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Theory z - Williamouchi

Introduction

William G. Ouchi is the Sanford & Betty Sigoloff Professor in Corporate Renewal at The AndersonGraduate School of Management at UCLA. He previously served as Vice Dean of the school and asChair of the Strategy and Organization Area of the school. He is the author of four booksand of scholarly articles on organization and management. His first book was

Theory Z: How American Management Can Meet the Japanese Challenge

(Addison-Wesley,1981).

Theory Z

was on the best seller list for five months, has been published in 14foreign editions, and ranks as the seventh most widely held book of the twelve milliontitles held in 4,000 U.S. libraries. His second book,

The M-Form Society: How American Teamwork Can Recapture the Competitive Edge

(Addison-Wesley, 1984),reports on a three year effort by a team of 16 researchers led by Professor Ouchi.

The M-Form Society

has appeared in four foreign editions to date. His third book,

Organizational Economics

(Jossey-Bass, 1986), was co-edited with Jay B. Barney. Hisfourth book,

Making Schools Work

, will be published in September of 2003 by Simon &Schuster.Dr. Ouchi was born and raised in Honolulu, Hawaii, where he graduated from thePunahou School in 1961. He received his B.A. at Williams College (1965), his M.B.A. atStanford (1967), and his Ph.D. in business administration at the University of Chicago(1972). He has been a member of the faculties at the University of Chicago, StanfordUniversity, and UCLA from 1979 to the present. During 1993-95 he served as advisor and then as Chief of Staff to Mayor Richard Riordan in Los Angeles. From 1996-1999 heserved as Vice Dean for Executive Education of the Anderson School.At UCLA, Professor Ouchi teaches courses in management and in organization design.He was Co-Chair of the UCLA School Management Program. He continues as Chairmanof the Riordan Programs, which serve minority high school and college students inSouthern California and also is the founder of the Nissan-HBCU Summer Institute, whichserves the professoriate of the Historically Black Colleges and Universities of the U.S.He is Chair of the George and Kimiko Nozawa Endowment, which grants scholarships tostudents from Japan. Professor Ouchi also serves on several other committees and boardsof the Graduate School of Management, supervises doctoral candidates, and carries on hisown research on the management of K-12 schools.

In 1981, William Ouchi came up with a method that would combine American andJapanese managing practice together to form Theory Z. In order for him to accomplishthis, he had to learn about the Japanese culture. He had to find out why the Japanesequality and productivity were much higher than the American. The people in the US areusually characterize as being soft, lazy people, who feel they are in title to a good life,without earning it. In the 80's US company's quality was so bad, that when a Japanesecompany ordered in American made car, they had a reassembly plant. Here the companywould disassemble those cars and rebuilt them to meet Japanese standards. People inAmerica see business management as a career. The US as a nation has people takingclasses to earn a degree in management.

Theory Z

Theory Z is an approach to management based upon a combination of American andJapanese management philosophies and characterized by, among other things, long-term job security, consensual decision making, slow evaluation and promotion procedures, andindividual responsibility within a group context. Proponents of Theory Z suggest that itleads to improvements in organizational performance. The following sections highlightthe development of Theory Z, Theory Z as an approach to management including each of the characteristics noted above, and an evaluation of Theory Z. Realizing the historicalcontext in which Theory Z emerged is helpful in understanding its underlying principles.The following section provides this context.

Development of Theory Z

Theory Z has been called a sociological description of the humanistic organizationsadvocated by management pioneers such as Elton Mayo, Chris Argyris, Rensis Likert,and Douglas McGregor. In fact, the descriptive phrase, "Theory Z." can be traced to thework of Douglas McGregor in the 1950s and 1960s. McGregor, a psychologist andcollege president, identified a negative set of assumptions about human nature, which hecalled Theory X. He asserted that these assumptions limited the potential for growth of many employees.McGregor presented an alternative set of assumptions that he called Theory Y and weremore positive about human nature as it relates to employees. In McGregor's view,managers who adopted Theory Y beliefs would exhibit different, more humanistic, andultimately more effective management styles. McGregor's work was read widely, andTheory Y became a well-known prescription for improving management practices.But in the 1970s and 1980s, many United States industries lost market share tointernational competitors, particularly Japanese companies. Concerns about thecompetitiveness of U. S. companies led some to examine Japanese management practicesfor clues to the success enjoyed by many of their industries. This led to many articles and books purporting to explain the success of Japanese companies. It was in this atmospherethat Theory Z was introduced into the management lexicon.2

Theory Z was first identified as a unique management approach by William Ouchi. Ouchicontrasted American types of organizations (Type A) that were rooted in the UnitedStates' tradition of individualism with Japanese organizations (Type J) that drew upon theJapanese heritage of collectivism. He argued that an emerging management philosophy,which came to be called Theory Z, would allow organizations to enjoy many of theadvantages of both systems. Ouchi presented his ideas fully in the 1981 book, Theory Z:How American Companies Can Meet the Japanese Challenge. This book was among the best-selling management books of the 1980s.Professor Ouchi advocated a modified American approach to management that wouldcapitalize on the best characteristics of Japanese organizations while retaining aspects of management that are deeply rooted in U.S. traditions of individualism. Ouchi citedseveral companies as examples of Type Z organizations and proposed that a Theory Zmanagement approach could lead to greater employee job satisfaction, lower rates of absenteeism and turnover, higher quality products, and better overall financial performance for U.S. firms adapting Theory Z management practices. The next sectiondiscusses Ouchi's suggestions for forging Theory Z within traditional Americanorganizations.

Theory Z as An Approach To Management

Theory Z represents a humanistic approach to management. Although it is based onJapanese management principles, it is not a pure form of Japanese management. Instead,Theory Z is a hybrid management approach combining Japanese management philosophies with U.S. culture. In addition, a Theory Z break away from McGregor’sTheory Y. Theory Y is a largely psychological perspective focusing on individual dyadsof employer-employee relationships while Theory Z changes the level of analysis to theentire organization.According to Professor Ouchi, Theory Z organizations exhibit a strong, homogeneous setof cultural values that are similar to clan cultures. The clan culture is characterized byhomogeneity of values, beliefs, and objectives. Clan cultures emphasize completesocialization of members to achieve congruence of individual and group goals. AlthoughTheory Z organizations exhibit characteristics of clan cultures, they retain some elementsof bureaucratic hierarchies, such as formal authority relationships, performanceevaluation, and some work specialization. Proponents of Theory Z suggest that thecommon cultural values should promote greater organizational commitment amongemployees. The primary features of Theory Z are summarized in the paragraphs thatfollow.A.Reason for a more flexible managerial style is to meet competition fromforeign firms.B.In the 1980s

WILLIAM OUCHI