Assumptions
1. This theory tends to view job security as an important source of job satisfaction and motivation.
2. The theory suggests that the performance of workers should be evaluated in a slow and steady manner on a long term basis. Further the promotion available to the workers should be few and far between in the work life of people.
3. According to this theory employees who continuously perform new tasks are normally more important, productive and satisfied with their work than those who remain in one job.
4. The theory suggests that employees work together towards the achievement of well-defined goals but the final responsibility should rest only with the individuals.
5. The organization must adopt a holistic approach in its dealings with employees by acknowledging that employees exist with ordinary demands of all workers in the society.
6. This theory recommends implicit, informal control but with explicit formalized measures.
7. The theory insists on the principles of collective decision making. According to this theory the management and group of employees must collectively discuss and decide on the issues that affect the organization in general and employees in particular.
Merits
1. The theory believes in converting the whole organization into one highly cohesive group.
2. It aims at promoting inter-personal skills required for group interaction which promotes worker’s contribution to the maximum of their potential.
3. It provides job security and broader career paths to workers and the informal control processes increases the quality of work.
4. It also helps the workers to self-direct and self-control their activities.
Demerits
1. This theory assumes the presence of a homogeneous internal organizational culture and decision making by consensus. This assumption is actually in conflict with the concept of cultural diversity and respect for divergent views, opinions and values.
2. The provision of life-time employment to develop strong bond between the organization and its employees seems to be difficult because of two reasons. Firstly the employer is unlikely to retain an employee who is otherwise unproductive because of easy availability of substitutes. Secondly an average employee will not hesitate to switch over if there is a relative rise in his income or other consequently the unusual loyalty of the employees.
3. Theory Z suggests organization without any structure. But without structure there may be chaos in the organization as nobody will know who is responsible to whom.
4. Theory Z is based on Japanese management practices. These practices have been evolved from Japan’s unique culture. Therefore, the theory may not be applicable in different cultures.