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What is Theory Z

Theory Z is summarize of William Ouchi’s observations to understand Japanese corporate culture and Japanese management styles through 7 characteristics, compare to American companies management styles.

A Theory Z is the work of William Ouchi an American professor and author in the field of business management. Theory Z was published in the 1981 in his first book, Theory Z: How American Management Can Meet the Japanese Challenge.

William Ouchi reflects Japanese corporate culture and management into 7 characteristics of Japanese management based on Ouchi’s assumptions “people want a work-life balance, stable employment, and people loyal the company as their family”.

 7 characteristics of Japanese management in Theory Z of Ouchi include these following characteristics:

  1. Lifetime Employment
  2. Evaluation
  3. Slow Promotion
  4. Non-specialized Career Path
  5. Implicit Control Mechanism
  6. Collective Decision Making
  7. Holistic Concern

Key Points

  • Theory Z is a work of William Ouchi’s observations about Japanese corporate culture and management compare to American management style.
  • 7 characteristics of Japanese management in Theory Z of Ouchi are include: lifetime employment, evaluation, slow promotion, non-specialized career path, implicit control mechanism, collective decision making, and holistic concern.

Lifetime Employment

Lifetime employment makes employees feel connected to the organization and become a part of the organization.

If you ever heard some of the Japanese corporate cultures. You may know Japanese employees will not leave their office immediately, but they will keep working until their work is finished, because they think it is the responsibility (not a duty).


Evaluation of the Japanese management will evaluate the work as a team.

This is a different way of western culture at all. Unless some of western culture may work as team, but most of western management always evaluate as individually.

Slow Promotion

Promotion in Japanese companies happens slowly. Sometimes it takes more than 5 or 10 years to get promoted because seniority is involved in promotion.

This is the reason why many Japanese managers are always older than western managers.

Non-specialized Career Path

Many Japanese organizations had a quite none-specialized career path.

Many times employees have to move into other departments to learn about the different tasks. Yes, you can be promoted to different tasks.

Implicit Control Mechanism

Many protocols are rarely written in clear rules. Mostly use culture to involve work and control.

For example, Japanese employees continue working after the time off. That is not defined in the company’s rules at all (In some companies, it doesn’t pay extra money). But many people do that because they think it is their responsibility to get their job done.

The leader is always hands-off from how employees finish the job. Employees can do anything to make their job done.

Collective Decision Making

Japanese always use group decisions, everything must go through the group’s comments and vote.

Although an idea is very good, but the group says no to that idea, it will never happen at all.

Holistic Concern

Japanese corporate culture is family-like as we mention above. The emphasis is on interdependence rather than on individualism.

For example, they are concerned about the health and happiness of colleagues, not just concerned about work.