"The Human Side of Enterprise"

“The Human Side of Enterprise”

By Douglas McGregor  

Of all the concepts ever developed on management philosophy, few have gained the renown of Theory X and Theory Y.  Those two contrasting styles of management formed the foundation of Douglas McGregor’s business classic, The Human Side of Enterprise, published in 1960. 

Few books of its kind have had the impact and staying power of McGregor’s work.  Warren Bennis, the famed consultant, author and business professor from the University of Southern California wrote this about the book’s timeless significance in the forward for the 25th anniversary edition of The Human Side of Enterprise in 1985:

“… (T)his book, more than any other on management changed an entire concept on organizational man, and replaced it with a new paradigm that stresses human potentials, emphasizes human growth and elevates the human role in industrial society … All of the themes in … The Human Side of Enterprise … are reflected in virtually every book written on management today.”

Revolutionary for its day, here’s how McGregor described the difference in the two contrasting management styles. 

Theory X is based on the assumption that “the average human being has an inherent dislike of work and will avoid it if he can,” according to McGregor.  If you accept that assumption, “most people must be coerced, controlled, directed, threatened with punishment to get them to put forth adequate effort toward the achievement of organizational objectives.”

Theory Y is based on a more promising and powerful view of human nature.  McGregor said, “The expenditure of physical and mental efforts in work is as natural as play or rest … and under the proper conditions employees not only accept, but seek responsibility.”  He challenged the conventional wisdom of the day with another assumption underlying Theory Y: “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.”  Theory Y is also at the heart of what is referred to now as “servant leadership,” a more empowering management style that fuels many of today’s high performance organizations.

Beyond the elegant insights at the heart of his management philosophy, McGregor also offers specific direction on how Theory Y should be applied in practice.  He called it “management by integration and self-control,” covering topics such as performance appraisal, administration of salaries and promotions, job descriptions, gain-sharing, staff-line collaboration, supervisor coaching of employees, management development and more.  Remarkably, the guidance on even the most tactical topics seems fresh and on target yet today.

An obvious question about McGregor’s ideas is this.  If Theory Y is such an obviously superior management method, why isn’t it the dominant approach by now?  At least two noteworthy reasons have been offered over the years:

• First, mixed messages continue to be conveyed in our management training with respect to the prevailing assumptions about human nature.  

• Second, organizations are still struggling with two competing aspects of human behavior highlighted by McGregor – the emphasis on individual influence and respect on the one hand, and the reliance on authority and control on the other. 

McGregor himself acknowledged that Theory Y wasn’t the ultimate answer.  As he said in the conclusion of his book, “It is not important that management accept the assumptions of Theory Y.  These are one man’s interpretations of current social science knowledge, and they will be modified – possibly supplanted – by new knowledge within a short time.  It IS important (though) that management abandon limiting assumptions like those of Theory X.”

Whatever the reason so many organizations continue to fall short of tapping the full measure of employee potential, The Human Side of Enterprise remains a beacon of insight that helps light the path to a saner and more successful way to optimize human performance in the workplace.

Written by Les Landes