Changing Software Development: Learning to Become Agile

8.5. Theories E and O of Change

Theories of change abound: not content with offering one theory, the academics Beer and Nohria actually suggest two.^[] Rather than claiming supremacy for one theory or another, these writers identify two broad categories of change, one rooted in economics and one in organizational capabilities:

^[] See Beer and Nohria (2000)

• Theory E, the economic approach: This is a hard approach to change that emphasizes economic value and shareholder value. This type of change encompasses corporate restructuring, worker lay-offs, mergers, acquisitions and divestments.

• Theory O, the organizational approach: This is a softer, slower, approach to change that focuses on building organization and personnel capabilities. This type of change encompasses team and personal development.

Broadly speaking, theory E corresponds to the discussion on radical change in Chapter 7, while theory O corresponds to the incremental change model outlined and running throughout this book. On the face of it, it appears that theory E can result in quick returns, while using O is a slow, gradual process that builds over time.

Managers who alternate between applying theories E and O will confuse employees, because there are conflicts between the two theories. Employees may not trust managers who talk about developing people but then lay off workers. Alternatively, managers who don't lay workers off when necessary may cause more damage to the company by delaying necessary decisions.

Both theories ...