In his 1960 book, The Human Side of Enterprise, Douglas McGregor proposed two theories by which to view employee motivation. He avoided descriptive labels and simply called the theories Theory X and Theory Y. Both of these theories begin with the premise that management's role is to assemble the factors of production, including people, for the economic benefit of the firm. Beyond this point, the two theories of management diverge.
Theory X assumes that the average person: Dislikes work and attempts to avoid it. Has no ambition, wants no responsibility, and would rather follow than lead. Is self-centered and therefore does not care about organizational goals. Resists change. Is gullible and not particularly intelligent. Essentially, Theory X assumes that people work only for money and security.
Theory X - The Hard Approach and Soft Approach
Under Theory X, management approaches can range from a hard approach to a soft approach. The hard approach relies on coercion, implicit threats, close supervision, and tight controls, essentially an environment of command and control. The soft appoach is to be permissive and seek harmony with the hope that in return employees will cooperate when asked to do so. However, neither of these extremes is optimal. The hard approach results in hostility, purposely low-output, and hard-line union demands. The soft approach results in ever-increasing requests for more rewards in exchange for everdecreasing work output.
The optimal management approach under Theory X probably would be somewhere between these extremes. However, McGregor asserts that neither approach is appropriate because the assumptions of Theory X are not correct.
The Problem with Theory X
Drawing on Maslow's hierarchy, McGregor argues that a satisfied need no longer motivates. Under Theory X the firm relies on money and benefits to satisfy employees' lower needs, and once those needs are satisfied the source of motivation...