The Theory Z in Leadership and Its Main Points

Companies that choose to use Theory Z for leadership are attempting to balance the cultures of the American business concepts, with that of the Japanese business culture. Often time’s companies struggle to find the perfect balance but in many cases companies utilizing Theory Z successfully have gained tremendously in profits, as well as in employee retention. Theory Z allows the company to provide incentives to assist in employee retention but with limited cost since the Japanese culture implemented in Theory Z focuses on building intimate, dedicated relationships with co-workers and management to develop lifelong commitments to a company (Sullivan, 1983).

Theory Z also focuses on the concept and theory that the employee will “do the right thing”. This is accomplished by ensuring that there are detailed policies and work process flows. In having this type of environment employees feel that they are not micro-managed and can complete their job with minimum supervision. This type of leadership style has shown to provide a greater level of productivity than companies that have utilized other leadership styles (England, 1983).

Many have questioned whether any one form of leadership is better than another in ensuring that a company is successful. Many forms of leadership have been tested over the years, and while there are several styles that have been successful. Studies have shown that Theory Z has been the management style that has been used in the foundation of many very successful large companies that have extensive profit margins, but also have had the best employee retention rates, and most loyalty from their employees (D’Andrade, 1986).

In America the concept of Theory Z leadership is being used successfully, and yet it is not as widely accepted here as it is in the Japanese culture. There are several reasons for this but the concept of “involved workers” are key. This goes against what many American management executives have been taught. The Theory Z culture focuses on non-specialized career paths, slow evaluations and slow promotion strategies. This is not how the American leadership executives have been taught and it is an adjustment that they need to make in order to be successful in this type of management structure. American executives need to look at this approach and begin to embrace it into their management style to be successful if their business is to fully utilize and reap the benefits of Theory Z (England, 1983). In America too often companies of large size tend to utilize the bureaucratic hierarchy which many in recent years and as Theory Z has been introduced more is becoming more and more dispensable. (Ouchi, 1993). Executives are learning to take the success of businesses in Japan that have been utilizing this leadership style for years and embrace the success that it can provide.

The final key point of the Theory Z leadership style is that it requires the company to move from a technology driven culture, to a culture focused on the people (Ouchi, 1981). Without doing this Theory Z is not being used to its full potential. It is believed the productivity gains are found when focusing on the people in a company, and not by stringent leadership where decisions are based on one upper management persons opinion, and surely not because technology drove it up. Theory Z focuses on the fact that the employee, the people, are the heart of business success and therefore should be embraced.

When researching companies that utilize the leadership style that is laid out in Theory Z, one of the largest and most well-known is that of Samsung. Samsung has taken Theory Z style and had implemented into its business the leadership style that was founded and discussed by Ouchi. Samsung has utilized the collective approach in its management style and has also developed among its employees one of the most stringent self-performance appraisals among the employees themselves. They have taken to this leadership style in such a dedicated aspect that this method has developed many able bodied managers in their organization but it also has caused Samsung to not be considered a lifelong employee since the Theory Z aspect of leadership has caused many to fail themselves because of self-competition among their own employees. The organization has gained great profit gains due to this type of leadership style, but also has reflected on the fact that it has developed a style that reflects responsibility for results on all those employed there and not just the management. While some may view this as a negative it has allowed Samsung to become a company that is respected as a very distinguished place for employment allowing for challenging careers and high salaries. Due to this is has because of its culture become a high interest employer for new graduates and since competition to gain employment with them if received has also made it hard for employees to leave (Lee, 1992).