- One of our most popular videos is the one about Douglas MacGregor's Theory X and Theory Y. And as a result, a number of people have asked me, Mike, what about Theory Z? That's what we'll look at in this video.

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Towards the end of his life, Douglas McGregor did indeed add a Theory Z to his Theory X and Theory Y. But it was after his death that William Ouchi revived and modified this Theory Z idea as a way of reflecting the adoption in the United States of Japanese management practices. Theory Z is largely about the way that large Japanese corporations were managed and run in the 1970s and early '80s.

Theory X makes a simple assumption about the workers within an organization. It assumes that they think like this. "I hate my work. I only do it for the money. I don't want to think for myself, and indeed, I'd rather do as little work as I can."

"As a result, my boss will favor a carrot and stick motivational approach of offering incentives to get me to work hard. And if I don't, will try to coerce me to work hard. Essentially, they will assume that I need to be compelled to do the job that I'm being paid for."

Theory Y makes a different assertion about the way workers think. It assumes that workers think. "I to work. It's part of my life, and I want to do well. And I'll work hard if you give me the level of responsibility and the recognition that I deserve." As a result, a Theory Y boss will give me the recognition that I deserve and the level of responsibility that I earn.

In 1981, William Ouchi published his Theory Z that extended McGregor's work with a Theory Z that assumes that a worker thinks like this. "I want a long term career and I want to believe in what I do, and I want to be led with a clear sense of purpose. As a result, my boss will work hard to convince me of the benefit of the work that I'm putting in to show that they and the organization care for me, and that I will be properly rewarded for the work that I do."

"They want me as a committed employee, so that I will see my career as a long game. As a result, I will be keen to develop my skills and they will support me in doing it. From this, I will expect steady promotion and opportunities, but not necessarily a stellar rise."

Theory Z follows Japanese management practices of the 1970s. This was a time when Japanese business was growing rapidly and starting to overtake its competitors in Europe and North America. However, when European and American businesses tried to emulate Theory Z management, they largely failed.

And the reason for this is to some extent obvious, certainly with hindsight. Theory Z management practices were embedded in a Japanese culture and they conformed to a very longstanding set of cultural traditions and norms. They worked in Japan because they were operating within a culture which was itself largely Theory Z. American and European cultures were, had been, and remain very different to that.

And now, of course, many Japanese companies have pivoted away from Theory Z management. This comes with a much wider shift in Japanese national culture over the last 30 years. Young Japanese employees are far more global in their outlook than their more insular parents and grandparents. As a result, they are subject to a much wider range of cultural influences, and to them, Theories Z feels old fashioned. It is no longer what they aspire to.

Before we finish, it's perhaps worth saying that there is a whole alphabet of management theories since McGregor, although it was perhaps shortsighted of him to start off at X and Y, leaving very little room for additional theories on the end. But there is indeed a Theory W-- in fact, there are a number of different Theory W's. And you'll find Theory U and Theory T overlays to McGregor's original work, U and T standing for utopian and tragic. But the different Theory W models, the Theory U, the Theory T models, those are all matters for another time.

Theory Z, however, did gain some real traction as a prevailing management theory, but the simple fact is that it blew itself out. It is no longer seen as a dominant model of how to run organizations in the 21st century. But, that said, if you look at any organization, you may still see more or less trace of Theory Z alongside Theory Y and Theory X.

Please do give us a thumbs up if you like this video. There's loads more great management courses content to come, so please do subscribe to our channel and hit the notification bell so you don't miss any of it. I'll look forward to seeing you in the next video, and in the meantime, keep learning.