Japanese Formal Organizations
The differences between Japanese and American business organizations tend to be along the axes of external forces (including history and culture), general management principles, manufacturing approaches, and human resource practices. Business organizations seek not only to survive, but to thrive, particularly within today's increasingly competitive global marketplace. A number of theorists have posited various ways to improve productivity, in particular through organizational management. One of the popular approaches that came out of the latter part of the twentieth century is Theory Z, which takes its principles from lessons learned in Japanese business organizations. However, one cannot simply transfer Japanese practices to organizations in the United States and expect them to succeed. There are many shortcomings in much of the research in this area, and it is impossible to completely and seamlessly transfer principles that have evolved in one cultural and historical context to a different setting without major revisions. However, there are lessons to be learned from Japanese business organizations, many of which are still being applied today.
One of the primary goals of business organizations is to survive. However, most business organizations want to do more than that: they want to thrive. This is particularly important in today's global marketplace, where one's competitor may be not a single business around the corner but many businesses around the world. Improving the effectiveness and profitability of the organization is typically done through some combination of lowering prices and offering a better product than the competition. However, there are many ways to accomplish these goals. To lower costs, for example, products can be redesigned or made with less expensive materials so that production costs are lowered. Similarly, the organization could pay their workers lower wages or outsource production to a company that can manufacture theirs for less. Each of these options -- as well as the numerous other options available -- is not without its risks, however. Reducing the quality of the product could potentially result in a loss of customer loyalty and selling fewer products than before. Reducing employee wages could result in the loss of skilled or experienced employees and the cost of replacing them, or it could lead to a strike that could halt production completely. Outsourcing of product manufacturing could also potentially mean that less qualified workers are making the product and could concomitantly result in higher cost for waste as well as for supervision of the employees. In general, therefore, there are three approaches to gaining or maintaining a competitive edge in business: costs, quality, and human resources. Although all three factors are important from a business point of view, it is the human resource variable that is of particular interest to social scientists.
Theory X Managers
One of the classic theories of human motivation in the workplace was articulated by Douglas McGregor in his influential book The Human Side of Enterprise (1960). The book was written in part as a reaction to the classic organizational theory of bureaucracy as posited by Max Weber. McGregor theorized that the beliefs held by managers about their subordinates influence the way that they manage them. To help explain his theory, McGregor hypothesized two contrasting managerial approaches. The first of these he labeled as Theory X. This approach to management is based on the belief that subordinates need to be controlled in order to meet the goals of the organization, and if managers do not control or focus their employees, the employees will become apathetic and resistant. Other assumptions of Theory X include that most people dislike work and will avoid it as much as they can, that employees need to be continually controlled, coerced, and threatened in order to do their work, and that they have little or no ambition, try to avoid responsibility, and seek security above other considerations. As a result, Theory X managers tend to be more likely than other managers to use a system of rewards and punishments in order to control their employees.
Theory Y Managers
Theory Y managers, on the other hand, have a management style based on the assumption that their subordinates are active and responsible and can be motivated to achieve organizational goals without the rigid use of concrete punishments and rewards. As opposed to Theory X managers, Theory Y managers believe that both physical and mental work is natural and that most people find work to be a source of satisfaction. They are motivated, self-controlled, self-directed, creative, and ingenious not only in pursuit of their own goals but also in the pursuit of the goals of the organization. These managers seek or learn to willingly accept responsibility; they usually do not have their full potential tapped in the organization. As a result, Theory Y managers are much more likely than Theory X managers to offer their subordinates expanded responsibilities and challenges. Although McGregor intended his descriptions of Theory X and Theory Y managers to only be examples of possible approaches to management, many managers misunderstood the fact that these examples are only endpoints on a continuum and an entire range of management behaviors exists between them. In reaction to this perceived dichotomy, a number of other management theories have since been posited. Among these is Ouchi's Theory Z, based on observations of management styles in business organizations in Japan (1981).
Theory Z Managers
There is good reason that business theorists looked to Japan for inspiration. During the period between 1890 and 1990, the per capita gross domestic product of Japan increased at an annual compound rate of 3% -- a growth rate 60% higher than that of the United States (Godo & Hayami, 2002). As Japan became an increasingly important industrial giant, business theorists turned their attention to determining what lay behind this phenomenal growth. Among the factors posited for the success of Japanese businesses was the Theory Z approach described by Ouchi (1981). This was offered in part as an alternative to McGregor's Theory X and Theory Y approaches.
Theory Z is the result of a Stanford study into the differences between business organizations in Japan and the United States and how those differences contributed to the relative success observed in the organizations. Based on his observations of management approaches and Japanese versus American business organizations, Ouchi posits two models of business management that he sees as being polar opposites (see Table 1). According to Ouchi, employment in American business organizations tended to be a relatively short-term (e.g., 50% to 90% annual turnover in manufacturing and clerical occupations). Such a high rate of turnover, however, costs the organization money; Ouchi states that an organization may spend as many as 15 days to train a new employee in a position, only to have him or her quit after six months of employment. Such high rates of turnover also extended to management and executive positions. For example, Ouchi points out that 25% per annum turnover rates for such positions were not unheard of, which means that organizational management could potentially be in a continuous process of learning about the organization, thereby making it difficult for organizational leadership to move the company ahead. One of the organizational implications for a high rate of turnover is...
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