Theory X - Theory Y

In response to the two sides of the debate around employee motivation and the best ways to boost productivity, Douglas McGregor argued that managers would tend to pursue the approach which was most in line with their view of their employees. He claimed that managers who viewed their employees as lazy would be more likely to follow an approach based on control, whilst managers who believed the workers could be motivated and wanted to develop themselves would be more likely to attempt to create positive working environments and opportunities for advancement. McGregor referred to these theories as theory X and theory Y.

It is important to note that, in contrast to popular opinion, McGregor did not state the theory Y was preferable to theory X, rather he held that both views had merit, and managers should not have too narrow a view of motivation. As such, he believed that scientific management approaches could benefit from focusing on the need to motivate workers, whilst motivational approaches could also benefit from greater managerial control. As such, he argued that theory X and theory Y simply represented different ends of a continuum of approaches to improving productivity, and managers should not fix themselves to one end of the continuum.

Both theory X and theory Y state that managers are responsible for assembling and organizing the various factors of production, including their employees, with the goal being to produce maximum economic benefit for the shareholders. However, they take different views around the drivers of employee behavior.

Theory X:

According to theory X, the average employee is lazy, does not like to work, and will attempt to avoid having to work as much as possible. They also have no ambition or responsibility, and do not care about the performance of the organisation. As such, they will tend to resist any organisational change, and not be particularly innovative or intelligent, only working because they have to in order to have money and security. However, it also holds that they are quite gullible and easy to manipulate. As a result, managers who follow a theory X approach can try to take a hard, controlling approach or a soft persuasive approach.

The hard approach depends on tight managerial controls and close supervision, such as proposed by scientific management, whilst also using coercion and implicit threats to prevent any soldiering. In contrast, the soft approach looks to manipulate employees with money and low levels of supervision, in an attempt to acquire employee cooperation and reasonable levels of productivity. Unfortunately, the hard approach will tend to generate hostility and resistance, whilst the soft approach will lead to workers requesting greater levels of rewards whilst working as little as possible. McGregor felt that most firms tried to use some aspect of both of these approaches, but neither were very successful.

The reason for this is that McGregor claimed that theory X would only ever focus on low level needs such as security. As such, whilst the threat of removing security, in the form of pay cuts or potential sackings, would only motivate an employee to a certain level. As such, whilst following a Theory X approach would be better than following no approach, it will never satisfy high level needs, and employees will not be motivated by their work. Instead, they will look for more money and rewards to compensate, thus allowing them to fulfil their social and esteem needs outside of work. Therefore, employees will never satisfy their high level needs through work, and thus will never work to their maximum productivity.

In addition, McGregor argued that modern developed societies, with their abundant and cheap food, high tax rates and social safety nets, already satisfied most of the physiological and security needs of people. This meant that providing monetary rewards and punishments would not motivate staff as their discomfort at being controlled would outweigh the monetary benefits. As such, employees under theory X will tend to dislike their work and take no interest in the goals of the organisation, thus fulfilling the assumptions made under the theory. As such, McGregor argued that theory X was a self fulfilling prophecy, and that managers who followed it would end up demotivating even the most intrinsically motivated workforce.

Theory Y

In contrast to theory X, theory Y assumes that working can be made as natural to people as play and rest. As such, people will motivate themselves to fulfil their work objectives, provided they commit to them, and they feel they will fulfil higher needs by achieving them. In addition, if these conditions can be fulfilled, people will seek additional challenges and responsibility, and will handle them well because humans are naturally creative and innovative: their talents just need to be encouraged in their work.

The most important aspect of theory Y is that it focused on the cycle of managers providing interesting work, which motivates employees to achieve, which allows managers to provide them with more interesting and challenging work, thus fulfilling the higher level esteem needs, and allowing people to approach self actualisation in their work. As self actualisation is a continually evolving need, it will thus continue to motivate employees throughout their working lives.

This allows managers to align employees’ personal goals with the goals of the organisation, by allowing the employee to fulfil their needs as the organisation succeeds. For example, a firm can decentralise its control structure, providing employees with more responsibility and harnessing more of their skills to drive success. Companies can also consult employees as part of the planning and decision making processes, giving the employees input into the organisation’s success whilst benefitting from the employees’ creativity. Participative performance appraisals are also often used in theory Y, as when employees participate in setting and monitoring their objectives, they are more likely to strive to reach them.

If such a system can be properly implemented, it would result in very high levels of motivation, with employees working ever harder as their personal needs develop and their job develops to satisfy them. However, Theory Y management cannot be seen as a soft approach as it is easy for employees to manipulate the system by pretending to be de-motivated and hiding their true motivations. Indeed, McGregor argued that some employees may not have developed sufficient emotional maturity to embrace a Theory Y style of management, and may believe the managers are trying to manipulate them or are being weak. As such, managers may need to develop an initial system of control for employees, and relax that system as the employee matures and develops.