Theory E and Theory O

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What are Theory E and Theory O? Meaning.

Theory E and Theory O are two different approaches to deal with organizational change. According to M. Beer and N. Nohria they should be combined.

In their article "Cracking the Code of Change" (Harvard Business Review, May-June 2000: 133-141), the authors describe two theories:

• Theory E: Theory E change strategies are aimed at realizing Economic value. Hence the E. In this “Hard” approach to change, Shareholder Value is the only legitimate concern. Change usually involves heavy use of economic incentives, drastic layoffs, Downsizing, and Restructuring.

• Theory O: Theory O change strategies are aimed at improving the Organization. Hence the O. Managers using Theory O believe if they focus exclusively on the price of their stock, they might harm their organizations. In this “Soft” approach to change, the goal is to develop Corporate Culture and human capability through individual and Organizational Learning. This theory is the process of changing, obtaining feedback, reflecting, and making further changes. Companies that follow this approach have a strong, long-held, commitment-based psychological contract with their employees.

The key differences between Theory E and Theory O are:
 

Instead of using only one theory or sequencing both theories, a company should implement both Theory E and Theory O at the same time. The simultaneous use of both theories is more likely to be the source of Sustainable Competitive Advantage. The company should explicitly confront the tension between E and O goals and embrace the paradox between the two theories. This should become a balancing act between initiating actions that follow one theory and then contradict that theory.

The company should be lead by a leader at the top who clearly sets and organizes company changes. At the same time, this leader should listen and look for input from the lower levels of the company by shifting power from the company’s headquarters to where the company does business.

Forum Forum about Theory E and Theory O. Below you can ask a question about this topic, share your experiences, report a new development, or explain something. Start a new topic about Theory E and Theory O Share your knowledge here (or ask a question)   🔥 NEW Theory E in Extreme Hurts the Human Capital In a mid-sized organization (450 employees) where I worked earlier for 7 years, the management staff are "penny pinchers" especially in building human capital. The staff turnover is about 40% per annu... 4   1 comments Examples of Current Theory E Companies Who can suggest companies that still practice Theory E in today's economy? How do they do it?... 4

Expert Tips Advanced insights about Theory E and Theory O. Here you will find professional advices by experts. The Relationship between Organizational Learning and Performance Tensions and Remedies In a paper by Sara J. Singer and Amy C. Edmondson of HBS, the complexities of the relationship between learning and perf... How to Measure Intangible Assets? Measuring Intangible Assets, Best Practices, Intangible Assets Indicators Karl-Erik Sveiby suggests following indicators to measure intangible assets with the help of the IAM: 1. EXTERNAL STRUC... Measuring the Immeasurable: Finding the Value of Intangibles Measuring Intangible Assets, Best Practices, Intangible Assets Indicators In his book "How to Measure Anything: Finding the Value of Intangibles in Business", Douglas W. Hubbard argues that what...

Information Sources Various sources of information regarding Theory E and Theory O. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops. Theory E and O Holding Hands Combined Economic and Organizational Strategy Picture from Beer and Nohria in which Theory O and E are joined. Note that the O really likes the 'marriage', while the ...

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