First things first - Theory Z is not a Mcgregor idea and as such is not Mcgregor's extension of his XY theory.

Theory Z was developed by not by Mcgregor, but 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, and a board member of several large US organisations.

Theory Z is often referred to as the 'Japanese' management style, which is essentially what it is. It's interesting that Ouchi chose to name his model 'Theory Z', which apart from anything else tends to give the impression that it's a Mcgregor idea. One wonders if the idea was not considered strong enough to stand alone with a completely new name... Nevertheless, Theory Z essentially advocates a combination of all that's best about theory Y 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. There is no doubt that Ouchi's Theory Z model offers excellent ideas, albeit it lacking the simple elegance of Mcgregor's model, which let's face it, thousands of organisations and managers around the world have still yet to embrace. For this reason, Theory Z may for some be like trying to manage the kitchen at the Ritz before mastering the ability to cook a decent fried breakfast.

Ouchi's Theory Z makes certain assumptions about workers. These include the assumption 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. Also, Theory Z workers have a high need to be supported by the company, and 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. These types of workers have a very well developed sense of order, discipline, moral obligation to work hard, and a sense of cohesion with their fellow workers. Finally, Theory Z workers, it is assumed, can be trusted to do their jobs to their utmost ability, so long as management can be trusted to support them and look out for their well being.

One of the most important tenets of this theory is that management must have a high degree of confidence in its workers in order for this type of participative management to work. For this to work, employees must be very knowledgeable about the various issues of the company, as well as possessing the competence to make informed decisions.

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. In fact, promotions tend to be slower in this type of setting, as workers are given a much longer opportunity to receive training, and more time to learn the intricacies of the company's operations. The desire, under this theory, is to develop a work force that has more of a loyalty towards staying with the company for an entire career, and be more permanent than in other types of settings. It is expected that once an employee does rise to a position of high level management, they will know a great deal more about the company and how it operates, and will be able to use Theory Z management theories effectively on the newer employees.

While several similarities and differences surround the ideas of McGregor and Ouchi, the most obvious comparison is that they both deal with perceptions and assumptions about people. These perceptions tend to take the form of how management views employees, while Ouchi's Theory Z takes this notion of perceptions a bit farther and talks about how the workers might perceive management.
29th June 2005 From India, Ahmadabad

Member Opinions In This Discussion
Ajmal Mirza
India, Ahmadabad
Ekta Sharma
India, Ahmadabad

Thought of adding this from

Application of employee motivation theory to the workplace

Management literature is replete with actual case histories of what does and what does not motivate people. Presented here is a tentative initial broad selection of the various practices that have been tried in order to draw lessons for the future.

'Stick' or 'carrot' approach?

The traditional Victorian style of strict discipline and punishment has not only failed to deliver the goods, but it has also left a mood of discontent amongst the working class. Punishment appears to have produced negative rather than positive results and has increased the hostility between 'them' (the management) and 'us' (the workers). In contrast to this, the 'carrot' approach, involving approval, praise and recognition of effort has markedly improved the work atmosphere, produced the 'goods' and given the workers enormous satisfaction.

Manager's motivation 'toolkit'

The manager's main task is to motivate his or her team, both individually and collectively so that they can deliver the 'goods' and also derive satisfaction from it.

This may appear somewhat contradictory, but it seems to work. The main tools in the manager's kitbag for motivating the team are:

* approval, praise and recognition

* trust, respect and high expectations

* loyalty, given that it may be received

* removing organizational barriers that stand in the way of individual and group performance (smooth business processes, systems, methods and resources - see outline team building program)

* job enrichment

* good communications

* financial incentives

These are arranged in order of importance and it is interesting to note that cash is way down the ladder of motivators. Let's look at a couple of examples taken from real life situations.

The Swedish shipbuilding company, Kockums, turned a 15 million dollar loss into a 100 million dollar profit in the course of ten years due entirely to a changed perception of the workforce brought about by better motivation. At Western Electric there was a dramatic improvement in output after the supervisors and managers started taking greater interest in their employees.

Don't coerce - persuade!

Persuasion is far more powerful than coercion, just as the pen is mightier than the sword. Managers have a much better chance of success if they use persuasion rather than coercion. The former builds morale, initiative and motivation, whilst the latter quite effectively kills such qualities. The three basic components in persuasion are:

* suggest;

* play on the person's sentiments; and

* appeal to logic.

Once convinced, the person is so motivated as to deliver the 'goods'. The manager will have achieved the goal quietly, gently and with the minimum of effort. It is, in effect, an effortless achievement.

There has been a considerable amount of research into persuasion / motivation in the field of advertising and marketing. The research is entirely of the applied type, which can and has been used to great practical advantage. Some of the findings in this field were first published in the fifties in a book with the title, The Hidden Persuaders, which became a bestseller.

More contemporary 'persuaders' used by advertising and marketing people include:

* Faster talk is found to be more effective, since it is remembered better.

* Brain emits fast beta waves when a person is really interested in a particular presentation. These waves can be detected by an instrument.

* Subliminal approach using short duration presentation, whereby the message is transmitted below the level of awareness.

Can these findings be used in actual work conditions? AT&T (The American Telephone and Telegraph Co.,) recognizing the importance of hidden needs, at one time succeeded in promoting long distance calls by use of the simple phrase: 'Reach out, reach out and touch someone'. Managers will need to adapt this persuasion / motivation technique to their own situation.

Job satisfaction - is there a trend?

This is the title of a study carried out by the US Department of Labor among 1500 workers, who were asked to rate the job factors, from a list of 23, which they considered important starting from the most important factor. Their findings (Sanzotta (1977)) are:

White-collar workers

1. interesting work

2. opportunity to develop special abilities

3. enough information

4. enough authority

5. enough help and equipment;

6. friendly and helpful coworkers

7. opportunity to see results of work

8. competent supervision

9. responsibilities clearly defined

10. good pay

Blue-collar workers

1. good pay

2. enough help and equipment

3. job security

4. enough information

5. interesting work

6. friendly and helpful coworkers

7. responsibilities clearly defined

8. opportunity to see results of work

9. enough authority

10. competent supervision

It is interesting that out of the 23 job factors listed for the survey, yet with the exception of two items (white-collar workers' choice (b) and blue-collar workers' choice (c)) groups selected the same top ten factors, although with different rankings. It is significant that good pay was considered as the most important factor by the blue-collar workers, but it ranked as the least important for white-collar workers.

Motivating your salesforce

It is well known that individual behavior is intensely personal and unique, yet companies seek to use the same policies to motivate everyone. This is mainly for convenience and ease compared to catering for individual oddities (Lindstone (1978)). 'Tailoring' the policy to the needs of each individual is difficult but is far more effective and can pay handsome dividends. Fairness, decisiveness, giving praise and constructive criticism can be more effective than money in the matter of motivation. Leadership is considered synonymous (Tack (1979)) with motivation, and the best form of leadership is designated as SAL, situation adaptable leadership. In this style of leadership, one is never surprised or shocked, leadership must begin with the chief executive and it is more a matter of adaptation than of imparting knowledge. Ultimately, it is the leadership quality which leads to the success of a company through building and motivating its people.

'The one-minute manager'

A contemporary bestseller (Blanchard & Johnson (1983)) aimed at managers who seek to make star performers of their subordinates. To start with, the manager sets a goal, e.g. one page read in one minute, and it is seen to be achieved by 'one minute' of praising or reprimand as the case may be. But to be effective, these must be given (a) promptly, (b) in specific terms, and the behavior, rather than the person, should be praised or reprimanded.

The concept is basic and it makes sense, although the book seeks to 'dramatize' it. 'One minute' praising is seen to be the motivating force. Everyone is considered a winner, though some people are disguised as losers, and the manager is extolled not to be fooled by such appearances.

'Lessons from America's Best-run Companies'

Another bestseller, In Search of Excellence (Peters & Waterman (1982)). Several criteria, including analysis of annual reports and in-depth interviews, were used to pick 14 'model excellent companies' out of an initial sample of 62 companies. As expected, most of the action in high-performing companies revolved around its people, their success being ascribed to:

* productivity through people;

* extraordinary performance from ordinary employees;

* treating people decently.

Personnel function and in particular leadership were considered the most critical components. If the leaders in an organization can create and sustain an environment in which all employees are motivated, the overall performance is bound to be good. The three essentials for creating such an environment are:

* fairness;

* job security; and

* involvement.

Of all the resources available, the human resource is clearly the most significant, but also the most difficult to manage. Excellence can only be achieved through excellent performance of every person, rather than by the high-pitched performance of a few individuals. And motivation is, undoubtedly, the crux.


There is no simple answer to the question of how to motivate people. Can money motivate? Yes, but money alone is not enough, though it does help. We have discussed some of the pertinent theories bearing on human motivation and this is balanced by some of the practical factors which can lead to excellence. Human resource remains the focal point and leadership the critical component, and motivation has to be 'tailored' to each individual. The next section deals with an important mode of motivation, namely financial aspects of rewarding employees.
29th June 2005 From India, Ahmadabad
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