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Definition: Theory Z is a name used for various combinations of McGregor's Theory X and Y of employee motivation and organizational development.
The most important one is Theory Z by William Ouchi ('81), also called "Japanese Management", having following characteristics: long-term employment - collective decision-making - individual responsibility - slow evaluation & promotion - implicit, informal control with explicit, formalized measures - moderately specialized career paths - and a holistic concern for the employee, including family. Management must have a high degree of confidence in its workers in order for this type of participative management to work.