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How the 'Z' Theory of Management Can Help You Run Your Business

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In his book No B.S. Ruthless Management of People & Profits, business coach and consultant Dan S. Kennedy presents a straightforward assessment of the real relationship between employers and their employees, and dares you to take action. In this edited excerpt, guest author Keith Lee explains how the right management system can help your business grow.

In almost all businesses, employees are needed to really grow, and when managed properly, they can create the ultimate leverage, job security and wealth for you.

But to take total control of your business and your employees, you need to create systems. I doubt this is the first time you've heard that systems are the key to controlling your business. The bestselling business book, The E-Myth Revisited, by Michael Gerber is all about systems, and Gerber has it exactly right. You need to "let systems run the business and people run the systems," as Gerber says, because "people come and go but systems remain constant."

There are three main management theories:

1. X Theory says, "I'm the owner. I'm the boss. I've built this company with my blood, sweat, and tears. Do what I say, and don't ask any questions."

2. Y Theory is what I learned in college. It says, "I'm the owner. I'm the boss. I built this company with my blood, sweat and tears. This is what I want you to do. Tell me what you think, and I'll tell you whether it's OK."

3. Z Theory says, "I'm the owner. I'm the boss. I'm the manager. I built this company with my blood, sweat and tears. I know a lot, and when we have something that's important, I understand that my team knows a lot also. In fact, in regards to their job, they likely know far more than me. On those important decisions that involve others, I'm going to get stakeholders involved and find the best answer."

When you ask employees "If we have a problem or an opportunity and we're an X theory management organization, whose problem is it?" The answer? "The boss's."

And if you ask them "If we're a Y theory management business, whose problem is it?" their answer is "The boss's."

But if you were to ask "If we have a problem or opportunity and we're a Z theory company, whose problem is it?" you'd get a different answer: "Ours!"

With Z theory management, we get everyone on the same side of the table working together to solve the problem. Once you create "buy in" for this with your actions, you'll have real freedom, a business that gets better every day with or without you there, and the ability to go on vacation for three weeks and come back to a business running better than when you left.

You can't use Z Theory Management for everything -- your staff would spend all its time in meetings. But the reality is, after it's been implemented for a while, not only will your business run much smoother and more efficiently, you'll spend far less time in meetings fixing things.

When we get a group of stakeholders (those affected by the problem or opportunity) together to solve a problem or capitalize on an opportunity, we call this a "Make-You-Happy Action Team." The result of their work is the written documentation (the system) of how to do a particular job. We call this written documentation a "Make-You-Happy Job Requirement." These Make-You-Happy Action Teams and Job Requirements make you—the owner—happy, make your clients and customers happy, make your employees happy and even make your vendors and suppliers happy.

Here's when you should use Z Theory management and Make-You-Happy Action Teams:

  • Whenever you're working on one of those big issues that will get a better answer when you get the group of stakeholders involved
  • When you have an issue that's causing conflict or problems in your business
  • When the results of what you decide will significantly affect another group. If what the salespeople are deciding is going to affect the warehouse, you should have at least one stakeholder from each group on the Make-You-Happy Action Team.
  • When someone asks for one. They say "I've tried to get this changed, and I can't get it done. Can we get a group together and find out the best way to do it?"

When your entire team knows you value their input and expect their help to make things better every day and you get their input on the big issues, you'll truly control your business and your life.

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