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.
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
theAsian 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.

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).
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.