Ouchi proposed Theory Z – a hybrid model that blends elements of successful Japanese managerial practice with an assessment of US workers’ needs.
It focuses heavily on a humanistic’ philosophy, teamwork and consensus decisions. This theory is rooted in the idea that employees who are involved in and committed to an organization will be motivated to increase productivity.
Based on the Japanese approach to management and motivation, Theory Z managers provide rewards such as long term employment, promotion from within, participatory management and other techniques to motivate employees.
Learn about Ouchi’s Theory Z of Motivation
Theory Z of Motivation – Essential Points and Special Features
Ouchi has come into limelight because of the recent development in Japanese Productivity Technique which the USA was eager to understand in order to adopt a better industrial productivity formula to compete in the global market.
Ouchi followed the principles laid down by Mc Gregor and the Japanese management principles and named his theory as ‘Z’ theory in 1981 to boost the American Management Productivity Programme. The theory, in fact, is a combination of productive principles of Japanese Management and ‘Y’ theory on the basis of human resource perspective.
The theory denotes the following points:
1. Organisation provides importance to long-term employment.
2. Consensus decision making process.
3. Proper accountability of work and responsibility of an individual.
4. Evaluation of performance to be proper and consistent with promotion.
5. Career prospects to be moderate and in specialised field.
1. Organisation Provides Importance to Long-Term Employment:
Japanese concept of long- term employment has been taken in ‘Z’ theory by Ouchi. This system provides certain categories of staff with employment that lasts throughout their working life. In this, an employee has the privilege to work regularly in the establishment till the age of retirement.
This also provides professional training to the employees and facilities like housing, education etc. This system can inculcate a sense of identification in the employees and they become sincerely committed to the work ethos of the enterprise.
2. Consensus Decision Making Process:
In Japanese management the collective responsibility of employees in an organisation is considered. This system leads to consensus decision making. Therefore, the decision making process is participative based on consensus of opinion. This method allows circulation of information and helps arrive at a general opinion on a particular issue.
The collective decision making is known as ‘RINGI’ (in Japanese). In this an employee at a lower level makes a proposal on a particular subject and conveys it to his superior in the normal course of his routine work, when asked for. If the matter is of a very important nature, the superior makes his remarks/recommendations on the subject and passes it on to the next higher level officer, till it reaches the Chief Executive of the organisation.
Whenever such a proposal is being put up, there are certain formalities to be accomplished by the individual forwarding. The proposal needs to be scrutinised meticulously and suggestion/opinion of the expert on the subject sought before it is passed on to the top management.
Most of the developed countries like the USA, the UK, etc., follow the method of management (top executives) making a decision and passing it on to the lower level for implementation. Ouchi’s ‘Z’ theory explains the consensus of decision making, when originated from a lower level and has more efficacy. This is accepted by all in an organisation.
3. Proper Accountability of Work and Responsibility of Individual:
In Japanese Management, there is an inherent feeling cultivated amongst employees to work cooperatively and the workers are responsible to the job and work ethos. Rivalry and competition among the workers are strictly prohibited. Japan has been successful to a large extent, in eliminating the inadequacies amongst the workers’ needs.
Their hallmark in the industry is harmony, cooperation and consensus. With this atmosphere of industrial setting, employees automatically become responsible, work conscious and thus lead to result-oriented teams.
4. Evaluation of Performance to be Proper and Consistent with Promotion:
Evaluation of performance has to be slow and consistent in all respects. Understanding the performance of an individual and his capacity do warrant observation for a long time. This system can bring out an individual’s maturity and experience. Therefore, the seniority and merit have to be considered while assessing the performance.
If this aspect is ignored, there will be resentment and unhealthy competition amongst workers. If the evaluation is carried out in a hurried manner, it will become subjective. Japanese conduct an objective performance appraisal to understand the merit of an individual for promotion and increment of salary.
5. Career Prospects to be Moderate and in Specialised Field:
To have a moderately specialised career, an employee needs to be trained in different job methods so as to enable him to adapt any work condition. This will make him confident and flexible to carry out the job along with co-workers. An employee has to be given exposure according to his ability and adaptability to various jobs. Job rotation is an essential aspect in training. Therefore, adaptation of new technology becomes an easy one in Japanese management.
In the recent past, ‘Z’ theory management has been introduced at various major corporations in USA, to improve productivity. There have been satisfactory results.
Special Features of ‘Z’ Theory:
1. Trusteeship between Employer and Employee:
This is necessary in any cooperative effort. Management being a joint effort of employer and employee, the faith and trust in each other is very vital to avoid conflict and to usher cooperation and harmony.
2. Possessiveness between Employees and Organisation:
Possessiveness is the outcome of feelings that the organisation understands the value of the worker. He is the most important factor in the production and also leads the organisation to prosperity. He also has an equal right in all the aspects of organisational growth and he is always proud of his organisation. He feels that he is a part and parcel of the organisation. This feeling can foster goodwill and harmony beneficial to both.
3. Self-Direction and Self-Control:
Management control and fear of punishment are not the only solution for achieving organisational objectives. A committed worker will always have self-direction and self-control for his performance.
4. Try to Learn and Shoulder Responsibility:
An average human being under proper conditions tries to learn about his responsibilities and also to shoulder them. There are certain inherent human characteristics like shirking responsibility and having a feeling of insecurity, which need to be cured.
5. Encouraging Human Creativity and Imagination:
Creative thinking and proper imagination can help solve many problems. This quality is commonly seen among people. This requires encouragement. If creative thinking is rightly directed, it can bring innovations and constructive changes in the organisation.
6. Direction of Physical and Mental Efforts:
A normal human being likes to work. Individual considers the work for his satisfaction, both mental and physical. Work should not be a source of dissatisfaction and punishment.
7. Reward Commensurate with Achievement:
An individual’s efforts directed towards organisational objectives with wholehearted commitment can be the source of objective and subjective satisfaction. He will have a mental satisfaction and a complacency that organisational goal and thus, satisfying his ego and self-actualisation needs.
8. Utilisation of Intellectual Potentials:
Advantage of intellectual potential is utilised only partially of the employed personnel in an organisation. Usually the organisational interests and the individual interests may reach conflicting situation due to vested interests of the management. It warrants a cooperative effort both from employees and management.
This will bring maximum output with minimum managerial control and direction. When the job is executed in a congenial atmosphere, the interests of the organisation and those of the employees are fulfilled by proper utilisation of intellectual potentials of the people.
Z Theory of Motivation – Positive and Negative Points along with Some Distinguishing Features
Ouchi proposed Theory Z – a hybrid model that blends elements of successful Japanese managerial practice with an assessment of US workers’ needs. It focuses heavily on a humanistic’ philosophy, teamwork and consensus decisions.
The distinguishing features of Theory Z companies are:
i. Long-term employment;
ii. Non-specialised careers;
iii. Individual responsibility;
iv. Concern for the total person;
v. Control systems are less formal;
vi. Consensus decision-making; and
vii. Slower rates of promotion.
It is believed that Theory Z companies develop close, cooperative, trusting relationships among workers, managers and other groups.
Theory Z emphasizes that industrial teams are created within a stable work environment. This match enables the employee to satisfy his needs for affiliation, independence and control. Further, it contributes for the organisation’s needs of high quality and high productivity.
Maruti Udyog Limited in India, Toyota, Honda and Nissan are the best examples for the practices and outcome of Theory Z. These organisations’ levels of quality and productivity have been quite higher than those of their competitors in the respective countries. In fact, the rate of absenteeism and number of grievances in these companies are very low compared to those in similar organisations.
Positive Points of Theory Z:
The positive points of theory Z are:
i. Theory Z companies have made a commendable attempt to adapt Japanese ideas into their organisations.
ii. This theory is based on shared concern for multiple employee needs.
iii. Theory Z suggests strong bondage between organisation and its employees.
iv. Employee involvement is a prominent factor in this theory.
v. Theory Z encourages the practice of informal organisation.
vi. This theory encourages automatic coordination among employees.
Negative Points of Theory Z:
Theory Z is not free from criticism due to the following drawbacks:
i. It is criticised that this theory is not new. It is an extension of earlier theories which failed to receive popularity;
ii. It is also criticized that the research supporting this theory is limited;
iii. The other criticism is that this theory fails to provide useful criteria for helping managers regarding the correct time to use this theory;
iv. The volatile firms in the software industry, information technology and other high technology industries cannot provide life time employment; and
v. Slow rates of promotions frustrate employees.
Despite these limitations or criticisms, Theory Z helps managers in managing human resources efficiently and balancing human behaviour with the organisational environment.
Z Theory of Motivation – Concept, Differences, Characteristics and Implementation
Concept:
Theory Z was first identified as a unique management approach by William Ouchi. Ouchi contrasted American types of organizations (Type A) that were rooted in the United States’ tradition of individualism with Japanese organizations (Type J) that drew upon the Japanese heritage of collectivism. He argued that an emerging management philosophy, which came to be called Theory Z, would allow organizations to enjoy many of the advantages of both systems. Ouchi presented his ideas fully in the 1981 book, Theory Z – How American Companies Can Meet the Japanese Challenge.
According to Professor Ouchi, Theory Z organizations exhibit a strong, homogeneous set of cultural values that are similar to clan cultures. The clan culture is characterized by homogeneity of values, beliefs, and objectives. Clan cultures emphasize complete socialization of members to achieve congruence of individual and group goals.
Although Theory Z organizations exhibit characteristics of clan cultures, they retain some elements of bureaucratic hierarchies, such as formal authority relationships, performance evaluation, and some work specialization. Proponents of Theory Z suggest that the common cultural values should promote greater organizational commitment among employees.
Theory Z has been adapted and modified for use in a number of U.S. companies. One adaptation involves workers in decisions through quality circles. Quality circles (also called quality-assurance teams) are small, usually having 5 to 8 members who discuss ways to reduce waste, eliminate problems, and improve quality, communication, and work satisfaction. Such quality teams are a common technique for harnessing the knowledge and creativity of hourly employees to solve problems in companies.
Differences between American and Japanese Management Practices:
William Ouchi proposed the concept of theory Z organizations. The concept was developed in his efforts to understand the best practices of Japanese management which can be used in companies of USA. He identified the differences between American and Japanese organizations in some aspects.
American Organizations:
i. Short-term employment
ii. Individual decision making
iii. Individual responsibility
iv. Rapid evaluation & promotion
v. Explicit control mechanisms
vi. Specialized career paths
vii. Segmented concern for employee as an employee.
Japanese Organizations:
i. Lifetime employment
ii. Collective decision making
iii. Collective responsibility
iv. Slow evaluation & promotion
v. Implicit control mechanisms
vi. Non-specialized career paths
vii. Holistic concern for employee as a person.
Characteristics of the Theory Z organizations:
i. Long-term employment and job security
ii. Collective responsibility
iii. Implicit, informal control with explicit, formalized measures
iv. Collective decision-making
v. Slow evaluation and promotion
vi. Moderately specialized careers
vii. Concern for a total person, including their family.
Implementation of Theory Z in Organizations:
Ouchi proposed 12 strategies or steps to implement Z theory in organizations or to transform a typical American company, named as type A company to type Z company –
1. In order for Theory Z to work, skeptics have to be allowed to exist. These people, who think this would not work, should not be discouraged. By involving these skeptics companies begin to form a space of trust.
2. The second strategy, the company should audit its philosophy. Here the company will try to figure out a way that suggests how the company is behaving with its employee and vice versa. Companies are going to have to find out where the company “is”, not where it should be.
3. The third strategy is management must be able to define desired philosophy and be able to involve company leaders. Here management cannot be intimidated by company leaders and the company leader must be willing to hear everything the manager has to say. Company leaders should not discourage his manager from speaking, because when he is intimidated the manager tends to hold back more information.
4. The fourth strategy is the company will have to create both a structure and incentive in the company. Create a place that whenever somebody is struggling, they can feel assured that his team will pick him up.
5. The fifth strategy is the company will have to develop some interpersonal skills. Here management is going to want everyone to improve on their communication skills. They need to encourage managers to listen more and know when to interrupt.
6. The sixth strategy is the company must be able to test themselves and the system. While implementing Theory Z management is going to begin to question their ability to manage.
7. The seventh strategy is to stabilize employment. To stabilize employment companies are going to have to challenge every employee, and be able to give him variation of job to do within the company. Here, when a company is doing badly they do not encourage management to lay off people, but rather reduce their hours. This in return gives companies a low turnover rate that results in less waste in training new people.
8. The eighth strategy is how to design a system of slow evaluation and promotion.
9. The ninth strategy is to broaden the people’s career paths. In order to retain employees within the organization, let them experience every aspect and every department in the company. When everyone knows what every department is doing, it makes it much easier for the company to pass important information within departments.
10. The tenth strategy is how to get this theory Z working into the lower level. In order for you to implement Theory Z at the lower level you have to start from the top. The change must occur with top management and professional employees, before you try to change lower level employees. People who are lower level employee are not going to follow a method that top management does not follow.
11. The eleventh strategy is to find areas where employee participation is allowed in decision making. The way you gain lower level trust is through participation in company’s decision making, and give them rewards for their accomplishments. You need to encourage employees to speak and let them know that the company wants the employees to work as a team and not as individuals.
12. The final thing is to create a sense of family between everyone.
This theory is rooted in the idea that employees who are involved in and committed to an organization will be motivated to increase productivity. Based on the Japanese approach to management and motivation, Theory Z managers provide rewards such as long term employment, promotion from within, participatory management and other techniques to motivate employees.
This theory assumes that hiring exceptionally great people means that they should be allowed to grow professionally within the company. Theory Z eschews the hiring of specialists; it prefers to have loyal generalists who wish to learn every business function inside out. Workers should be cross-trained, rotated, rewarded, given freedom, and empowered to the point that their job becomes one of the most meaningful aspects of their lives. Under this theory, managers are on the same level as the rest of the employees, and auspicious decisions are made by the entire staff.
One of the most important tenets of this theory is that management must have a high degree of confidence in its workers in order for this type of participative management to work. While this theory assumes that workers will be participating in the decisions of the company to a great degree, the employees must be very knowledgeable about the various issues of the company, as well as possessing the competence to make those decisions. The management sometimes has a tendency to underestimate the ability of the workers to effectively contribute to the decision making process.
Theory Z stresses the need for enabling the workers to become generalists, rather than specialists, and to increase their knowledge of the company and its processes through job rotations and continual training. In fact, promotions tend to be slower in this type of setting, as workers are given a much longer opportunity to receive training and more time to learn the intricacies of the company’s operations.
The desire, under this theory, is to develop a work force, which has more of a loyalty towards staying with the company for an entire career, and be more permanent than in other types of settings. It is expected that once an employee does rise to a position of high level management, they will know a great deal more about the company and how it operates, and will be able to use Theory Z management theories effectively on the newer employees.
Z Theory of Motivation – Features and Criticisms of Z Theory
Prof. William G. Ouchi has developed theory Z. This theory is based on the comparative study of Japanese and American management practices. Theory Z describes how Japanese management practices can be adopted to the environment of other countries especially in the United States. This theory focuses attention on the organisational behaviour side of management.
Theory Z can be treated as a model for motivation. This theory believes in the philosophy of management. Both major and minor decisions are taken through consensus in the truly democratic and dynamic management. Besides, family relationship prevails between the employer and employees. In other words, close, Co-operative and trustworthy relationship prevails among workers, managers and other groups.
Theory X:
i. Workers dislike to work by themselves.
ii. Workers are not ready to accept responsibility.
iii. Workers prefer to be directed by others.
iv. Workers are unambitious.
v. Workers by nature resist changes and want security.
vi. Workers lack creativity and fail to solve organisational problems.
vii. It focuses the lower level needs of workers i.e., physiological and safety.
viii. Strict control is necessary to achieve organisational objectives.
ix. Authority is not delegated.
x. Autocratic leadership is followed.
Theory Y:
i. Workers feel that work is as natural as play.
ii. Workers are ready to accept responsibility if proper motivation is available to them.
iii. Workers are directed by them-selves.
iv. Workers are ambitious.
v. Workers are ready to cope with changes.
vi. Workers have a high degree of creativity and succeed in solving organisational problems.
vii. It focuses not only the lower level needs but also higher level needs i.e., social, esteem and self-actualisation of workers.
viii. Workers exercise self-control and self-direction to achieve organisational objectives.
ix. Authority is delegated.
x. Democratic leadership is followed.
Theory Z emphasis external control of human behaviour. Mutual trust reduces conflict among the employees and ensures team spirit. In practice, the management people work out their own style of management on the basis of the type of people dealt with and the nature of work performed.
Features of Theory Z:
The distinguishing features of theory “Z” are briefly explained below:
i. Trust:
The existence of trust and openness between employees, workers, trade unions and management executives avoids conflict at the maximum. Besides, employees extend their co-operation fully to achieve the objectives of the organisation. According to William G. Ouchi, trust, integrity and openness are necessary to an effective organisation.
ii. Life-Time Employment:
Life time employment should be given to all employees in order to promote a strong bond between employees and organisation. Shareholders or owners of the company should forgo their dividends or profits to avoid retrenchment of workers during adverse business conditions.
iii. Involvement of Employees:
Involvement of employees means participation of employees in decision making process. Participation of employees is not necessary in all decisions. But at the same time, any decision affecting employees in any way should be taken jointly. If the management wants to take a decision independently, the employees should be informed the position of management so that the employees do not feel ignored. Such involvement generates a sense of responsibility.
iv. Integrated Organisation:
An integrated organisation gives importance to job rotation. The reason is that job rotation improves understanding of interdependence of tasks. This type of understanding leads to team spirit.
v. Restricted Promotions:
Promotion of worker is restricted to the maximum. The reason is that promotion leads to saturation in the adoption of latest technology. The promoted workers are not ready to cope with changes. Instead, the management gives importance to the horizontal movement of workers so that workers do not have a sense of stagnation in the same post for a long time.
vi. Co-Ordination:
The role of any leader is to co-ordinate the efforts of employees and creates class feeling in the organisation. The leader should have a discussion with each and every employee and analyse the problems.
vii. No Formal Structure:
There is no formal structure to the organisation as per theory Z. At the same time, there should be a perfect team-work with co-operation, ideas, strategies, plans and information. For example, A cricket team plays well and solves problems with no formal reporting relationships.
viii. Motivation:
If workers are allowed to work with their superiors or on specific projects they will be motivated. The reason is that there are the prospects of greater income in future due to their involvement.
ix. Informal Control System:
Organisation should make the control system an informal one. So, importance is given to mutual trust and co-operation rather than superior- sub-ordinate relationship for this purpose.
x. Working Environment:
The stable working environment is necessary to the workers for increasing their satisfaction.
Theory Z is not considered as a motivation technique. Hence, it has been criticised on several grounds.
The criticisms are listed below:
i. Theory Z is based on the Japanese management practices. Japanese management practices have emerged from that country’s culture. Theory Z can be applied where Japanese culture prevails. Culture of one country differs from that of another country. So, theory Z cannot be applied universally.
ii. Theory Z lacks empirical research. So, the practical utility of this theory is very limited.
iii. Theory Z fails to give guidelines relating to the time at which it may be applied in an organisation.
iv. One of the features of theory Z is that there is no formal structure. The absence of formal structure creates some operational problems if the organisation wants to implement theory Z.
v. Life-time employment is not possible as per theory Z. The reason is that an employer is not ready to retain an employee who is otherwise unproductive; there is also easy availability of substitutes.
vi. Theory Z emphasizes on a class feeling within the organisation. It is very difficult to achieve this. The reason is that employees differ in habits, having food, dress, language and the like.
vii. In India, Owners or Shareholders will not accept less profit or less divided to avoid lay-off.
viii. If upward promotion of workers is restricted, an organisation will have to face a lot of problems created by trade unions.
ix. Horizontal movement of workers is not very easy. A skill needed for a particular job cannot be transferred to another job.
x. An organisation is not in a position to reap the advantages of specialisation if it follows the restriction in upward promotion.
In a nutshell, theory Z does not present any solution of problem to the management. A perfect solution is necessary at the present fast developing computer world.
Z Theory of Motivation – Distinguishing Features and Criticisms
Theory Z developed by William Ouchy, is an integrated model of motivation. It focuses attention on organisational and behavioural aspects of management. This theory suggests that large complex organisations are human systems and their effectiveness depends on the quality of humanism used.
The distinguishing features of Theory Z are as follows:
1. Trust – Trust, integrity and openness are essential ingredients of an organisation. Mutual trust between members of an organisation reduces conflict and leads to team work.
2. Subtlety – Subtlety, here, means sensitivity towards others. This results in higher productivity.
3. Intimacy between organisation and employees – There are several methods to establish an intimacy between the organisation and its employees. For example, employees may be granted life-time employment which leads to loyalty towards the organisation.
4. Employee Involvement – Involvement implies meaningful participation of employees in the decision-making process, particularly in matters which directly affect them. It generates a sense of responsibility and increases enthusiasm in the implementation of decisions.
5. Integrated Organisation – Under Theory Z, an integrated organisation improves understanding about interdependence of tasks. Such an understanding leads to group spirit.
6. Co-Ordination – The leader should co-ordinate the efforts of others to develop common culture and class feeling in the organisation.
Criticism:
Theory Z has been subject to the following criticisms:
1. This theory is based on Japanese management practices which may not be relevant for organisations in other places.
2. The practical utility of this theory has not yet been confirmed.
3. There may be operational problems in implementing Theory Z.
Z Theory of Motivation
While criticizing the contradictory assumptions of Theory ‘X’ and Theory ‘Y’ Lyndall F. Urwick proposed another theory of human behaviour at workplace which he has called theory Z.
Urwick was of this opinion that-“The primary task of every manager is to make or distribute goods or services at prices which the consumers are able and willing to pay. And it is to this end that he must direct the efforts of those associated with him”.
In this context, he was written the following propositions:
(1) “Management is responsible for organising the elements of productive enterprise – money, materials equipment, people in the interest of economic ends.”
(2) In a free society, economic ends are determined by the choice of innumerable individuals in their capacity as consumers.
(3) This involves a network of decisions and communications through which management postulates leadership.
(4) Management so groups these choices as –
(a) To facilitate economic production and distribution,
(b) To enable these same people in their capacity as producers or distributors, to satisfy their needs.
(5) In a handicraft economy, the consumer communicates directly with the producer, while in modern machine economy there are at least eight points at which consumer choices may be misinterpreted in terms of procedure/distributor needs. Man has to move from point to point all rounds to Z, instead of direct contact.
(6) Man as a consumer insists that the latest products of science and technology are at his disposal; he seeks change.
(7) Man, as a producer or distributor, is not resistant to organisation needs.
But change threatens his human needs if it suggests:
(a) Loss of employment physical and safety needs.
(b) Change of working patterns social needs.
(c) Elimination of positions to which he may have aspired egoistic and self-fulfillment needs.
(8) Management can overcome these difficulties of complex communications by devoting more attention to morale.
This involves:
(a) Discipline, that is the system of communication in precise and accepted by all concerned;
(b) Confidence, that is “each individual is assured that the institution is beneficent and will safeguard his / her needs.”
In order to clarify his propositions and human behaviour, Urwick has given a model which is the shape of Z, hence it is known as Z theory.
Urwick indicates that the individuals would be ready to direct their behaviour towards organisational goals under two conditions:
(1) Each individual should know the organisational goal precisely and the contribution which his attempts are making towards the realisation of these;
(2) Each individual should be confident that the realisation of organisational goals is going to affect his needs satisfaction positively, and that none of his needs are threatened or frustrated by membership of the organisation.
“Theory Z takes into account the organisational variables in shaping the behaviour of individuals. Thus, a particular individual may behave differently in different organisational conditions. From this point of view, the theory presents a more realistic picture of human behaviour in the organisation, rather than making assumptions about human behaviour.”
Thus, the success of any organisation depends ultimately on the morale of all those engaged in it. The theory however, could not get much popularity in management literature because such propositions have been given in one form or the other by different theories.
Z Theory of Motivation – Development, Approach and Primary Features
Theory Z is an approach to management based upon a combination of American and Japanese management philosophies and characterized by, among other things, long-term job security, consensual decision making, slow evaluation and promotion procedures and individual responsibility within a group context. Proponents of Theory Z suggest that it leads to, improvements in organizational performance.
Development of Theory Z:
Theory Z was first identified as a unique management approach by William Ouchi. Ouchi contrasted American types of organizations (Type A) that were rooted in the United States’ tradition of individualism with Japanese organizations (Type J) that drew upon the Japanese heritage of collectivism. He argued that an emerging management philosophy, which came to be called Theory Z, would allow organizations to enjoy many of the advantages of both systems.
Professor Ouchi advocated a modified American approach to management that would capitalize on the best characteristics of Japanese organizations while retaining aspects of management that are deeply rooted in U.S. traditions of individualism. Ouchi cited several companies as examples of Type Z organizations and proposed that a Theory Z management approach could lead to greater employee job satisfaction, lower rates of absenteeism and turnover, higher quality products, and better overall financial performance for U.S. firms adapting Theory Z management practices.
Theory Z as an Approach to Management:
Theory Z represents a humanistic approach to management. Although it is based on Japanese management principles, it is not a pure form of Japanese management. Instead, Theory Z is a hybrid management approach combining Japanese management philosophies with U.S. culture. In addition, Theory Z breaks away from McGregor’s Theory Y. Theory Y is a largely psychological perspective focusing on individual dyads of employer-employee relationships while Theory Z changes the level of analysis to the entire organization.
According to Professor Ouchi, Theory Z organizations exhibit a strong, homogeneous set of cultural values that are similar to clan cultures. The clan culture is characterized by homogeneity of values, beliefs, and objectives. Clan cultures emphasize complete socialization of members to achieve congruence of individual and group goals.
Although Theory Z organizations exhibit characteristics of clan cultures, they retain some elements of bureaucratic hierarchies, such as formal authority relationships, performance evaluation, and some work specialization. Proponents of Theory Z suggests that the common cultural values should promote greater organizational commitment among employees.
The primary features of theory Z are as follows:
Long-Term Employment:
Traditional U.S. organizations are plagued with short-term commitments by employees, but employers using more traditional management perspective may inadvertently encourage this by treating employees simply as replaceable cogs in the profit-making machinery. In United States, employment at will, which essentially means the employer or the employee can terminate the employment relationship at any time, has been among the dominant forms of employment relationships.
Conversely, Type J organizations generally make life-long commitments to their employees and expect loyalty in return, but Type J organizations set the conditions to encourage this. This promotes stability in the organization and job security among employees.
Consensual Decision Making:
The Type Z organization emphasizes communication, collaboration and consensus in decision making. This marks a contrast from the traditional. Type A organization that emphasizes on individual decision-making.
Z Theory of Motivation – With Characteristics
Theory Z is the name applied to the so-called “Japanese Management” style popularized during the Asian economic boom of the 1980s. In contrast Theory X, which stated that workers inherently dislike and avoid work and must be driven to it, and Theory Y, which stated that work is natural and can be a source of satisfaction when aimed at higher order human psychological needs, Theory Z focused on increasing employee loyalty to the company by providing a job for life with a strong focus on the well-being of the employee, both on and off the job.
According to Dr. William Ouchi, its leading proponent, Theory Z management tends to promote stable employment, high productivity, and high employee morale and satisfaction.
Theory Z is a form of management in which workers are involved in the work process on the factory floor. Schedules, division of labor, work assignments, and other aspects of the labor process are given over to workers to do as they see best. Investment policies, wages, fringe benefits and kind of product are not given over to workers to decide; only how best to do that decided by top management.
Theory Z was developed by William Ouchi, in his book 1981 ‘Theory Z – How American management can meet the Japanese Challenge’. William Ouchi is professor of management at UCLA, Los Angeles. Theory Z is often referred to as the ‘Japanese’ management style. It’s interesting that Ouchi chose to name his model ‘Theory Z’, which tends to give the impression that it’s a McGregor idea.
Ironically, “Japanese Management” and Theory Z itself were based on Dr. W. Edwards Deming’s famous “14 points”. Deming, an American scholar whose management and motivation theories were rejected in the United States, went on to help lay the foundation of Japanese organisational development during their expansion in the world economy in the 1980s.
Deming’s theories are summarized in his two books, Out of the Crisis and The New Economics, in which he spells out his “System of Profound Knowledge”. He was a frequent advisor to Japanese business and government leaders, and eventually became a revered counselor. Deming was awarded the Second Order of the Sacred Treasure by the former Emperor Hirohito, and American businesses ultimately tried unsuccessfully to use his “Japanese” approach to improve their competitive position.
Characteristics of the Theory Z:
i. Long-term employment and job security
ii. Collective responsibility
iii. Implicit, informal control with explicit, formalized measures
iv. Collective decision making
v. Slow evaluation and promotion
vi. Moderately specialized careers
vii. Concern for a total person, including their family
Theory Z essentially advocates a combination of all that’s best about McGregor’s XY theory and modern Japanese management, which places a large amount of freedom and trusts with workers, and assumes that workers have a strong loyalty and interest in team-working and the organisation. Theory Z also places more reliance on the attitude and responsibilities of the workers, whereas McGregor’s X, Y theory is mainly focused on management and motivation from the manager’s and organisation’s perspective.