THEORY Z OF WILLIAM

OUCHI
DONE BY:
NAMRATA BHASKAR
 WILLIAM OUCHI
◦ William G. "Bill" Ouchi (born 1943) is an American professor and
author in the field of business management.
◦ He is the distinguished Professor of Management and
Organizations, Stanford and Betty Sigoloff Chair in Corporate
Renewal at the ULCA Anderson School of Management.
◦ He was born and raised in Honolulu, Hawaii. He earned a B.A.
from Williams College, in 1965, and an MBA from Stanford
University and a Ph.D. in Business Administration from the University
of Chicago. He was a Stanford business school professor for 8
years and has been a faculty member of the Anderson School of
Management at University of California, Los Angeles for many
years.
 THEORY Z
◦ William Ouchi developed Theory Z after making a comparative study of
Japanese and American management practices.
◦ Theory Z is an integrated model of motivation. Theory Z suggests that large
complex organizations are human systems and their effectiveness depends
on the quality of humanism used.
◦ A type Z organization has three major features—Trust, Subtlety and
Intimacy.
◦ Mutual trust between members of an organization reduces conflict and
leads to team work.
◦ Subtlety requires sensitivity towards others and yields higher productivity.
◦ Intimacy implies concern, support and disciplined unselfishness.
 HISTORY OF THEORY Z
◦ 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.
 FEATURES OF THEORY Z
1. Mutual Trust
2. Strong bond between Organization and Employees
3. Employee Involvement
4. Integrated Organization
5. Coordination
6. Informal control system
7. Human Resource Development
LIMITATIONS OF THEORY Z
1) There is no provision of lifetime employment to employees. It
merely provides job security and may fail to develop loyalty
among employees. An employee may leave the organisation
when better employments are offered to him by some other
enterprise.
2) Participation of employees in the decision-making process is very
difficult. Managers may dislike participation as it may hurt their
ego and freedom.
1) Theory Z suggests organization without any structure. But without
structure there may be chaos in the organization as nobody will
know who is responsible to whom.
2) Theory Z is based on Japanese management practices. These
practices have been evolved from Japan’s unique culture.
Therefore, the theory may not be applicable in different cultures.
EXAMPLE WHERE THEORY Z IS USED
Samsung satisfies the following Theory Z management characteristics:
* The length of employment is neither short-termed nor lifetime.
* The organization culture values a collective approach, not individual
action, regarding mode of decision making.
* Responsibility is assumed by the individual.
* The frequency of employee evaluation is low.
* The control depends on both implicit-informal and explicit-formal
measures.
* The career path is moderately specialized.
* There is holistic concern for employees.
◦ LENGTH OF EMPLOYMENT: Samsung may not be called a place of life-long employment as far as
middle and upper level managers are concerned. Among 27 university graduates accepted by
Samsung in 1956 as the first "cadets," only one person is still working with Samsung. At the same
time, it is not correct to call Samsung a place of short-term employment. Samsung is a business
corporation that is prestigious to work for, allows challenging career opportunities, gives the
highest salaries, and, hence, is the first choice of many university graduates.
◦ MODE OF DECISION MAKING: In his book, Theory Z, author William Ouchi cites, "When a major
decision is to be made, a written proposal lays out one 'best' alternative for consideration (in
Japan). The task of writing the proposal goes to the youngest and newest member of the
department involved. He talks to everyone, soliciting their opinions. In so doing he is seeking a
common ground. Ultimately, a formal proposal is written and then circulated from the bottom of
the organization to the top. At each stage, the manager in question signifies his agreement by
affixing his seal to the document.“
This process called “ringi” is what Samsung follows.
◦ RESPONSIBILTY: Ouchi claims that a "key figure of decision making in Japan is the intentional
ambiguity of who is responsible for what decisions. In the United States, we have job descriptions
and negotiations between employees for the purpose of setting crystal clear boundaries on
where my decision authority ends and yours begins."Samsung never makes the responsibility
ambiguous. A manager will enjoy the absolute support of the boss.
COMPARISION AT WORKPLACE:
WITH THEORY Z WITHOUT THEORY Z
Long-term commitments  Short term commitment
Collective decision making No Consensual decision
Concern for employee as a making
person
LOW PRODUCTIVITY
NEGATIVE WORK ENVIRONMENT
HIGH PRODUCTIVITY
HIGH EMPLOYEE TURNOVER RATE
EMPLOYEE SATISFACTION
LOWER TURNOVER RATE
CONCLUSION
• Theory Z does not provide complete solution to motivational
problems of all organizations operating under different types of
environment. Despite some of its limitations, Theory Z tends to
promote stable employment, high productivity, and high
employee morale and satisfaction. It focuses on the well being
of the employee, both on and off the job.

•HENCE THIS THEORY IS NOT MERELY

A THEORY OF MOTIVATION BUT A
PHILOSOPHY OF MANAGING.