Cracking the Code of Change by Beer & Nohria - Article Example

Running Header: Critique of the article ‘Cracking the Code’ Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission Critique of the article ‘Cracking the Code’ ‘Cracking the code of change’ is an article written with focus on the changes that happen in the business world. The entry of new economy has not only brought in immense business opportunities but also great turmoil. For an organization, change is inevitable and it must keep up with change or it risks dying. Most companies find it very hard to keep up with change and the few that are able to, find it very hard to manage the process well. This is due to the complex nature of change in the corporate world. This article focuses on two theories of change: theory E and O. In Theory E economic value forms the basis of change. For Theory O change is based on the firms’ capability. The two models are valid and each management tries to use theory so as to attain its goals. But each theory bears it own costs. The two authors are re-known scholars. Michael Banner has studied civil engineering in the University of Technology, Dresden. His main studies are in the construction together with structural engineering. Since the year 1996, he has been a professor in the University of Technology, Dresden for structural analysis. On the other hand, Nohria chairs the Organizational Behavior Unit, at the Harvard Business School. He is also a professor at Harvard Business School. He is the professor of Richard P. Chapman. The article they co-author is intended for the individual use by the permitted patrons in the Harvard institution. According to the authors most of the changes initiated by the organization often fail. The main reason for these failures is due to the haste by which organization undertake to change their organizations. The managers therefore end up losing focus on their efforts of introducing change in their organization because they are bombarded with information both in print and online as to why and how their companies should adopt change. This results to a devastating effect, both to the human and economic aspect of the business. In order to avoid this kind of scenario the managers should take the initiative of understanding the nature of corporate change in a much better way. Cracking the code of change is therefore imperative to the leaders’ (Beer & Nohria 2000). In the course of studying the whole idea of corporate change, two theories of change emerge. These are based on the usually common unconscious assumptions that the senior managers have about how and why the changes are to be executed. The first Theory E sates that change is based on the economic value. For the second Theory O, Organization capability forms the basis of change. Both models are legitimate and they realize some of the management’s goals although they have their own costs. Theory E strategies are very radical therefore attracting all the attention. This is because they exhibit a very “hard” approach to institute change. In this theory the increase in the shareholders values is used to measures the success of change. In this theory the strategies used usually employs heavy use of drastic layoff s, downsizing, economic incentives, and restructuring. On the other hand the managers who are aligned to the Theory O believe that the focus on the price of the stock alone might end up harming their organization in the long run. Therefore they focus on building a sustaining corporate culture together with human culpability. This is done through individual together with organization learning. Beer, Eisenstat & Spector, 2001, further adds that the Theory O can be strengthened by empowering managers’ together with the employees as to implement change. Most of the companies employ a mix of the two theories. The most common mistake made when applying the two theories in tandem is the inability to resolve the inherent tensions that exist between them. The difference in their nature makes them hard to simultaneously manage them. The leaders who alternate between fierce corporate behavior and nurturing of the employees create distrust between them and their employees. A research carried out by the two authors suggests that there indeed exists ways in which the tensions can be resolved. This will enable the firms to achieve shareholders satisfaction and at the same time build viable institutions. The firm’s ability to successfully combine the two approaches can help it to attain big payoff in terms of both profitability and productivity. This enables them to attain a competitive advantage which is sustainable. An investigation of two companies with similar business but adopted different theories of change have been used by the authors’ to compare the theories of change. The two were paper companies. One of them, the CEO of Scott paper, used the Theory E and managed to treble the shareholders returns. He however failed to build the capabilities that are required for a competitive advantage which is sustainable which includes commitment, communication, coordination and creativity. For Champion Paper who adopted the Theory O, their shareholders were concerned that they had witnessed not witnessed any rise in the company’s economic value for close to a decade. The comparing of the two initiatives adopted by the companies helped to discover the limitations of sticking to only one theory of change. The contradictions that arise can be eliminated by sequencing the both theories. This can more likely lead to a competitive advantage which is sustainable (Beer & Nohria 2000). According to Michael Beer together with his Harvard Colleagues’ the genesis of this competitive advantage are coordination, competence and commitment. However because of the fact that people continuously change jobs all these can easily be undermined (Cable, 2000). Changing of workers frequently makes it hard for company to sustain a corporate culture. This due to the fact the new workers come with new values from their previous work places and they can take a long time to adopt the new companies’ culture. Loosing of staff for the company is a result of poor pay, unfavorable working conditions among others. The frequent loss of staff can make it hard for the manager of an organization to sustain a competitive advantage for the company. The authors believe that change in business has been of two divide: either very hastily coming up with an economic value for the company or slowly using the bottom up approach to institute change in the company. The bottom up approach can only be instituted to a company when the employees are willing (Hirschhorn, 2002).The latter involves a long time development of an open and trusting corporate culture. This is usually incorporated into the company slowly and can take over a period of time stretching over years. Therefore a lot of patience is required before the results can be realized by the company. The right kind of management is also required for the company. This is because for the successful adoption of the policies being followed by the company the leaders must lead by example. The two authors have to a large extent done justice in trying to make the readers understand the essence of why the managers must be able to understand how change can successfully be executed by the business leaders. Their explanation of the two theories makes the understanding of the concept simple. The use of the two companies to compare the use of the two theories has made the article to be more comprehensible. This comparing helps the reader to know the differences that are exhibited by the application of the two theories by the management. I also agree with the suggestions that they have offered in the management of the contradictions that arises with the use of the two models. They have shown that new research indicates that the combination of the “hard” together with the “soft” approaches has the potential of radically transforming how the business changes (Beer & Nohria 2000). In conclusion, the corporate world is very dynamic. This has been due to the advancing technology which changes the nature of doing business. Most corporations have been forced to adapt to new changes or risk dying. Therefore the managers have to get the act of change right in such a way that the companies are not harmed in any way. The process of adapting to this change for a company can take a more radical form by aiming to create an economic value for the shareholders. A more conservative way is by trying to build a bottom up approach by creating a corporate culture. Most of the companies apply a mix of the two approaches. This integration provides major payoff for the company. The application of the two appraoaches by the management has to be done in the right way so as to achieve maximum results. References Beer, M. & Nohria, N. 2000. Cracking the Code of Change. Harvard Business Review. 74(8), 133-141 Beer, M., Eisenstat, A. & Spector, B, 2001, Why Change Programs Don’t produce Change. Harvard Business Review. 9(7): 65-76 Cable, V. 2000. 3-D competition, Demos Quarterly. 8(6): 26-32 Hirschhorn, L. 2002. Campaigning for Change. Harvard Business Review. 20(7): 107-133 Read More