Informal control according to Theory Z encourages:

The correct answer emphasizes that informal control according to Theory Z encourages creativity and personal initiative. Theory Z, developed by William Ouchi, combines aspects of both American and Japanese management styles and focuses on the importance of trust, collaboration, and long-term employment relationships.

In this approach, organizations foster an environment where employees feel empowered to take initiative and express their creativity. This is often achieved through a collaborative culture that values teamwork and employee contributions. Encouraging personal initiative helps to enhance job satisfaction and engagement, ultimately leading to improved organizational performance.

The other choices do not align with the principles of Theory Z. Strict adherence to policies contradicts the flexible and adaptive nature promoted by this theory. Limited employee engagement is contrary to the goal of fostering a participatory workplace where employees are motivated to contribute actively. Top-down decision making goes against the collaborative spirit of Theory Z, which advocates for more shared decision-making processes that involve input from various levels within the organization.