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n the preface to The Human Side of Enterprise Douglas McGregor writes: ‘This volume is an attempt to substantiate the thesis that the human side of enterprise is “all of a piece” – that the theoretical assumptions management holds about controlling its human resources determine the whole character of the enterprise.’
The Human Side of Enterprise remains a classic text of its time and of the Human Relations school. McGregor’s study of work and motivation fitted in with the concerns of the middle and late 1960s when the large monolithic corporation was at its most dominant, and the world at its most questioning. The book sold 30,000 copies in its peak year of 1965, at that time an unprecedented figure.
In The Human Side of Enterprise, McGregor presents two ways of describing managers’ thinking: Theory X and Theory Y.
Theory X is traditional carrot and stick thinking built on
‘the assumption of the mediocrity of the masses’. This assumes that workers are inherently lazy, need to be supervised and motivated, and regard work as a necessary evil to provide money. The premises of Theory X, writes McGregor, are ‘(1) that the average human has an inherent dislike of work and will avoid it if he can, (2) that people, therefore, need to be coerced, controlled, directed, and threatened with punishment to get them to put forward adequate effort toward the organization’s ends and (3) that the typical human prefers to be directed, wants to avoid responsibility, has relatively little ambition, and wants security above all’.
McGregor lamented that Theory X ‘materially influences managerial strategy in a wide sector of American industry,’
and observed ‘if there is a single assumption that pervades conventional organizational theory it is that authority is the central, indispensable means of managerial control’.
‘The human side of enterprise today is fashioned from propositions and beliefs such as these,’ w•rites McGregor,
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before going on to conclude that ‘this behavior is not a consequence of man’s inherent nature. It is a consequence rather of the nature of industrial organizations, of management philosophy, policy, and practice.’ It is not people who have made organizations, but organizations which have transformed the perspectives, aspirations and behavior of people.
The other extreme is described by McGregor as Theory Y which is based on the principle that people want and need to work. If this is the case, then organizations need to develop the individual’s commitment to its objectives, and then to liberate his or her abilities on behalf of those objectives. McGregor described the assumptions behind Theory Y: ‘(1) that the expenditure of physical and mental effort in work is as natural as in play or rest – the typical human doesn’t inherently dislike work; (2) external control and threat of punishment are not the only means for bringing about effort toward a company’s ends; (3) commitment to objectives is a function of the rewards associated with their achievement – the most important of such rewards is the satisfaction of ego and can be the direct product of effort directed toward an organization’s purposes; (4) the average human being learns, under the right conditions, not only to accept but to seek responsibility; and (5) the capacity to exercise a relatively high degree of imagination, ingenuity, and creativity in the solution of organizational problems is widely, not narrowly, distributed in the population.’
Theories X and Y are not simplistic stereotypes. McGregor is realistic: ‘It is no more possible to create an organization today which will be a full, effective application of this theory than it was to build an atomic power plant in 1945. ‘Mere are many formidable obstacles to overcome.’
The Human Side of Enterprise also explores a number of other areas. For example, McGregor examines the process of acquiring new skills and identifies four kinds of learning relevant for managers: intellectual knowledge; manual skills;
problem-solving skills; social interaction. The last element is,
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says McGregor, outside the confines of normal teaching and learning methods. ‘We normally get little feedback of real value concerning the impact of our behavior on others. If they don’t behave as we desire, it is easy to blame their stupidity, their adjustment, their peculiarities. Above all, it isn’t considered good taste to give this kind of feedback in most social settings. Instead, it is discussed by our colleagues when we are not present to learn about it.’ McGregor recommends the use of T-groups, then in their early stages, in which group participation was used to help people extend their insights into their own and other people’s behavior.
The common complaint against McGregor’s Theories X and Y is that they are mutually exclusive, two incompatible ends of an endless spectrum. To counter this, before he died in 1964, McGregor was developing Theory Z, a theory which synthesized the organizational and personal imperatives. The concept of Theory Z was later seized upon by William Ouchi.
In his book of the same name, he analyzed Japanese working methods. Here, he found fertile ground for many of the ideas McGregor was proposing for Theory Z – lifetime employment, concern for employees including their social life, informal control, decisions made by consensus, slow promotion, excellent transmittal of information from top to bottom and bottom to top with the help of middle management, commitment to the firm and high concern for quality.
In another development from McGregor’s original argument, John Morse and Jay Lorsch(l 970) argued that ‘the appropriate pattern of organization is contingent on the nature of the work to be done and the particular needs of the people involved’. They labeled their approach ‘contingency theory’, a pragmatic juxtaposition of Theories X and Y.
It is worth noting that Theory Y was more than mere theorizing. In the early 1950s, McGregor helped design a Proctor & Gamble plant in Georgia. Built on the Theory Y model with self-managing teams its performance soon
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surpassed other P&G plants. This suggests that Theory Y works, though it has largely remained consigned to textbooks rather than being put into practice on the factory floor.