Theory Z of Ouchi is a management style developed by William Ouchi that is based on Dr. W. Edwards Deming's "14 points" for management. Theory Z focuses on increasing employee loyalty through job security and a strong focus on employee well-being both on and off the job. This management style aims to promote stable employment, high productivity, and high employee morale and satisfaction. Ironically, Theory Z and "Japanese management" styles were influenced by Deming's work with Japanese companies to help lay the foundation for their economic success in the 1980s.

1. Theory Z of Ouchi
From Wikipedia, the free encyclopedia
This article does not cite any references orsources. Please help improve this article by adding
citations to reliable sources. Unsourced material may be challenged and removed. (January 2013)
It has been suggested that this article be merged with Theory Z. (Discuss) Proposed since September
2013.
Theory Z of Ouchi is Dr. William Ouchi's so-called "Japanese Management" style popularized
during the Asian economic boom of the 1980s.
For Ouchi, 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 Ouchi, Theory Z management tends to promote stable employment, high productivity, and high
employee morale and satisfaction.
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
more popular outside the United States, went on to help lay the foundation of Japanese
organizational 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 Treasures by the former Emperor Hirohito, and American
businesses tried to use his "Japanese" approach to improve their competitive position.
History[edit]
Professor Ouchi spent years researching Japanese companies and examining American companies
using the Theory Z management styles. By the 1980s, Japan was known for the highest productivity
anywhere in the world, while America had fallen drastically. The word "Wa" in Japanese can be
applied to Theory Z because they both deal with promoting partnerships and group work. The word
"Wa" means a perfect circle or harmony, which influences Japanese society to always be in teams
and to come to a solution together. Promoting Theory Z and the Japanese word "Wa" is how the
Japanese economy became so powerful. And also because the Japanese show a high level of
enthusiasm to work, some of the researchers claim that 'Z' in the theory Z stands for 'Zeal'.
Ouchi wrote a book called Theory Z How American Business Can Meet the Japanese
Challenge (1981), in this book; Ouchi shows how American corporations can meet the Japanese
challenges with a highly effective management style that promises to transform business in the
1980s. The secret to Japanese success, according to Ouchi, is not technology, but a special way of
managing people. "This is a managing style that focuses on a strong company philosophy, a distinct
corporate culture, long-range staff development, and consensus decision-making"(Ouchi, 1981).
Ouchi shows that the results show lower turn-over, increased job commitment, and dramatically
higher productivity.
William Ouchi doesn't say that the Japanese culture for business is necessarily the best strategy for
the American companies but he takes Japanese business techniques and adapts them to the
American corporate environment. Much like McGregor's theories, Ouchi's Theory Z makes certain
assumptions about workers. Some of the assumptions about workers under this theory include the
idea that workers tend to want to build happy and intimate working relationships with those that they
work for and with, as well as the people that work for them. Also, Theory Z workers have a high need
to be supported by the company, and highly value a working environment in which such things as
family, cultures and traditions, and social institutions are regarded as equally important as the work

2. itself. These types of workers have a very well developed sense of order, discipline, a moral
obligation to work hard, and a sense of cohesion with their fellow workers. Finally, Theory Z workers,
it is assumed, can be trusted to do their jobs to their utmost ability, so long as management can be
trusted to support them and look out for their well being (Massie & Douglas, 1992).
One of the most important pieces 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. This theory
assumes that workers will be participating in the decisions of the company to a great degree. Ouchi
explains that the employees must be very knowledgeable about the various issues of the company,
as well as possessing the competence to make those decisions. He also points out; however, that
management sometimes has a tendency to underestimate the ability of the workers to effectively
contribute to the decision making process (Bittel, 1989). But for this reason, Theory Z stresses the
need for the workers to become generalists, rather than specialists, and to increase their knowledge
of the company and its processes through job rotations and constant training. Actually, 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 ins and outs 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 (Luthans, 1989, p. 36).
References[edit]
Further reading[edit]
 McGregor, Douglas. (1960). The Human Side of the Enterprise. New York: McGraw-Hill, Inc.
 Likert R. (1967). Human Organization: Its Management and Value (p. 139). New York, McGraw-
Hill.
 Bacarr, Jina. How to Succeed in a Japanese Company. New York. Carol Publishing Group,
1994.
 Maslow, Abraham H. (1970). Motivation and Personality (p. 28). New York: Harper & Row
 Ouchi, William G. (1981). Theory Z. New York: Avon Books.
 Bittel, Lester R. (1989). The McGraw-Hill 36-Hour Management Course (p. 11). New York:
McGraw- Hill.
 Luthans, Fred. (1989). Organizational Behavior (p. 36). New York: McGraw-Hill.
 DuBrin, Andrew J. (1990). Essentials of Management (p. 34). Cincinnati: South-Western.
 Massie, Joseph L. and John Douglas. (1992). Managing: A Contemporary Introduction (p. 48).
Englewood Cliffs: Simon & Schuster Company.
 Heil G., Bennis W., and Stephens D. (2000). Douglas McGregor, Revisited: Managing the
Human Side of the Enterprise (p. 236). New York: John Wiley & Sons, Inc.
 Wortheim E.G. (2002) Historical background of organizational behavior (p. 17). Boston, MA:
College of Business Administration.
 Reddin, W. J. Managerial Effectiveness. (1970). (pp. 189–190). (New York: McGraw-Hill Book
Company).
 Whisenand, Paul M. and R. Fred Ferguson. (1978). (p. 37). The Managing of Police
Organizations, Second Edition.

3. Theory Z
From Wikipedia, the free encyclopedia
See also: Theory_Z_of_Ouchi
This article does not cite any references orsources. Please help improve this article by adding
citations to reliable sources. Unsourced material may be challenged and removed. (May 2011)
It has been suggested that this article be merged with Theory Z of Ouchi. (Discuss) Proposed since
September 2013.
Theory Z is a name for various theories of human motivation built on Douglas McGregor's Theory X
and Theory Y. Theories X, Y and various versions of Z have been used in human resource
management, organizational behavior, organizational communication and organizational
development.
One Theory Z was developed by Abraham H. Maslow in his paper "Theory Z" and the other is Dr.
William Ouchi's so-called "Japanese Management" style popularized during the Asian economic
boom of the 1980s. The third was developed by W. J. Reddin in Managerial Effectiveness.
McGregor's Theory Y in contrast to 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.
For Ouchi, 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 Ouchi, Theory Z management tends to promote stable employment, high productivity, and high
employee morale and satisfaction.
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
more popular outside the United States, went on to help lay the foundation of Japanese
organizational 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 Treasures by the former Emperor Hirohito, and American
businesses tried to use his "Japanese" approach to improve their competitive position.
Contents
[hide]
 1 Pre Theory Z
 2 Implications of these types of theories for leaders in modern organizations
 3 References
 4 External links
 5 Further reading
Pre Theory Z[edit]
Abraham Maslow, a psychologist and the first theorist to develop a theory of motivation based upon
human needs produced a theory that had three assumptions. First, human needs are never
completely satisfied. Second, human behavior is purposeful and is motivated by need for
satisfaction. Third, these needs can be classified according to a hierarchical structure of importance
from the lowest to highest (Maslow, 1970).

4. 1. Physiological need
2. Safety needs
3. Belongingness and love needs
4. The esteem needs – self-confidence
5. The need for self-actualization – the need to reach your full potential
Maslow's hierarchy of needs theory helps the manager to understand what motivates an employee.
By understanding what needs must be met in order for an employee to achieve the highest-level of
motivation, managers are then able to get the most out of production. Theory X, Y and Z all play a
role in how a company should manage successfully. Theory X and Theory Y were both written by
Douglas McGregor, a social psychologist who is believed to be a key element in the area of
management theory. In Mc.Gregor's book The Human Side of Enterprise (1960), Mc.Gregor
describes Theory X and Theory Y based upon Maslow's hierarchy of needs, where McGregor
grouped the hierarchy into a lower order (Theory X) needs and a higher order (Theory Y) needs.
Mc.Gregor suggested that management could use either set of needs to motivate employees, but
better results could be gained by the use of Theory Y, rather than Theory X (Heil, Bennis, &
Stephens, 2000).
Implications of these types of theories for leaders in modern
organizations[edit]
Psychology helps to explain changes in human behavior, Sociology studies people in their
relationships with other human beings. Social Psychology was created when the two concepts were
blended, so that the focus is on influences of people on one another to Anthropology and Political
Science.
With Theories X, Y, and Z implications for the modern organization include new challenges and
opportunities. As we learn from these theories and work to implement the ideas in them we must be
aware of the modern issues of working with people from different cultures and overseeing
movements of jobs to countries with low-cost labor. Also, we must embrace diversity as the U.S.
demographics change and understand that our new managers must recognize and respond to the
different culture changes that will surely ensue with their growing diverse working population.
These theories have proven with many fortune 500 companies and others that when applied, do
improve quality and productivity and also help to strengthen company labor issues. In addition to the
changing work demographic, new problems and issues have risen since the X, Y and Z theories
were formed. Some issues include fewer skilled laborers, early retirements, and older workers. Other
opportunities that have been implied while companies use Theory Y and Z include, an improvement
of people skills, empowering their employees, stimulating change, helping employees balance work
with life conflicts, and improving ethical behavior.
Modern implications for companies using these theories have shown improvements in turnover
rates, productivity, effectiveness, efficiency, organizational behavior, and job satisfaction.
References[edit]
External links[edit]
 "Maslow On Management", summary by James Altfeld