Theory Z is a management technique that combines American and Japanese approaches to business, emphasizing a common environment among employees and social values. It originated from Douglas McGregor’s “Theory Y” and William Ouchi’s response to it, promoting a community-oriented approach. Theory Z encourages slow company advancement, long-term employment, and high support for skills development.
Theory Z is a type of management technique that grew out of a hybrid of American and Japanese approaches to business. Its main features are a kind of common environment that is fostered among employees and a devotion to social betterment and values as important as the pursuit of profits. While the common aspects of Theory Z arise from Japanese management styles, the dedication to fostering individual achievement within a group atmosphere comes from American business philosophy. Other distinguishing features of this theory include slow company advancement and long-term employment periods for workers, and high support from management in the form of skills development and training.
The genesis of Theory Z came from an American professor named Douglas McGregor, whose work became popular in the 1950s and 1960s. McGregor postulated that the most ineffective management procedures came from managers having an ingrained negative attitude toward their employees. He called this approach “Theory X” and noted that it did not do justice to workers’ abilities and motivations. On the other hand, a much more benevolent worker-employer relationship known as “Theory Y” was McGregor’s solution.
Another theorist named William Ouchi, in a 1981 book, responded to Theory Y by saying that the individualism promoted by American business could indeed lead to small bursts of excessive productivity. Ouchi, however, felt that the competitive nature of the American system would be counterproductive. As a result, he created Theory Z, which took some of these American principles and tied them into the more community-oriented approach taken by Japanese companies.
A company that operates under the Theory Z principle has all employees working harmoniously toward a common goal, even though the company’s individual workers still have the opportunity to excel. The positive relationship between managers and workers postulated by Theory Y remains, but it goes a step further by turning the entire company into a single unified group. It still allows all decisions involving the company to be taken by consensus.
Many of the competitive aspects of the American system are discouraged by Theory Z and its insistence on a slow promotion schedule for its employees. Still, employees benefit from the fact that a company operating under this theory is less likely to hire and fire quickly, preferring to keep employees as long as possible. Excellent support is provided to employees of this system, and the entire company operates not only for profit, but also for the benefit of the society it serves.
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