William Ouchi’s Theory ‘Z’ # Introduction:

William Ouchi made a comparative study of the Japanese and the

American management practices and put forward a theory, called
‘Theory ‘Z’; which is an attempt to comine the best features of
Japanese and American styles of management.

Letter ‘Z’ does not stand for anything; it denotes the state of affairs
found in an organization of type ‘Z’ i.e. human behaviour of a type
different from ‘X’ and ‘ Y’ types as described by Douglas McGregor.

William Ouchi’s Theory ‘Z’ # Features:

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The salient features of theory Z could be stated as under:

(i) Mutual trust and openness:
According to Ouchi there should be mutual trust among employees,
supervisors, work-groups, unions and management. In fact, trust
and openness are closely related. When trust and openness exist in
an organisation; chances of conflict are reduced to the minimum.
Thus trust and openness are the hallmarks of an effective
organisation.

(ii) Strong bond between organisation and employees:

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In order to make employees loyal and committed to the

organisation, there must exist a strong bond (strong connection)
between organisation and employees.

To ensure and achieve this strong bond, the following

management practices may be adopted:
1. Life-time employment of employees, avoiding retrenchment, lay-
off etc.

2. Promotions based on seniority; making people stay waiting for

their chance of advancement.

3. Concern for employees (Taking care of health, welfare of

employees and paying attention to their personal problems.).

(iii) Collective decisions-making:

To elicit commitment of employees, it is desirable that employees
are involved in the decision-making process. In Z type of
organisation, decisions are taken collectively by managers and
employees; specially on matters affecting employees directly.

In some cases, however, only suggestions may be taken from

employees and decision-taken by management on its own. Under
the system of collective decision-making, decisions may be slow but
their implementation is fast.

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(iv) Free-form organisational structure:

Theory Z supposes no formal structure for the organisation. The
structure should be based on team-work and co-operation with
sharing of information, resources and plan. Ouchi has given the
example of a basketball team which plays well together and solves
all problems with no formal reporting relationships and minimum
of specialization of position and tasks.
(v) Role of facilitator and coordinator for management
and paternalistic leadership:
Managers must play the role of a facilitator and coordinator of the
actions of people, comprised in their work-groups. They must act as
paternalistic leaders and create a family type environment in a work
situation.

(vi) Common culture:

To foster mutual understanding, excellent human relations and co-
operation in an organisation, theory Z emphasises on common
culture e.g. same uniform for employees irrespective of designation,
common canteen for all etc.

(vii) Informal controls:

Managers should reduce their reliance on formal controls. Controls
should rather be informal and flexible. There should be free flow of
information in the organisation; so that corrective action may be
taken quickly, whenever needed.

(viii) Human resource development:

Theory Z lays greater emphasis on human resource development.

For this purpose, following strategies may be adopted:

1. Horizontal movement of employees to remove stagnation

2. Job enlargement

3. Career planning.

4. Training and development, etc.

William Ouchi’s Theory ‘Z’ # Evaluation:
Merits:
Some important merits of theory Z are stated below:
(i) Life-time employment promotes morale of employees. It
increases their efficiency and elicits loyalty on the part of
employees.

(ii) Concern of the management for employees makes them loyal

and committed to the organisation. The old adage ‘love begets love’,
applies to Z type of organisation.

(iii)The feature of common culture promotes brotherhood and co-

operation; and makes for excellent human relations, in the
organisation.

(iv)Horizontal movement of employees helps to overcome boredom

and stagnation. It is, in fact, a technique of motivating employees.

(v)Free-from organisational structure promotes team work and co-

operation.

(vi)Involvement of employees in decision making fosters

commitment to decisions and their faster implementation
(vii)Paternalistic leadership helps create a family environment in
the organisation – promoting co-operation and good human
relations.

Limitations:
Some serious limitations of theory Z are given below:
(i) Life-time employment is not much practical for business
enterprises. It adds to business costs, because employees are kept
on the payroll even though there may be insufficient work. This
permanent employment practice, known as nenko, is used only by
large firms, even in Japan. Employees, too, may not like the idea of
life-long employment; as they may get better job opportunities
outside the organisation.

(ii)Common culture phenomenon may be difficult to obtain in

practice, in many organisations, in different countries. For example,
in an Indian enterprise where people from North and South are
working jointly; language, eating habits and other attitudes may be
so different that to speak of and obtain a common culture may be
totally beyond the capacity of management.

(iii)Free-from organisational structure may be possible in a

basketball team; but may create serious chaos in a large business
enterprise; where nobody will know who is responsible to whom.

(iv) Horizontal movement of employees is not possible when skills

of job at one level are not transferable to job at the other horizontal
level. Moreover, this horizontal movement comes in the way of
employee specialisation so essential for effective organisational
functioning.
Involvement of employees in decision-making is a
problem, where:
1. Unskilled or semi-skilled people are involved

2. Strategic decisions have to be taken.

William Ouchi’s Theory ‘Z’ # Point of Comment:

Theory Z is not a theory of motivation in a direct sense. It is an
integrated version of motivational philosophy i.e. various features of
theory Z considered in conjunction with one another make for a
strong base towards motivating people. However, because of its
unique features, theory Z is not much useful and valid for countries,
other than Japan.