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CH 14] Business 101 14-7

in the long term, it destroys creativity and the initiative and desire to do a good job."

Theory Y as a Replacement for Theory X
Theory X appears to have a critical deficiency. It focuses strictly on physiological
and safety needs while ignoring the higher-order needs. If people behave in the manner
described by Theory X, the reason for their behavior may be that the organization only
partially satisfies their needs. If, instead, the organization enables them to satisfy their
social, esteem, and self-actualization needs, new behavior patterns should develop—
and different assumptions should be made. Theory Y
Theory Y offers a new managerial assumption: workers do not dislike work and, Managerial assumption that
under proper conditions, they accept and seek out responsibilities in order to fulfill workers like work and,
under proper conditions,
their social, esteem, and self-actualization needs. Under Theory Y, McGregor points accept and seek out
out: responsibilities to fulfill their
social, esteem, and
1. Workers do not inherently dislike work. The expenditure of physical and self-actualization needs.
mental effort in work is as natural as play or rest.
2. Employees do not want to be rigidly controlled and threatened with
punishment.
3. The average worker will, under proper conditions, not only accept but also
actually seek responsibility.
4. Employees desire to satisfy social, esteem, and self-actualization needs in 14
addition to security needs.

Unlike the traditional management philosophy that relies on external control and
constant supervision, Theory Y emphasizes self-control and direction. Its
implementation requires a different managerial strategy.

Use of Participative Management in Theory Z
During the past 15 years, the United States has imported more than automobiles,
television sets, and DVD players from Japan and China. Japan developed high quality
products exporting them to the American consumer. Transferring and expanding some
production techniques to China as it has become the world’s leading exporting of raw
and finished goods. China has adopted the Japanese model for quality production and
lowered prices, in a sort of game of monopoly.
A number of management writers paid particular attention to the relationships
between Japanese workers and their employers. UCLA business professor William G.
Ouchi argues that part of the reason for Japanese industrial success is not technology,
but their unique way of managing people—a style that focuses on employee
involvement in every phase of corporate life. This style was introduced by W.
Edwards Deming from his lectures and training on production, quality control and
human resources. Table 14.1 shows the contrasts between the typical Japanese
organization and the typical U.S. organization.
The Japanese approach involves lifetime employment, worker participation in
decision making, and nonspecialized career paths. Unlike the high turnover in many
U.S. corporations, large Japanese companies hire workers for life. About 35 percent of
all workers in Japan will work for only one company during their lives. Although
lifetime employment provisions are rare in the United States, a growing number of
firms are adopting a no-layoff philosophy. Eli Lilly, for example, has not laid off an
employee in its 110-year history. Hewlett-Packard is also well known for its no-layoffs
policies. Delta Air Lines has not laid off anyone since the 1950s.
Although there is a tendency to recommend implementing the Japanese approach
to management as a "quick fix," Ouchi warns that the cultural differences of the two Theory Z
nations require modifications in the new approach. This modified approach has been Management approach
labeled Theory Z. Theory Z views involved workers as the key to increased emphasizing employee
productivity and an improved quality of work life. Theory Z organizations provide participation as the key to
long-term employment for employees and a sharing of responsibility for making and increased productivity and
improved quality of work life.
implementing decisions. Evaluations and promotions are relatively slow and
promotions are tied to individual progress rather than to the calendar. Employees

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