William Ouchi spent years researching Japanese companies under the great Japanese economic boom of the 1980s. In this period, Japanese companies were by far the most productive in the world, and hence very interesting to western management scientists.

During his research, William Ouchi identified several characteristic traits of Japanese leadership, which formed the basis for the formulation of a new leadership style – Theory Z. Therefore, Theory Z is also oftentimes described as the so-called Japanese Management Style.

In short, Theory Z stresses the importance of a caring and benevolent relationship between leaders and followers, and presumes that workers will get motivated by a strong social relationship with the company. Loyalty to the company will increase by providing a job for life, in which the company takes genuine interest in the well-being of the employee.

This leadership style is also comparable with Paternalistic Leadership that is oftentimes the most accepted leadership style in Asian countries, in which social relations between leaders and followers play a significant role for employee motivation.

Just as for Douglas McGregor’s Theory X & Y, it is very important always to acknowledge that it is the followers needs that should determine which leadership style to adopt, and that every leader must adapt his/her leadership style to the local cultural context. Therefore it may not be easy to implement Theory Z in a western cultural setting, because western employees may have completely different needs for leadership than e.g. the Japanese workforce.

When wanting to understand cultural differences between national and organizational cultures, current or prospective leaders may benefit from understanding the research performed by scientists such as Geert Hofstede, Fons Trompenaars and Edgar Schein, who all conducted extensive research on both national and organizational culture, and on how potential cultural differences may affect leadership.