This theory can help you boost team performance.
Back in the '70s and '80s, Japanese organizations were arguably the most productive and efficient in the world, and they were making significant inroads into North American and European markets.
The secret to their success wasn't necessarily what they were producing. Rather, some argued, it was how they were managing their people – Japanese employees were engaged, empowered, and highly productive.
Management professor William Ouchi argued that Western organizations could learn from their Japanese counterparts. He created Theory Z – a model that, he said, blended the best of Eastern and Western management practices.
In this article, we'll explore this model and discuss if it's still relevant today. We'll also look at how you can apply its principles in your own organization.
Ouchi first wrote about Theory Z in his 1981 book, "Theory Z: How American Management Can Meet the Japanese Challenge." He created the theory after conducting research designed to help American companies compete with Japanese businesses. It takes the best of the Japanese management philosophy, and the best of traditional US management philosophy, and combines the two.
According to Ouchi, the benefits of using Theory Z include reducing employee turnover, increasing commitment, improving morale and job satisfaction, and drastically increasing productivity.
To realize these benefits, he argued that an organization should have the following:
Theory Z has fallen out of favor in many organizations, especially since the performance of the Japanese economy flattened off in the 1990s. However, many of its principles are now seen to be "just good business practice."
It's natural to try to compare Theory Z with Theory X and Theory Y , two similarly named management models.
Theory X says that all employees inherently dislike working. They must be enticed to produce work, and need supervision at all levels. As you might imagine, Theory X organizations are heavily bureaucratic and top-heavy.
Theory Y offers a more humane look at management. It says that employees view work as part of life. They use their creativity to solve problems, seek out responsibility and new tasks, and do best when left on their own (instead of with constant direction from management).
Theory Z is sometimes considered a blend of these two models, with more of a leaning towards Theory Y, because it focuses on long-term employment and job security, informal control, and a deep concern for the happiness and well-being of employees.
However, it's also possible to argue that Theory Z doesn't belong with Theories X and Y.
Applying all the principles of Theory Z may be impractical, and even undesirable, in some situations. However, there are some useful aspects to the theory. We've highlighted these below...
"When I started using Mind Tools, I was not in a supervisory position. Now I am. Along with that came a 12% increase in salary." – Pat Degan, Houston, USA
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