Introduction
The breadth of impact of Dr. McGregor’s classic work, his only book, astounded this writer. The book is seen by many as a powerful catalyst in the creation of the human relations movement, but its true imprint on our thinking is best demonstrated by the frequency and diversity of citations in leading books and journals over the last 43 years¹.  There were more references to this work in 2004 – than in 1966!

For the purposes of organization, this author’s significant learnings from Dr. McGregor’s work have been categorized under the following five areas; Assumptions, Motivation and Power, the Scientific Process, Dependence, and The Situational Approach.

Assumptions
The word “assumption” means something that one accepts or holds true – without proof or demonstration. This is the foundational concept of The Human Side of Enterprise; asking that we “examine our assumptions (implicit as well as explicit) about the most effective way to manage people”². In McGregor’s own words, “every managerial act rests on assumptions, generalizations, and hypotheses…that determine our predictions that if we do a, b will occur. Theory and practice are inseparable”². Believing that “behind every managerial decision or action are assumptions about human nature and human behavior”², Dr. McGregor puts forward two contrasting collections of assumptions of management called Theory X and Theory Y.

Theory X, what he called the “traditional view of direction and control”², rests upon key assumptions that presuppose that the average human being “has an inherent dislike of work and will avoid it if possible…must be coerced, controlled, directed, and threatened with punishment…and prefers to be directed, wishes to avoid responsibility, has relatively little ambition”².

In contrast, Dr. McGregor also defines a second theory, Theory Y, through which he feels organizational goals and individual goals may be successfully integrated.  Theory Y posits that; “the expenditure of effort in work is as natural as play or rest…man will exercise self-direction and self-control in the service of objectives to which he is committed, commitment is a function of associated rewards…the average human being learns not only to accept but to seek responsibility…that these capacities are widely, not narrowly, distributed in the population…and that the potentialities of the average human being are only partially utilized”².

McGregor’s conclusion as to the two sets of assumptions, outside of his own personal bias, is succinct; “It is not important that management accept the assumptions of Theory Y. These are one man’s interpretations of current social science knowledge…It is important that management abandon limiting assumptions like those of Theory X”².

Motivation and Power
Dr. McGregor establishes his views on human motivation in describing man as “a wanting animal – as soon as one of his needs is satisfied, another appears in its place…Man continuously puts forth effort…to satisfy his needs”².  He then uses Maslow’s hierarchy of needs to show the fallacy of most Theory X assumptions around employee motivation. McGregor accurately states that “by making possible the satisfaction of lower-level needs, management has deprived itself of the ability to use the control devices on which the assumptions of Theory X has taught it to rely; rewards, promises incentives or threats or other coercive devices”².

Motivation and power come into play within both Theory X and Y in the very descriptors of each set of assumptions; “coerced, controlled, directed, threatened”¹ for Theory X, and “the satisfaction of ego and self-actualization needs”² for Theory Y. The evidence of position power inherent in coercion and control is no more or less obvious that the evidence of personal power within a Theory Y role in which the manager strives to be seen as “a colleague whose experience and knowledge are at your disposal”². Dollars and cents as both motivator and power base are treated within Chapters 7 and 8 on the administration of salaries and promotions and the use of gain sharing mechanisms such as the Scanlon plan. McGregor’s views can be summed up on one hand in quoting “salary has more potency as a job dissatisfier than as a job satisfier”², and on the other hand in considering both equity and incentive in proposing that “measurement is, therefore, the key to equity in administering economic rewards”².

The “Scientific” Process
A significant, recurring theme found throughout The Human Side of Enterprise is that of a scientific or professional approach to management of the human enterprise.  In several chapters McGregor equates the behavioral sciences to the physical sciences in urging practitioners to “draw upon a reasonable and growing body of knowledge”², claiming that “the manager, vis-à-vis the social sciences will one day be no different that that of the engineer vis-à-vis the physical sciences or the doctor vis-à-vis chemistry or biology”². A very convincing example comes in the discussion that “we do not…dig channels with the expectation that water will flow uphill…yet many of our attempts to control behavior…consist in trying to make people behave as we wish without concern for natural law”². His final hope is that the professional manager draw more upon knowledge and science, and less so on merely personal experience.

Dependence
In supporting Theory Y assumptions Dr. McGregor relies on the concept of dependence and interdependence to make his case.  In proposing that the professional manager increases effectiveness in understanding, predicting and controlling behavior, he sets the stage that “control is a process of selective adaptation to…the degree of dependence in organizational relationships”².  He furthers his dismissal of Theory X assumptions through concepts of dependence in stating that “management of industry is becoming unable to rely on authority…in accomplishing organizational objectives – its dependence downward is too great to permit this unilateral means of control”². The fact that “interdependence is a central characteristic of the modern, complex organization”² is far truer today in 2009 than it was when written in 1960. McGregor puts it in perspective in Chapter 4 in that “Perfect integration of organizational requirements and individual goals and needs is not a realistic objective.  In adopting this principle, we seek that degree of integration in which the individual can achieve his goals best by directing his efforts toward the success of the organization”².

The Situational Approach
McGregor’s work is a foundational premise of a contingent or situational approach to leadership. Instead of singular reliance on control, McGregor points us towards various forms of influence; “The power to influence others is not a function of the amount of authority one can exert. It is, rather, a function of the appropriate selection of the means of influence – which the particular circumstances require”². He continues with “the managerial role is not a single, invariant one, but a complex of different roles"². McGregor sets out the concept of follower readiness in stating that “the dimensions of a managerial position can be precisely defined only for a particular incumbent in a particular set of circumstances at a given point in time”².

McGregor also treats presumably Theory Y behaviors of participation situationally in defending that “participation is not co-equivalent with the abdication of responsibility”², along with “the use of participation is to encourage the growth of subordinates” and that “there is no implication that more participation is better than less”².  Dr. McGregor consistently demonstrates a belief in the contingent nature of influence whether describing assumptions of Theory X or Theory Y. In recognition of McGregor’s perhaps paving the way for the situational influence precepts of follower development, true delegation and utilization of the follower resource, Jeff Mauzy and Richard Harriman in Creativity, Inc: Building an Inventive Organization put a nail in the coffin of Theory X by summarizing; “the effect of this management approach is to reduce the creative power of a 30,000-person organization to the top 100 leaders, a power reduction of 300 to 1”².

Questions for further discussion include:

1. Which theory or set of assumptions would be more prevalent today, almost 50 years after the book was written? Why is that?
2. What has changed since 1960 that has had the most impact on any shift or stagnation in managerial assumptions?
3. Dr. McGregor very profoundly observes that “over the long sweep of history there have been two major transitions with respect to the central means of controlling human behavior in organizational settings. The first was the transition from sheer physical force to reliance on formal authority². He continues that the “second transition has been under way for at least a century”² but that a major difficulty is that we are not clear what we are trending toward”².  What might we be trending toward? If not formal authority, what will be the central means of controlling human behavior?

References
¹Social Science Citation Index, 2004
²McGregor, Douglas. (2006). The Human Side of Enterprise, (Annotated Edition). New York: McGraw-Hill