Z Theory

Theory X, Theory Y

Z Theory is a form of management in which workers are involved in the work process on the factory floor. Schedules, division of labor, work assignments, and other aspects of the labor process are given over to workers to do as they see best. Investment policies, wages, fringe benefits and kind of product are not given over to workers to decide; only how best to do that decided by top management.

Theory Z was developed by William Ouchi, in his book 1981 'Theory Z: How American management can Meet the Japanese Challenge'. William Ouchi is professor of management at UCLA, Los Angeles.

Theory Z is often referred to as the 'Japanese' management style. It's interesting that Ouchi chose to name his model 'Theory Z', which tends to give the impression that it's a Mcgregor idea.

Theory Z essentially advocates a combination of all that's best about Mcgregor's XY theory and modern Japanese management, which places a large amount of freedom and trust with workers, and assumes that workers have a strong loyalty and interest in team-working and the organisation.

Theory Z also places more reliance on the attitude and responsibilities of the workers, whereas Mcgregor's XY theory is mainly focused on management and motivation from the manager's and organisation's perspective.

Theory Z places reliance on the attitude and responsibilities of the workers, whereas Mcgregor's XY theory is mainly focused on management and motivation from the manager's and organisation's perspective.

Theory Z stresses the need for enabling workers to become generalists, rather than specialists, and to increase their knowledge of the company and its processes through job rotations and continual training.

Theory Z makes assumes that workers tend to want to build cooperative and intimate working relationships with those that they work for and with, as well as the people that work for them.

Theory Z workers need to be supported by the company, and they highly value a working environment in which such things as family, cultures and traditions, and social institutions are regarded as equally important as the work itself.

Mcgregor's XY Theory

Douglas McGregor was an American social psychologist. He proposed his famous XY theory in his 1960 book 'The Human Side Of Enterprise'.

Theory X and theory Y are referred to commonly in the field of management and motivation and Mcgregor's XY Theory remains a valid basic principle from which to develop positive management style and techniques. McGregor's XY Theory also remains central to organizational development, and to improving organizational culture.

McGregor's XY theory is based on the natural rules for managing people.

McGregor maintained that there are two fundamental approaches to managing people. Many managers tend towards theory X, and generally get poor results. Enlightened managers use theory Y, which produces better performance and results, and allows people to grow and develop.

Theory X ('authoritarian management' style)

• The average person dislikes work and will avoid it he/she can.

• Therefore most people must be forced with the threat of punishment to work towards organisational objectives.

• The average person prefers to be directed; to avoid responsibility; is relatively unambitious, and wants security above all else.

Theory Y ('participative management' style)

• Effort in work is as natural as work and play.

• People will apply self-control and self-direction in the pursuit of organisational objectives, without external control or the threat of punishment.

• Commitment to objectives is a function of rewards associated with their achievement.

• People usually accept and often seek responsibility.

• The capacity to use a high degree of imagination, ingenuity and creativity in solving organisational problems is widely, not narrowly, distributed in the population.

• In industry the intellectual potential of the average person is only partly utilised. 

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