Management is responsible for organizing the elements of productive enterprise money, materials, equipment and people in the interest of economic ends.
With respect to people, this is a process of directing their efforts, motivating them, controlling their actions, modifying their behaviour to fit the heeds of the organization.
Without the active intervention by management, people would be passive, even resistant to organisational needs. They must therefore be persuaded, rewarded, punished controlled and directed. He named this as theory X. Theory X explains traditional manager’s attitudes. According to this theory, McGregor assumes:
(a) Men are indolent. They work as little as possible.
(b) Men lack ambition, dislike responsibility and prefer to be led.
(c) Men are inherently self-centred and thus are indifferent to the organization’s needs.
(d) Men are resistant to’ change, and
(e) Men are motivated only by monetary incentives.
This of course, is a pessimistic attitude towards mankind. This is based on the philosophy and belief that people are motivated by monetary gains, fringe benefits, threats and punishments. In other words, this theory is based on the “carrot” and “stick” approach to the motivation. But this “carrot” and “stick” approach cannot be successful for all the people for all the times. Though it may be useful under certain circumstances.
McGregor has realized that management by direction and control, whether implemented with hard or soft approach, fails under today’s conditions to provide effective motivation of human effort toward organisational objectives.
It fails because direction and control are useless methods of motivating people whose physiological and safety needs are reasonably satisfied and whose social, egoistic and self-fulfilment needs are predominant.
Thus, realizing the limitations of the theory X McGregor developed an alternative theory which is known as theory Y. This theory assumes:
(a) Management is responsible for organizing the elements of productive enterprise- money, materials, equipment and people in the interest of economic ends.
(b) People are not by nature passive or resistant to organizational needs. They have become so as a result of experience in organisations.
(c) The motivation, the potential for development, the capacity for assuming responsibility, the readings to direct behaviour towards organisational goals are all present in people. Management does not put them there. It is a responsibility of management to make it possible for people to recognize and develop those human characteristics for themselves.
(d) The essential task of management is to arrange organisational conditions and methods of operation so that people can achieve their own goals best by directing their own efforts towards organizational objectives.
This is a process primarily of creating opportunities, releasing potential, removing obstacles, encouraging growth, providing guidance. It is what Peter Drucker has called management by objectives in contrast to “management by control”.
McGregor has, however, pointed out following difficulties in motivating workers in accordance with theory Y:
The conditions imposed by conventional organizational theory and by the approach of scientific management, for the past half century have tied men to limited jobs which do not utilize their capabilities, have discouraged the acceptance of responsibility, have encouraged passivity and have eliminated meaning from work.
Man’s habits, attitudes, expectations his whole concept of membership in an industrial organisation have been conditioned by his experience under these circumstances. Change in the direction of theory Y will be slow, and it will require extensive modification of the attitudes of management and workers alike.
McGregor has further added that people today are accustomed to being directed, manipulated and controlled in industrial organizations and to finding satisfaction for their social, egoistic, and self fulfillment needs away from the job.
This is true of much of management as well as of workers. “Genuine industrial citizenship”, to borrow again a term from Drucker is a remote and unrealistic idea, the meanings of which have not even been considered by most members of industrial organizations.
Another way of saying, this is that theory X places exclusive reliance upon external control of human behaviour, while theory Y relies heavily on self-control and self-direction. It is worth noting that this difference is the difference between treating people as children and treating them as natural adults. After generations of the former, we cannot expect to shift to the latter over-night.
Theory X and theory, Y, as propounded by McGregor, have a tremendous effect on the modern managerial thinking. These have helped us in understanding the nature of human motivation.