He based the systems on studies of highly productive supervisors and their team members of an American Insurance Company.
They initially intended to spell out the roles of principals, students, and teachers; eventually others such as superintendents, administrators, and parents were included.
Major policy decisions are left to those at the top, who have awareness of the problems that occur at both upper and lower levels throughout the organization.
[4] This contrast in feelings toward responsibility can result in conflict, which can create negative attitudes within the organization.
Subordinates gain motivation through rewards, occasional punishments, and little involvement in making decisions and setting goals.
Managers talk to their subordinates about problems and action plans before they set organizational goals.
As a result, upper-level managers make company decisions with consideration for input from subordinates.
This system also coincides with human-resources theory based on the level of lateral interaction between employees and managers.
[4] Organizational goals are accepted universally in this system because all individuals are actively involved in their creation.