In his 1960 management book, The Human Side of Enterprise, Douglas McGregor made his mark on the history of organizational management when he proposed the two motivational theories by which managers perceive employee motivation. He referred to these opposing motivational theories as Theory X and Theory Y. Each theory assumes that management's role is to organize resources, including people, to best benefit the company. However, beyond this commonality, they're quite dissimilar.
A Theory X manager assumes the following:
Essentially, Theory X assumes that the primary source of most employee motivation is monetary, with security as a strong second.
Under Theory X, management approaches to motivation range from a hard approach to a soft approach.
The hard approach to motivation relies on coercion, implicit threats, micromanagement, and tight controls -- essentially an environment of command and control. The soft appoach, however, is to be permissive and seek harmony in the hopes that, in return, employees will cooperate when asked. However, neither of these extremes is optimal. The hard approach results in hostility, purposely low-output, and extreme union demands. The soft approach results in increasing desire for greater reward in exchange for diminishing work output.
It would appear that the optimal approach to human resource management would be lie somewhere between these extremes. However, McGregor asserts that neither approach is appropriate since the foundation of Theory X are incorrect.
Drawing on Maslow's Hierarchy of Needs, McGregor argues that a need, once satisfied, no longer motivates. Under Theory X, the company relies on monetary rewards and benefits to satisfy employees' lower level needs. Once those needs have been satisfied, the motivation is gone. Theory X management styles, in fact, hinder the satisfaction of higher-level needs. Consequently, the only way that employees can attempt to satisfy higher level needs at work is to seek more compensation, so it is quite predictable that they will focus on monetary rewards. While money may not be the most effective way to self-fulfillment, in a Theory X environment it may be the only way. Under Theory X, people use work to satisfy their lower needs, and seek to satisfy their higher needs during their leisure time. Unfortunately, employees can be most productive when their work goals align with their higher level needs.
McGregor makes the point that a command and control environment is not effective because it relies on lower needs for motivation, but in modern society those needs are mostly satisfied and thus no longer motivate. In this situation, one would expect employees to dislike their work, avoid responsibility, have no interest in organizational goals, resist change, etc., thus creating a self-fulfilling prophecy. From this reasoning, McGregor proposed an alternative: Theory Y.
The higher-level needs of esteem and self-actualization are continuing needs in that they are never completely satisfied. As such, it is these higher-level needs through which employees can best be motivated.
In strong contrast to Theory X, a Theory Y manager makes the following general assumptions:
Under these assumptions, there is an opportunity to align personal goals with organizational goals by using the employee's own need for fulfillment as the motivator. McGregor stressed that Theory Y management does not imply a soft approach.
McGregor recognized that some people may not have reached the level of maturity assumed by Theory Y and therefore may need tighter controls that can be relaxed as the employee develops.
If Theory Y holds true, an organization can use these principles of scientific management to improve employee motivation:
If properly implemented, such an environment would result in a high level of motivation as employees work to satisfy their higher level personal needs through their jobs.