Japanese Management Theory

Theory Z: (Emerging Approach in Management Thought):

William Ouchi, a management expert, conducted research on both American (Theory X) and Japanese (Theory Y) and outlined a new theory called Theory Z. This theory combines the positive aspects of both the theories. The theory Z approach involves providing job security to employees to ensure their loyalty and long-term association with the company. It also involves job rotation of employees to develop their cross-functional skills. It also advocates the decision-making participation of the employees and emphasizes the use of formal control in the organization along with explicit performance measures. The organization shows concern to their employees’ well-being and lays emphasis on their training and development. The quality management is also the type of thought involves in this.

In other words, Theory Z companies were American in origin, but Japanese in conduct and experience. They used some Japanese managerial practices, but made adjustments according to the environment prevailing in the United States. Ouchi’s work showed that American organizations could benefit from thoughtful incorporation of the Japanese management practices.

Japanese Management Theory

Some of the specific Japanese management practices are appended below:

1. Lifetime Employment: Lifetime employment (Shushin Koyo) refers to recruitment of employees immediately upon graduation, generation of employment until retirement, and mandatory retirement. Under this, an employee spends his entire working life with a single enterprise. This helps generate a feeling of job security in the employee and a feeling of belongingness towards the enterprise. This concept brings “harmony”, which results employee loyalty.

2. Seniority System: This concept is closely related to the concept of lifetime employment. Companies following this concept, provide privileges to older employees who have been with it for a long time. Promotion and wages increases are based on the employee’s length of service (henko) in the company, not job performance.

3. Continuous Training: The secret of the success of Japanese managers may lie in “continuous training.” In Japanese firms however, every young manager has a “godfather,” who is never his boss or anyone in the direct line of authority. The “godfather” is not part of the top management, but is highly respected by others and is over 45 years of age. He is expected to advise, counsels and looks after his “godchild.”

4. Emphasis on Group Work: In Japanese organizations, a task is not assigned to an individual; instead several tasks are assigned to a group, which consists of a small number of people.

5. Decision-Making: In Japan, concept that change and new ideas should come primarily from personnel belonging to lower levels in the hierarchy. Thus, lower level prepares proposals for higher-level personnel. The “ringi system” refers to decision-making by consensus.

6. Complicated Performance Evaluation: When job descriptions are not well defined, and when tasks are performed by groups, it become difficult to evaluate individual job performance objectively and takes very long time. It also requires use of qualitative and quantitative information about performance. Since jobs are done on a group basis, individual merit rating systems cannot be used to demonstrate individual brilliance or dynamic leadership and job responsibility can’t be allocated.

7. Good benefits for Employees: Japanese companies provide substantial benefits to their employees. Such as housing and transportation allowances, bachelor accommodations, scholarships to their children, and low interest housing loans. Also includes rapid salary enhancements, premium pay for overtime etc. In Japanese companies, an employee moves up to the top of the corporate ladder and gets Car and a chauffeur, and memberships in social clubs and golf club. They also have post retirement schemes for all.

8. Simple and Flexible organization: In Japanese firms, very often, people are trained to be generalists. For this reason, the organization structure in Japan is relatively simple and flexible, and it is possible for people to take up a new challenge or a new task by forming a new formal or informal group.

To sum up, Japanese managerial practices emphasize lifetime employment, concern for the individual, seniority, and a sense of loyalty to the firm. Furthermore, decision-making is based on principles of full information sharing and consensus. They also carry out a complicated performance evaluation process, emphasize “father-like” leadership and offer employees good benefits.