THEORY Z: How American Business Can Meet the Japanese Challenge by William Ouchi
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THEORY Z: How American Business Can Meet the Japanese Challenge

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IBM, GM, Pillsbury, and a clutch of other Fortune 500 companies as well as lesser lights (e.g., six rabbis who run a social-services agency in Los Angeles) have in common the fact that they are eager students of the consensual, participatory style of management which has helped to make Japanese industry so astonishingly productive. Here, Professor Ouchi (UCLA Graduate School of Management) explores the ways American business generally could follow suit--via what he calls the Theory Z approach to management. The term alludes to Douglas McGregor's distinction between Theory X and Theory Y management in The Human Side of Enterprise (1960). In brief, Theory X executives operate on the presumption that lower-echelon employees are a shiftless, undependable lot who bear close supervision, while their Theory Y counterparts assume subordinates are basically responsible and diligent, and require only occasional encouragement to perform well. ""The basis of Theory Z,"" in turn, is ""that happy, involved workers are the key to enhanced productivity."" There is, of course, more to Theory Z than morale. The company that wishes to convert to Type Z organization, Ouchi emphasizes, must develop a philosophy that implicitly defines not only objectives but also relationships with suppliers, customers, competitors, regulatory authorities, and so on. Decision-making becomes a collective and egalitarian process in which anyone who will be affected by a particular course of action is consulted. Among the prospective rewards of Theory Z management, Ouchi points out, are low staff turnover, unselfish one-for-all teamwork, efficiency, and an inherent ability to make long-range plans. There are tradeoffs--some loss of professionalism and profitability, plus a tendency to react slowly to new circumstances. Most large American companies, says Ouchi, are still Type A, i.e. segmented and hierarchical with decision-making powers vested in a comparatively few individuals. The drawbacks of such corporate bureaucracies include the possibility of operational breakdowns in the absence of key personnel; undue emphasis on short-run profits, frequently at the expense of long-range welfare; and pervasive mistrust that can increase costs (viz., industrial relations departments to deal with militant unions). On the plus side, smaller concerns have the capacity to perform in virtuoso fashion. Ouchi offers a step-by-step guide to going from A to Z; commendably characterizes his guidelines as approximate (since ""as of yet I do not have a complete theory of the change process""); does not, laudably too, present an unbroken string of success stories as case studies. And he acknowledges an indebtedness to others besides the Japanese, citing Amana (refrigerators), Oneida (tableware), and other utopian communities that made a go of commercial enterprises. It's a pragmatic successor, in part, to Ezra Vogel's 1979 Japan as Number One; it's been the basis, already, of a major story in the New York Times Magazine; it's e to get a considerable play. And it well warrants discussion, if not slavish adherence, too.

Pub Date: April 15th, 1981
Publisher: Addison-Wesley