Cracking the Code of Change

Written by
Nitin Nohria & Michael Beer
Submitted by Group 8

Theory E and Theory O

Theory E Economic Value

Focus on shareholder returns Financial markets push the corporate boards for
rapid turnarounds
Boosts returns through economic incentives, drastic lay-offs and restructuring
General Dynamics in 1991 reduced workforce by 71,000 through diversification
and attrition by focusing only on economic value
AI Dunlap tripled shareholder value to $9 Billion using this approach, but failed to
build the capabilities needed for sustainable competitive advantage commitment,
coordination, communication and creativity

Theory O - Organizational Capability

Focuses on developing corporate culture employee behaviors, attitudes, capabilities
and commitment
Patiently building trust and emotional commitment to the company through teamwork and
communication
Champion Intl used this approach to achieve complete cultural transformation that
increased in productivity and employee commitment

Limitations of Theory E
CEOs distance themselves from their employees to ease down their pain
and guilt.
CEOs become less inclined to adopt O-style change strategies.
CEOs fail to invest in building the companys human resource.

Limitations of Theory O
CEOs are not able to take tough decisions because of their soft
strategies.
CEOs try to postpone the hard decisions in the hope of rising productivity
will improve the business situation.

Combining Theory E and Theory O

The Need for a Corporate Global Mind-Set

Written by
Thomas M. Begley & David P. Boyd
Submitted by Group 9

Global Consistency vs.

Local Responsiveness

GLOBAL
CONSISTENCY

High

Maximize
Maximize worldworldscale
scale systems
systems

Balance
Balance global
global
with
with local
local
concerns
concerns

Export
Export
domestically
domestically
produced
produced
products
products

Encourage
Encourage local
local
autonomy
autonomy

Low

Global mindset: Ability to develop,

interpret & implement criteria for business
performance that are not dependent on
the assumptions of a single country,
culture or context

Companies that short change global

reach lose opportunities to maximize
efficiencies and consolidate costs;
Low

LOCAL
RESPONSIVENESS

High

Companies that shortchange local

responsiveness endanger market
share and alienate employees.
Eg.- Marketing : local tastes
Finances : globally unified approach

FORCES FOR GLOBAL

CONSISTENCY

High

Low

dependence
dependence on
on global
global
systems.
systems.
-- Standardized
Standardized process
process
maximize
global
uniformity.
maximize global uniformity.
-- Unilateral
Unilateral decision
decision push
push
global
adherence.
global adherence.

-- Formal
Formal guidelines
guidelines support
support
interdependence
interdependence of
of global
global and
and
local
local units.
units.
-- Custom
Custom components
components around
around aa
standard
core
balance
global
standard core balance global with
with
local
local processes.
processes.
-- Participation
Participation builds
builds global-local
global-local
consensus.
consensus.

-- A
A global
global structure
structure does
does not
not

-- Informal
Informal guidelines
guidelines protect
protect

-- Formal
Formal rules
rules legislate
legislate

exist.
exist.
-- Global
Global processes
processes do
do not
not
exist.
exist.
-- A
A global
global power
power orientation
orientation
does
not
exist
does not exist..

Low

independence
independence of
of localized
localized
adaptations.
adaptations.
-- Customized
Customized process
process
accommodate
accommodate country-specific
country-specific
conditions.
conditions.
-- Delegation
Delegation encourages
encourages local
local
autonomy.
autonomy.

FORCES FOR LOCAL

RESPONSIVENESS

High

The Three Tensions of

a Global Business

Structure Tension: Mix of rules vs

guidelines.
Process Tension: Blend of uniformity and
uniqueness.
Power Tension: Locus of power in the
exercise of worldwide decision making.
Within Policy Consistency: Consistency
across the grid is desirable.
Eg.- HPs insurance coverage policies.

Between Policy Consistency: Fitment with

other company policies.
Eg.- Compaqs acquisition of Digital
Equipment and Tandem.
Policies Consistency with Values:
Alignment with the corporate values.
Eg.- Texas Instruments -> from Defense to
high-technology products market.

Thank you!