published by University of South Florida: pg. 12-45. (2003).
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