In 1961, on his second day of classes in the University of Western Ontario’s Graduate School of Business Administration, a young Robert Cunningham bought The Human Side of Enterprise, by Douglas McGregor. The book became a classic and changed forever how organizations view and treat employees. The Human Side of Enterprise also had a powerful impact on Mr. Cunningham, who would graduate from Western with an MBA and go on to a successful career of more than 50 years in labour relations and human resources management in the public, private and not-for-profit sectors. In this article, written to mark the 50th anniversary off his graduation from Western, and in recognition of Douglas McGregor’s great contribution, Mr. Cunningham describes the impact McGregor’s book had on him and organizational behaviour.

It is hard to believe that fifty years ago, in September 1961, I arrived at the Graduate School of Business Administration in London, Ontario to start my studies in the two-year MBA Program at Western. On my second day, I purchased a management book entitled, The Human Side of Enterprise, written in 1960 by Douglas McGregor¹. I bought it because of my passion for people and my keen interest in how the application of behavioural science to management practices might improve productivity in the organization. McGregor lived a relatively short life, from 1906-1964, passing away at age fifty-eight. Those who have read his masterpiece are glad that he lived long enough to complete it.

I was able to purchase McGregor’s book for $5.75. The concepts he presented have remained with me for fifty years, and I have shared them with many colleagues over the course of my career in labour relations and human resources management. He was a person who believed that people should come first in every organization and he devoted himself to selling managers on becoming believers in taking into consideration the things that motivated positive changes in human behaviour. My daughter refers to McGregor’s concepts in her own consulting work today. McGregor clearly let you know that he passionately believed in the entire contents of his book. He wanted you to think in-depth about what he was professing, and he sincerely hoped that you would incorporate his thoughts into your work life.

It is interesting to note that exactly forty years after he wrote the book, and as the new millennium was dawning, three management theorists (Gary Hail, Warren Bennis and Deborah C. Stephens) teamed up to write Douglas McGregor, Revisited: Managing the Human Side of Enterprise². These three individuals gave McGregor special credit for his still-valuable theories. A noteworthy quotation from Peter F. Drucker was included on the cover of the book: “With every passing year, McGregor’s message becomes ever more relevant, more timely, and more important.”

McGregor’s Theory X and Theory Y were the foundation of The Human Side of Enterprise. Theory X is based on a philosophy that does not treat employees as human beings and that is implemented by a dictatorial style of management. On the other hand, Theory Y treats employees in a dignified manner and involves them fully. McGregor based Theory X on three core assumptions:

1. The average human being has an inherent dislike of work and will avoid it if at all possible;
2. Because of this human characteristic of dislike of work, most people must be coerced, controlled, directed, and threatened with punishment to get them to put forth adequate effort toward the achievement of organizational objectives versus just personal objectives;
3. The average human being prefers to be directed, wishes to avoid responsibility, has relatively little ambition, and wants security above all else.³

Included in this conventional theory there are several additional beliefs associated with Theory X, perhaps expressed less explicitly, but implied throughout the book:

1. The average man (or woman) is by nature indolent. He or she works as little as possible;
2. He or she lacks ambition, dislikes responsibility, and prefers to be led;
3. He or she is inherently self-centered, indifferent to organizational needs;
4. He or she is by nature resistant to change;
5. He or she is gullible, not very bright, the ready dupe of the charlatan and the demagogue.⁴

In 1960, McGregor felt that the set of assumptions that he attributed to Theory X influenced management strategy in a major way across a wide spectrum of American industry. His analysis of what sometimes appeared to be new strategies such as decentralization, management by objectives, consultative supervision, democratic leadership and the likes were in fact only old ideas presented in a different way. In effect, these new concepts would not work in many organizations because management implemented them under Theory X philosophy.

Ever since I read McGregor’s book for the first time, I have often wondered why managers who were knowledgeable about the Theory X core assumptions felt that they did not function in this way, when in actual fact they did. In many situations I believe that the inappropriate use of power tended to find many management personnel well under the Theory X umbrella, despite their own denial of the fact.

A practice used by many companies today is restructuring, which I often feel falls under Theory X. This practice allows senior management to cover up ineffective management activities by changing the structure of the company and to then terminate a group of employees without fear of wrongful dismissal lawsuits. This practice allows a company to cover up shortcomings and ultimately, unfairly, to pin the tails on the wrong donkeys. McGregor, via his Theory X and Theory Y core assumptions, helps us to clearly see today that many managers harbour these very negative assumptions despite McGregor’s presentation of a new option in his alternative Theory Y in 1960.

McGregor introduced Theory Y to management as a positive approach to replace the commonly used Theory X negative approach for managing employees. McGregor really believed that his Theory Y proposition, if followed closely, could bring about a major improvement in treating employees as human beings. He felt it was most important to give due consideration to the human side of each and every employee.

McGregor’s Theory Y assumptions (if followed) would make things much better for more managers today, more than fifty years after he documented them for all to see:

1. The expenditures of physical and mental effort in work is as natural as play or rest;
2. External control and the threat of punishment are not the only means for bringing about effort toward organizational objectives. Men and women will exercise self-direction and self-control in the service of objectives to which they are committed;
3. Commitment to objectives is a function of the rewards associated with the achievement;
4. The average human being learns, under proper conditions, not only to accept, but to seek responsibility;
5. The capacity to exercise a relatively high degree of imagination, ingenuity, and creativity in the resolution of organizational problems is widely, not narrowly, distributed in the population;
6. Under the conditions of modern industrial life, the intellectual potentialities of the average human being are only partly utilized.⁵

As I reflect on McGregor and my own career, my question is this: What are you and your organization doing in 2011 to fully live up to this most important of the assumptions that underpin Theory Y?

In expounding on Theory Y, McGregor observed that the use of human talent in many organizations was not limited by the human element. Rather, the real problem was management’s lack of sensitivity and the necessary mental capacity to develop ways to utilize the true potential of its employees. In his view, many people in positions with managerial power and responsibility could not see that productivity declined when employees were not treated in a positive and challenging manner.

McGregor was really the first management theorist who alerted management to the fact that they didn’t have any idea of how to effectively utilize the human element. Managers functioning under Theory X may tend to hide behind their employees, accusing them – and only them – as the cause of less-than-satisfactory organizational performance. McGregor contended that the responsibility for overall performance must rest with management. He felt that if employees are lacking desire or have a “don’t care” attitude, they will nit take the initiative in their work. Theory Y clearly outlines that the actual causes of poor performance definitely rest with management and the way they organize and manage employees. McGregor pointed out that any organization that ignores the needs of its employees would suffer the consequences of poor results. He was emphatic that real success depends on the organization’s recognition of and consideration to both the organization’s needs, as well as the needs of all employees.

It is a sad fact that in 1960, when McGregor wrote The Human Side of Enterprise, Theory X was adopted by a high percentage of organizations. These organizations just could not accept the fact that the way they were doing things with their employees was the root cause of less-than-satisfactory results. Today it is also sad to realize, that despite the passing of fifty years, there are still many Theory X organizations around the world.

Many managers in 1960 thrived on thinking they had power over their employees, and the ability to force them to do their bidding. The results of this philosophy were almost always inferior to what they could have been with a more humanistic approach. You do not get commitment from human beings unless you let them know that you care about them. You must also let them know that you appreciate their need to feel that they are an important part of the organization, and inform them about where the organization is planning to go in the future. It has been proven that if employees know that they are valued and know what is going on, the results should be positively impacted.

It was clear that The Human Side of Enterprise marked the beginning of the human relations movement in the field of management practice. It should be clearly noted that McGregor understood that employees’ behaviour reflects their attitudes. Theory Y managers should constantly be taking action that promotes positive attitudes in the organization. When things are kept on a positive wavelength there is a much better chance for satisfactory results. Managers who do not have employees working with them should be smart enough to know that they must change the way they manage the human element.

McGregor strongly believed that organizations that best utilized the human element and the associated potential were the ones most likely to succeed. He also felt that properly organized employees would be surprised at how effective they could be. He draws a broad conclusion that the entire human element in an organization can only be effective and achieve best results if they are on a common wavelength and that they work together. When this happens all employees should be in a position to benefit from overall improved organizational results.

In searching for potential in individuals, I strongly feel that McGregor’s positive thoughts on self-appraisal in the performance appraisal process should be considered. Managers should want to learn from their subordinates to help them identify ways to improve the performance of each and every employee. That is the way of integrity in management.

I feel that the two books that I have referenced in the article would be excellent reading for MBA students and management personnel wanting to learn more about the human element in organizations. There is still ongoing evidence that many organizations and their management personnel could use a new approach to develop employee potential. I have always been amazed at the deep sensitivity McGregor exhibited regarding the number one strength and/or weakness in all organizations: the human element.

It is my sincere hope that this article will help you to think more about how you can improve how you deal with the most important human aspect of your organization.

The author is especially pleased to acknowledge the inspiration he received from the books, The Human Side of Enterprise by Douglas McGregor and Douglas McGregor, Revisited: Managing the Human Side of Enterprise by Gary Heil, Warren Bennis and Deborah C. Stephens, as referenced below.

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1. McGregor, Douglas. The Human Side of Enterprise, New York: McGraw–Hill Book Co., 1960.
2. Heil, Gary, Warren Bennis & Deborah C. Stephens. Douglas McGregor, Revisited: Managing the Human Side of Enterprise. New York: John Wiley & Sons, Inc., 2000.
3. McGregor, Douglas. The Human Side of Enterprise, New York: McGraw–Hill Book Co., 1960, pp. 33-34.
4. McGregor, Douglas. Leadership and Motivation: Essays of Douglas McGregor, The M.I.T. Press: Cambridge, Massachusetts, 1966, p.6.
5. McGregor, Douglas. The Human Side of Enterprise, New York: McGraw–Hill Book Co., 1960, pp. 47-48.