theory x and theory y case study

CASE STUDY IV Theory X and Theory Y, System 1 and System 4

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Theory X and Theory Y (& Z): Employee Motivation Explained

Motivation is not straightforward; the motivational factors for each employee will not be the same across the entire organization (Sennewald & Baillie, 2016; Ryan & Deci, 2018).

Douglas McGregor’s (1960) Theory X and Theory Y challenged the long-standing autocratic approach to leadership, offering several important insights into motivating and leading more effectively (Pearson, 2020).

In this article, we dig deeper into McGregor’s approach and explore its potential to improve individual and organizational engagement and performance.

Before you continue, we thought you might like to download our three Positive Leadership Exercises for free . These detailed, science-based exercises will help you or others adopt positive leadership practices and help organizations thrive.

This Article Contains

A brief history of mcgregor’s motivation theory, diving deep into theory x, taking a closer look at theory y, theory x and theory y: examples in practice, applying theory x and theory y in management.

• Theory Z: Combining Eastern & Western Management Approaches
• Finding the Right Balance Between Theory X and Y (& Z)

Resources From PositivePsychology.com

A take-home message.

Organizations have long recognized that to be competitive, they must create an environment that inspires and drives staff to be their best, for themselves and the performance of their business (Sennewald & Baillie, 2016).

When MIT professor Douglas McGregor (1960) wrote The Human Side of Enterprise , he split corporate thinking into two camps. His Theory X and Theory Y recognized the importance of influence in managerial leadership (MIT Sloan School of Management, n.d.).

As a result, his approach offered several valuable insights into workplace motivation by challenging our assumptions about human nature and behavior (McGregor, 1960).

According to McGregor’s (1960) model, leaders typically believe one of the following (Villoria, 2022; Pearson, 2020):

• Theory X A more traditional, autocratic style of leadership , direction, and control that assumes humans typically dislike work and must be “coerced, controlled, directed, threatened with punishment to get them to put forth adequate effort” (Pearson, 2020, p. 84)
• Theory Y Recognizes that as humans, under the proper conditions, we accept and seek out responsibility and are ready and willing to engage our imagination, ingenuity, and creativity. The modern workplace often fails to create an environment that fully uses our potential.

McGregor’s Theory Y became a vital alternative to the established view “at a time when labor-management relations were becoming more adversarial,” recognizing “that there was another way to view workers and leadership” (MIT Sloan School of Management, n.d., para. 7).

Kerry Goyette’s popular video discusses how to unleash employees’ motivation and leverage it for success.

The man behind the theory

Undoubtedly, McGregor’s early working years shaped how he viewed the needs of the workforce and recognized the importance of supportive (less overbearing) leadership (MIT Sloan School of Management, n.d.).

Starting in high school, McGregor worked at the family-run McGregor Institute, which offered temporary lodgings to transient workers, and even played piano during the church services they held.

He subsequently enrolled in the psychology department at Wayne State University in Detroit. He later dropped out to begin working at a gas station as a pump attendant in Buffalo, New York, before being promoted to regional gas station manager (MIT Sloan School of Management, n.d.).

He later returned to education, completing his degree in 1932 while managing the McGregor Institute and still finding time to run the soup kitchen for the unemployed. He then moved to Harvard University, achieving his MA and PhD in psychology before setting up the Industrial Relations Section at MIT.

He ultimately rose to professor of management at the MIT Sloan School of Management (n.d.).

Following the publication of The Human Side of Enterprise , McGregor (1960) became known as the proponent of Theory Y, yet continued to urge choice. Managers should “reflect on their own assumptions and come to their own conclusion” (MIT Sloan School of Management n.d., para. 11).

Theory X — the more traditional view of direction and control — assumes that, where possible, humans avoid work and responsibility. As such, they not only need but also want to be directed.

If true, organizational objectives are only achievable in response to adequate control and appropriate punishment (Pearson, 2020).

It’s important because a manager’s perspective and attitude are self-fulfilling. Assuming employees will get away with the least effort possible means they are more likely to do just that. The Golem effect, as it is known, is seen in the workplace, education, and elsewhere (Fotsch & Case, 2017).

The following are three foundational assumptions upon which theory X rests (Pearson, 2020):

• Humans inherently dislike work and will avoid it whenever and wherever they can.
• “People must be coerced, controlled, directed, and threatened with punishment to get them to put forth adequate effort toward the attainment of organizational objectives” (Pearson, 2020, p. 109).
• Workers wish to be directed, as they have limited ambition and choose security over responsibility.

A leader with such assumptions prefers the autocratic style rather than nurturing, often ignoring their employees’ psychological safety (Prottas & Nummelin, 2018).

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In contrast to the autocratic approach of Theory X, Theory Y encourages management to be more supportive of their employees (Pearson, 2020).

Theory Y assumes that employees want to work and will engage their imagination, determination, and creativity, as well as be self-directed in pursuing their personal and organizational goals (Fotsch & Case, 2017).

As such, it rests upon the following six assumptions (Pearson, 2020):

• Humans do not inherently dislike work; instead, it is natural, like play and rest.
• We characteristically engage in self-direction and self-control to reach our goals, rather than needing external coercion and threat of punishment.
• Ego satisfaction and self-fulfillment are, in themselves, rewarding.
• We seek (rather than shirk) responsibility when the conditions are right.
• Generally, humans display a “relatively high degree of imagination, ingenuity, and creativity in seeking to solve an organizational problem” (Pearson, 2020, p. 110).
• Our modern working environment leaves a great deal of the average person’s potential untapped.

Therefore, according to McGregor, Theory Y “emphasizes the average person’s intrinsic interest in his work, his desire to be self-directing and to seek responsibility, and his capacity to be creative in solving business problems” (Morse & Lorsch, 1970, para. 4).

Over the years, more open-book, Theory Y-driven companies have engaged with their teams, asking questions such as (Fotsch & Case, 2017):

How could the company be more profitable? What opportunities does the staff have for improvement?

When staff members are treated like business owners, they behave accordingly (Fotsch & Case, 2017).

The multinational beverage company Coca-Cola employs more than 700,000 individuals around the world. For many years, Coca-Cola (like many other organizations of the time) practiced a Theory X approach to leadership. Management was hierarchical, and decision-making was centralized. The autocratic approach demanded that all employee work had to be closely scrutinized, resulting in reduced productivity and falling profits.

Coca-Cola needed to change. So, to test leadership approaches, they continued to use Theory X with its bottling investments division while introducing the new approach (Theory Y) in its corporate group (Fotsch & Case, 2017).

The results were dramatic. They found that adopting Theory Y, engaging employees more, and giving them ownership increased their performance and boosted commercial success (Fotsch & Case, 2017).

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Theory X and Theory Y are more than leadership concepts. They have real-world applications within corporate structures (Pearson, 2020).

We should note that Theory X can be valuable for leadership in large organizations, mainly where tasks are short, repetitive, clearly defined, and do not require too much decision-making. Employee skills may be limited, but actions can be clearly documented (Indeed, 2023).

On the other hand, smaller organizations (or larger ones with less easily defined roles) can benefit from adopting Theory Y. Rules and procedures remain more flexible. Staff members are encouraged to take ownership of their work and rely on their discretion and expertise (Indeed, 2023).

In truth, Theory X and Theory Y represent two extremes. Most organizations will find a middle ground, as we see in the following pointers (Pearson, 2020):

How do we apply Theory X in the workplace?

• Put in place a high level of structure.
• Define and control every step performed by each employee.
• Offer a detailed explanation of each role.
• Limit decision-making in employees and provide short-term goals.
• Capitalize on commonalities, encouraging strong bonds to improve productivity and efficiency.
• Maintain tight deadlines, as most tasks are short in duration.
• Offer regular positive feedback and acknowledge daily effort.

How do we apply Theory Y in the workplace?

• Create a loose or flexible management structure appropriate to the roles and goals.
• Provide staff with high autonomy.
• Encourage individualism and creativity, particularly in hard-to-define tasks.
• Treat staff as experts. Allow them to choose how and when they perform tasks.
• Encourage individualism, but support teamwork.
• Be patient, as tasks are often longer, yet show encouragement and support.

Theory Z: Combining Eastern & Western Management Approaches

William Ouchi proposed Theory Z in his 1981 leadership book Theory Z: How American Business Can Meet the Japanese Challenge . While many at the time thought of Theory Z as a sequel to Theory X and Theory Y, it was dramatically different (Barney, 2004).

The crucial difference was that “Theory Z changed the unit of analysis from the individual to the system within which an individual operated” (Barney, 2004, p. 106). It was a sociological approach.

America’s realization that Japanese automakers were offering more affordable, higher-quality vehicles than Ford, General Motors, and Chrysler in the early 1980s contributed to Theory Z’s uptake (Barney, 2004).

The new style included human resources practices that led to stable, long-term employment and group-based reward systems. It also considered employee beliefs, values, and needs (Barney, 2004).

Finding the Right Balance Between Theory X and Y (& Z)

There is no perfect leadership approach to motivating staff (Pearson, 2020).

Theory X uses a more authoritarian style that can demotivate employees and lead to resistance, while Theory Y recognizes staff (when given the proper conditions) as self-motivated. And yet, the appropriateness of leadership style depends on the organization and its tasks (Pearson, 2020).

Theory Z motivates employees by considering their needs, such as offering stable employment, emphasizing the importance of the quality of employee performance rather than solely quantity, and offering appropriate rewards (Barney, 2004).

To find the right balance between Theories X, Y, and Z, tailor and personalize the leadership approach (Pearson, 2020; Barney, 2004).

• Employees’ needs and personalities – Personalize the approach to the individuals and the tasks.
• Degree of participation – Understand how much involvement in decision-making is appropriate.
• Goals and performance metrics – Consider whether the goals are short- or long-term and how progress will be measured.
• Need, trust, and commitment – In all organizations, it is vital to emphasize long-term employment and build two-way loyalty between the organization and its staff.
• Readiness to shift – A flexible approach to management allows for responsiveness to business needs, team dynamics, and external factors.

Raising expectations, boosting motivation, and securing commitment will result in better results and lives (Fotsch & Case, 2017).

17 Exercises To Build Positive Leaders

Use these 17 Positive Leadership Exercises [PDF] to help others inspire, motivate, and guide employees in ways that enrich workplace performance and satisfaction. Created by Experts. 100% Science-based.

We have many resources available for HR professionals, coaches, or strategists working with leaders and their staff that support their motivation and leadership skills.

Our free resources include:

• Setting SMART+R Goals Helping clients set and work toward specific, clear, and measurable goals is energizing and motivating.
• Why Do You Do What You Do? Emotional awareness is vital for improving communication between leaders and employees.
• Workplace Strength Cards Understanding strengths can dramatically improve individual and team engagement, motivation, and performance.
• Workplace Mindfulness Mindfulness can help individuals deal better with the stress in their lives and roles.

More extensive versions of the following tools are available with a subscription to the Positive Psychology Toolkit© , but they are described briefly below:

• Workplace Comfort Zone Analysis

In this exercise, clients are invited to reflect on their current job and decide whether they are within or outside their comfort zone on a scale known as the comfort continuum.

Assessments involve scoring several questions, including:

When was the last time you tried something new at work? How much are you learning new things at work right now? To what extent do you feel you are developing your skills and/or knowledge at work? To what extent does your work feel repetitive and/or monotonous? When was the last time you took a risk at work? Do you ever feel like it is time for a change? If so, what would you like to change?

The answers provide input for goal setting and achievement actions.

• Using Guided Imagery to Envision Organizational Success

This exercise supports leaders in drafting their vision story through guided imagery. The process can stimulate positive emotions, enhance wellbeing, reduce stress and anxiety, and improve motivation.

• Step one – The individual or group is introduced to guided imagery and why it is so valuable.
• Step two – They are encouraged to relax before being walked through a guided imagery session. For instance:

Imagine yourself existing in this ideal future. What does your organization look like? How has it changed? What role are you playing? Take a moment to see the details.

• Step three – Individuals craft a vivid vision story before distilling it into something more concrete and actionable: a breakthrough statement.

If you’re looking for more science-based ways to help others develop positive leadership skills, check out this collection of 17 validated positive leadership exercises . Use them to equip leaders with the skills needed to cultivate a culture of positivity and resilience.

There are many approaches to leadership. Primarily, they focus on the need to engage with, connect to, and motivate staff to work toward individual, team, and corporate goals.

Douglas McGregor (1960) introduced Theory X and Theory Y to illuminate two extremes in management styles.

Theory X is often considered more traditional and can be described as autocratic. The assumption is that employees are unmotivated and will fail to perform unless controlled, coerced, and even punished.

Theory Y is radically different. Here, the leader believes that staff are inherently motivated to do a good job and, with the right circumstances, can deliver on realistic and shared goals.

McGregor recognized that most leadership teams sit somewhere on a continuum between Theory X and Theory Y. While neither is 100% appropriate all the time, most organizations would benefit from adopting more Theory X assumptions.

After all, even workers performing relatively unskilled tasks will be more motivated and energized if they control how they conduct their work, particularly if they focus on ensuring quality and performance.

Theory Z brings other considerations, combining best practices from Eastern and Western management approaches. It recognizes the importance of considering the needs of the employees and fostering motivation through group-based rewards and job security.

Ultimately, Theories X, Y, and Z offer helpful lenses through which coaches, leaders, and employees can gain insight when examining their organization’s management style. A fair and actionable assessment can lead to positive changes that improve the employees’ and business’s health and wellbeing.

We hope you enjoyed reading this article. Don’t forget to download our three Positive Leadership Exercises for free .

• Barkema, H. G., Chen, X.-P., George, G., Lup, Y., & Tsui, A. S. (2015). West meets East: New concepts and theories. Academy of Management Journal , 58 (2), 460–479.
• Barney, J. B. (2004). William Ouchi’s Theory Z: How American business can meet the Japanese challenge. The Academy of Management Executive , 18 (4), 106–107.
• Fotsch, B., & Case, J. (2017, July 11). The challenge of being a theory Y manager . Forbes. https://www.forbes.com/sites/fotschcase/ 2017/07/11/the-challenge-of-theory-y/
• Indeed. (2023, January 9). McGregor’s Theory X and Y: What they are and how to apply . https://uk.indeed.com/career-advice/career-development/mcgregor-theory-x-and-y
• McGregor, D. (1960). The human side of enterprise . McGrawHill.
• MIT Sloan School of Management. (n.d.). Douglas M. McGregor . Retrieved April 22, 2024, from https://mitsloan.mit.edu/institute-work-and-employment-research/douglas-m-mcgregor
• Morse, J., & Lorsch, J. W. (1970 May). Beyond theory Y . Harvard Business Review. https://hbr.org/1970/05/beyond-theory-y
• Pearson, G. (2020). Remaking the real economy . Policy Press.
• Prottas, D. J., & Nummelin, M. R. (2018). Theory X/Y in the health care setting: Employee perceptions, attitudes, and behaviors. The Health Care Manager , 37 (2), 109–117.
• Ryan, R. M., & Deci, E. L. (2018). Self-determination theory: basic psychological needs in motivation, development, and wellness . Guilford Press.
• Sennewald, C. A. & Baillie, C. (2016). Effective security management (6th ed.). Elsevier.
• Villoria, M. (2022). Contingency theory of leadership. In A. Farazmand (Ed.),  Global encyclopedia of public administration, public policy, and governance . Springer.

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The Modern-day Relevancy Of Theory X and Theory Y

In this post, I would like to take the time to shed light on a golden oldie management concept: Theory X vs. Theory Y. Despite being developed in the 1950s, Douglas McGregor's Theory X and Theory Y continues to be influential in modern management theory and practice. Why is this? And what is the relevance to modern management contexts?

Over the last few decades, organizations have faced the challenge of choosing between two conflicting approaches to managing their people.

The first approach, known as the classical school , emphasizes the need for clear lines of authority, defined roles, and ranks equal to levels of responsibility.

The second approach, known as the participative approach , focuses on involving employees in decision-making processes to increase their motivation.

These are also known as Theory X and Theory Y. And you can probably guess which one we prefer.

In fact, one could argue that by defining this theory, the first major steps to defining engagement in the workplace were taken. Basically, the rebellion started with this.

What is Theory X and Theory Y?

MIT management professor Douglas McGregor's “ Theory X and Theory Y ” distinguishes between the assumptions about human motivation underlying these approaches.

Basically, Management Theory X and Theory Y are two personality-based styles.

Theory X assumes that people dislike work. People must be coerced, controlled, and directed toward organizational goals to get them to work.

On the other hand, Theory Y asserts that people are naturally interested in their work, desire self-direction, and are capable of solving business problems creatively.

McGregor ultimately concluded that the participative approach, or Theory Y, is the more desirable option. (Yeah, we got that too.)

Sadly, there are still a lot of Theory X managers for some reason.

Theory X management

Theory X management can be roughly split into two variations: the hard approach and the soft approach.

The hard approach is characterized by micromanagement, intimidation, anger, and punishment. You see this primarily in vertical hierarchical structures, where this approach is deemed necessary for managing unmotivated employees who need a high level of oversight to get work done—as if they are spiteful children who won’t behave unless you give them a juice box or something.

The soft approach, on the other hand, involves attempting to change the attitudes and behavior of employees by building trust and being more lenient and forgiving.

This approach may involve praising even small accomplishments and improving work satisfaction by endowing the job with prestige that it may not inherently have. This is sort of a patronizing (i.e., condescending) way of motivating staff.

Nevertheless, both the hard and soft approaches are still based on the assumption that employees are inherently lazy, apathetic, and uneducated, which can lead to workplace inequity and toxic work culture.

Theory Y management

Theory Y says that team members find meaning and dignity in their work and, as a result, perform well without much supervision.

These employees are motivated by an internal drive, can work independently, and are expected to produce high-quality work.

Obviously, there are several other advantages to managing employees using the Theory Y approach.

Workers who fit into this category tend to have better relationships at work—both with management (if there is middle management, not with flat organizations ) and their colleagues.

Moreover, Theory Y staff is also believed to be consistently more productive.

However, there might also be some disadvantages to Theory Y management. Some argue that Theory Y may overlook the class of employees who require more leadership guidance and external motivation, which might eventually lead to a loss of productivity.

The move from X to Y

The million-dollar question then becomes how one can move from a Theory X mindset to a Theory Y mindset.

To make this change, you will need to make some significant changes in your approach and beliefs on treating and motivating people. Here are some concrete steps you might want to take:

Recognize that employees are capable and trustworthy and therefore do not need to be controlled via a formal managerial hierarchy. That is (obviously) a great place to start.

Start believing that people can act autonomously, take initiative when motivated, and honor their commitments when they choose to make them autonomously.

Empower employees with the authority to make all major decisions that involve their own work so they can take ownership of their work. This helps foster a sense of autonomy and entrepreneurship.

Encourage radical transparency and open communication among team members. This helps to create a sense of shared responsibility among team members and serves as a mechanism for peer control.

Provide team members with the resources and support they need to be successful in their roles. This involves giving them the authority, resources, tools, equipment, and technology necessary to do their jobs effectively.

Foster a working climate that supports employee growth and development. This might involve providing opportunities for training and professional development and creating a supportive and collaborative culture.

By adopting these beliefs and practices, we can all transform towards a dominant Theory Y mindset and create a more engaging work environment.

Future-proof

To cut a long story short, the theory may be old, but it is not quite outdated just yet.

One of the key challenges for most traditional workplaces is to move from a Theory X mindset to a Theory Y mindset, which requires a foundational shift in the way we think about human motivation and potential.

By doing so, all companies can create a work environment that promotes meaning, autonomy, and mastery.

Just the way we like it.

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Module 6: Motivation in the Workplace

Mcgregor’s theory x and theory y, learning outcomes.

• Differentiate between Theory X and Theory Y

The idea that a manager’s attitude has an impact on employee motivation was originally proposed by Douglas McGregor , a management professor at the Massachusetts Institute of Technology during the 1950s and 1960s. In his 1960 book, The Human Side of Enterprise , McGregor proposed two theories by which managers perceive and address employee motivation. He referred to these opposing motivational methods as Theory X and Theory Y management. Each assumes that the manager’s role is to organize resources, including people, to best benefit the company. However, beyond this commonality, the attitudes and assumptions they embody are quite different.

According to McGregor, Theory X management assumes the following:

• Work is inherently distasteful to most people, and they will attempt to avoid work whenever possible.
• Most people are not ambitious, have little desire for responsibility, and prefer to be directed.
• Most people have little aptitude for creativity in solving organizational problems.
• Motivation occurs only at the physiological and security levels of Maslow’s hierarchy of needs.
• Most people are self-centered. As a result, they must be closely controlled and often coerced to achieve organizational objectives.
• Most people resist change.
• Most people are gullible and unintelligent.

The hard approach to motivation relies on coercion, implicit threats, micromanagement, and tight controls— essentially an environment of command and control. The soft approach, however, is to be permissive and seek harmony in the hopes that, in return, employees will cooperate when asked. However, neither of these extremes is optimal. The hard approach results in hostility, purposely low output, and extreme union demands. The soft approach results in a growing desire for greater reward in exchange for diminished work output.

It might seem that the optimal approach to human resource management would lie somewhere between these extremes. However, McGregor asserts that neither approach is appropriate, since the basic assumptions of Theory X are incorrect.

Drawing on Maslow’s hierarchy of needs, McGregor argues that a need, once satisfied, no longer motivates. The company uses monetary rewards and benefits to satisfy employees’ lower-level needs. Once those needs have been satisfied, the motivation disappears. Theory X management hinders the satisfaction of higher-level needs because it doesn’t acknowledge that those needs are relevant in the workplace. As a result, the only way that employees can attempt to meet higher-level needs at work is to seek more compensation, so, predictably, they focus on monetary rewards. While money may not be the most effective way to self-fulfillment, it may be the only way available. People will use work to satisfy their lower needs and seek to satisfy their higher needs during their leisure time. However, employees can be most productive when their work goals align with their higher-level needs.

McGregor makes the point that a command-and-control environment is not effective because it relies on lower needs for motivation, but in modern society those needs are mostly satisfied and thus are no longer motivating. In this situation, one would expect employees to dislike their work, avoid responsibility, have no interest in organizational goals, resist change, etc.—creating, in effect, a self-fulfilling prophecy. To McGregor, a steady supply of motivation seemed more likely to occur under Theory Y management.

The higher-level needs of esteem and self-actualization are ongoing needs that, for most people, are never completely satisfied. As such, it is these higher-level needs through which employees can best be motivated.

In strong contrast to Theory X, Theory Y management makes the following assumptions:

• Work can be as natural as play if the conditions are favorable.
• People will be self-directed and creative to meet their work and organizational objectives if they are committed to them.
• People will be committed to their quality and productivity objectives if rewards are in place that address higher needs such as self-fulfillment.
• The capacity for creativity spreads throughout organizations.
• Most people can handle responsibility because creativity and ingenuity are common in the population.
• Under these conditions, people will seek responsibility.

McGregor recognized that some people may not have reached the level of maturity assumed by Theory Y and may initially need tighter controls that can be relaxed as the employee develops.

If Theory Y holds true, an organization can apply the following principles of scientific management to improve employee motivation:

• Decentralization and delegation : If firms decentralize control and reduce the number of levels of management, managers will have more subordinates and consequently need to delegate some responsibility and decision making to them.
• Job enlargement : Broadening the scope of an employee’s job adds variety and opportunities to satisfy ego needs.
• Participative management : Consulting employees in the decision-making process taps their creative capacity and provides them with some control over their work environment.
• Performance appraisals : Having the employee set objectives and participate in the process of self-evaluation increases engagement and dedication.

If properly implemented, such an environment can increase and continually fuel motivation as employees work to satisfy their higher-level personal needs through their jobs.

Practice Question

• Douglas McGregor's Theory X and Theory Y. Authored by : Envision Software. Located at : https://web.archive.org/web/20160203121235/http://www.envisionsoftware.com/articles/Theory_X.htmlhttps://web.archive.org/web/20160203121235/http://www.envisionsoftware.com/articles/Theory_X.html . License : CC BY-NC: Attribution-NonCommercial
• Revision and adaptation. Authored by : Linda Williams and Lumen Learning. Located at : https://courses.lumenlearning.com/wmopen-introductiontobusiness/chapter/introduction-to-theory-x-theory-y-and-theory-z/ . License : CC BY-NC: Attribution-NonCommercial
• Woman with bitcoin. Authored by : Icons8 team. Provided by : Unsplash. Located at : https://unsplash.com/photos/sBbm92cRIQo . License : CC0: No Rights Reserved . License Terms : Unsplash License
• Untitled. Authored by : Kaleidico. Provided by : Unsplash. Located at : https://unsplash.com/photos/3V8xo5Gbusk . License : CC0: No Rights Reserved . License Terms : Unsplash License

Demystifying Theory X and Theory Y: A Comprehensive Analysis

Table of contents.

McGregor’s groundbreaking theories on motivation, Theory X and Theory Y , have revolutionized how managers motivate workers and people in the workplace. Understanding motivation theory is crucial for effective leadership in today’s organizations. It helps leaders align organizational goals, make informed decisions, and establish a clear hierarchy. Theory X suggests that typical workers, or employees, have an inherent dislike for work and need strict supervision from their manager to stay productive. This theory is often applied in the context of performance appraisals. On the other hand, Theory Y posits that workers are self-motivated, seek responsibility, and can excel when given autonomy and trust. This is especially relevant in the context of performance appraisals, as managers can evaluate the worker’s ability to perform and contribute to the overall productivity of the product. These contrasting approaches shed light on employee motivation and behavior within an organization, regardless of the manager’s level. It is important to consider different types of employees when designing a website.

By understanding the different types of managers, leaders can adapt their management style to optimize productivity and engagement on the website. Theory X and Theory Y provide insights into how to create a conducive work environment at both the manager and employee level. The manager’s soft approach of Theory Y emphasizes collaboration, empowerment, and creating a positive work culture on the website. This includes understanding and managing cookies. In contrast, the hard approach of Theory X relies on command-and-control tactics with a focus on rewards and punishments for the manager’s website and the use of cookies.

In this blog post, we will explore McGregor’s theory x and theory y in depth, discussing their implications for leadership styles and employee performance within organizations. Additionally, we will examine how these theories can be applied by managers to improve employee performance and create a positive work environment. Moreover, we will delve into the importance of recognizing and rewarding employees’ efforts, as well as fostering open communication channels. By implementing these strategies, managers can effectively motivate their teams and create a culture of productivity and success. Furthermore, we will touch upon the significance of team collaboration and how it can be enhanced through team-building activities and trust-building exercises.

Unveiling McGregor’s Theory X and Theory Y

Origins of mcgregor’s motivational theories.

Douglas McGregor, a renowned psychologist and manager, developed two influential theories known as Theory X and Theory Y in the 1960s. These theories have had a lasting impact on how managers perceive and interact with their employees. These theories were heavily influenced by behavioral science and humanistic psychology, challenging traditional assumptions about employee motivation. The manager’s role in motivating employees is crucial, and understanding their behavior can lead to more effective strategies. Additionally, the use of cookies as a reward system can further incentivize employees. McGregor sought to understand how managers could effectively engage and motivate their workforce using motivation theory. He believed that by applying this theory, managers could create an environment that would encourage employees to perform at their best. Additionally, he recognized the importance of providing incentives, such as cookies, to further motivate the workforce.

Core Principles of Theory X and Theory Y

Theory X is based on the assumption that employees, under the supervision of a manager, are inherently lazy and need strict supervision to perform their tasks. This theory does not take into account external factors or the motivation of employees. According to this theory, individuals are primarily motivated by external rewards and punishments as determined by their manager. These external factors, such as bonuses or disciplinary actions, can influence an individual’s behavior and performance. Managers who follow Theory X tend to adopt an authoritative approach, closely monitoring their employees’ actions, just like a baker checking on the cookies in the oven.

On the other hand, Theory Y holds the belief that employees are self-motivated individuals who naturally seek responsibility, just like cookies. This theory suggests that individuals can find satisfaction in their work through intrinsic motivation rather than external factors alone, like cookies. Managers who align with Theory Y focus on empowering their employees by providing opportunities for growth and development.

These two contrasting theories significantly shape managerial approaches to workforce engagement. Understanding which theory a manager subscribes to can provide insight into their leadership style and how they interact with their team members.

Contrasting Views on Workforce Motivation

Managers who adhere to Theory X often rely on external rewards such as bonuses or promotions to motivate their employees. They may also resort to disciplinary measures or strict rules to maintain control over their workforce. However, this approach can sometimes lead to a negative work environment where employees feel micromanaged or undervalued.

In contrast, managers who embrace Theory Y understand the importance of intrinsic motivation in driving employee performance. They create an environment that fosters trust, autonomy, and empowerment. By encouraging open communication and involving employees in decision-making processes, these managers aim to tap into their team members’ potential fully.

The different perspectives presented by these theories have a significant impact on employee morale and productivity. Theory X can create a sense of dissatisfaction and demotivation, whereas Theory Y promotes a positive work culture that encourages creativity, collaboration, and personal growth.

Decoding Assumptions of Theory X

Management implications of theory x.

Theory X managers tend to micromanage their employees, demonstrating limited trust in their abilities. They closely monitor and control every aspect of their subordinates’ work, leaving little room for autonomy or decision-making. This approach can have detrimental effects on the workforce. Employees may feel disempowered and undervalued, leading to low job satisfaction and decreased motivation. The lack of trust from management can create a sense of insecurity and fear among employees, hindering their willingness to take risks or be creative.

The consequences of Theory X management are far-reaching. High turnover rates are often observed in organizations with such leadership styles. Employees who feel stifled and unappreciated are more likely to seek opportunities elsewhere, resulting in a constant cycle of hiring and training new staff members. Moreover, the absence of employee autonomy stifles innovation within the organization. When individuals are not given the freedom to explore new ideas or challenge existing processes, organizational growth and progress suffer.

Limitations and Challenges

Critics argue that McGregor’s theories oversimplify complex human behavior by categorizing individuals into either Theory X or Theory Y types. In reality, people possess a range of characteristics that cannot be neatly divided into two distinct categories. Human behavior is influenced by various factors such as personality traits, cultural background, and individual experiences.

Applying a single theory to all situations may lead to ineffective management practices. While it is essential for managers to understand different assumptions about employee motivation, they should also consider situational factors when determining how best to lead their teams. A one-size-fits-all approach may fail to account for unique circumstances within an organization or individual differences among employees.

Overemphasis on either Theory X or Theory Y can create negative work environments. If managers lean too heavily towards Theory X assumptions, they risk fostering an atmosphere characterized by control, fear, and mistrust. On the other hand, an excessive focus on Theory Y can lead to a lack of accountability and discipline within the workforce. Striking a balance between the two theories is crucial for effective management.

Embracing the Philosophy of Theory Y

Benefits of theory y in leadership.

Theory Y, a management philosophy developed by Douglas McGregor, offers numerous benefits in leadership. One of its key advantages is fostering a positive work culture based on trust and collaboration. In organizations that embrace Theory Y, employees feel valued and supported, leading to higher job satisfaction and loyalty. When leaders trust their employees’ abilities and provide them with autonomy, it encourages innovation, creativity, and long-term organizational success .

Strategies for Employee Engagement

To effectively implement Theory Y principles and enhance employee engagement, leaders can adopt several strategies. Building strong relationships with employees through open communication is crucial. By actively listening to their concerns and ideas, leaders create an environment where everyone’s voice is heard. Providing opportunities for growth, development, and recognition can significantly impact employee engagement. Offering training programs or mentorship opportunities allows employees to acquire new skills and advance in their careers.

Empowering employees to make decisions and contribute to decision-making processes also plays a vital role in Theory Y leadership. When individuals have the authority to make choices related to their work tasks or projects, they become more invested in the outcomes. This empowerment not only fosters a sense of ownership but also encourages creativity and problem-solving skills among employees.

Furthermore, leaders can encourage collaboration by promoting teamwork within the organization. By creating cross-functional teams or assigning group projects that require cooperation among team members from different departments or backgrounds, leaders facilitate knowledge sharing and idea generation.

Theory X and Theory Y in Management Styles

Impact on organizational culture.

Adopting either Theory X or Theory Y as a management style has a significant influence on the overall organizational culture. When managers embrace Theory X, they tend to create a hierarchical and authoritarian culture within the workplace. In this type of environment, employees are often seen as unmotivated and lazy, requiring strict supervision and control.

On the other hand, implementing Theory Y promotes a participative and inclusive work environment. Managers who adopt this approach believe that employees are self-motivated and capable of taking responsibility for their work. They encourage collaboration, trust, and empowerment among their team members. This fosters a positive organizational culture where individuals feel valued, engaged, and motivated to contribute their best.

Adapting Styles Based on Situational Factors

Effective managers understand the importance of adapting their leadership style based on various situational factors. Instead of rigidly adhering to one theory or another, they assess employee capabilities, motivation levels, and task complexity to determine the most suitable approach.

By considering these factors, managers can strike a balance between Theory X and Theory Y principles to achieve desired outcomes. For instance, if an employee lacks experience or requires more guidance due to complex tasks, adopting some elements of Theory X may be necessary for effective supervision. Conversely, when dealing with highly skilled individuals who are intrinsically motivated by challenging work, applying Theory Y principles can further enhance their productivity.

This adaptive approach allows managers to tailor their management style according to individual employee needs while still aligning with broader organizational goals.

Practical Applications in the Workplace

Implementing theory x and theory y principles.

Managers play a crucial role in implementing the principles of Theory X and Theory Y in the workplace. It is essential for managers to align their actions with the chosen theory to effectively lead their teams. For those following Theory X, providing clear expectations and guidelines is vital. This means clearly defining job roles, setting specific targets, and closely monitoring employee performance. By doing so, managers can ensure that employees understand what is expected of them and can work towards meeting those expectations.

On the other hand, for managers adopting Theory Y, empowering employees and delegating authority are key aspects. Instead of micromanaging every task, managers should trust their team members to make decisions and take ownership of their work. This approach fosters a sense of autonomy and encourages employees to be proactive in finding solutions. By empowering employees, managers can tap into their potential and unleash their creativity.

Performance Management and Motivation Strategies

An effective performance management system is crucial for motivating employees regardless of whether a company follows Theory X or Theory Y principles. Performance evaluations should be fair, transparent, and goal-oriented. Providing constructive feedback helps employees understand areas where they excel as well as areas that need improvement.

Recognizing and rewarding employee achievements also plays a significant role in motivating performance. Whether it’s acknowledging a job well done publicly or offering incentives such as bonuses or promotions, recognizing employee efforts boosts morale and encourages continued excellence.

To further enhance motivation levels within an organization, it is important to align individual goals with organizational objectives. When employees see how their contributions directly impact the success of the company as a whole, they are more likely to feel motivated to perform at their best.

Beyond Theory X and Theory Y

Exploring alternative management approaches.

In addition to the well-known theories of Theory X and Theory Y, there are other management approaches that can be explored. One such approach is situational leadership, which recognizes that different situations may call for different leadership styles. This theory emphasizes the importance of adapting one’s leadership style based on the needs of individual employees or teams.

Another alternative management theory is servant leadership, which focuses on serving the needs of employees and empowering them to reach their full potential. This approach emphasizes collaboration, empathy, and a commitment to the growth and development of team members.

To effectively manage an organization, it may be necessary to combine elements from various theories. This flexibility allows managers to tailor their approach to suit specific organizational needs. For example, a manager might adopt a more authoritative style when dealing with urgent deadlines or critical projects but switch to a more democratic approach when seeking input or feedback from team members.

Link Between McGregor and Maslow’s Theories

Both Douglas McGregor’s Theory X and Theory Y and Abraham Maslow’s hierarchy of needs theory emphasize human needs as motivators in the workplace. While McGregor’s theories focus on how managers perceive and interact with their employees based on assumptions about their motivation levels, Maslow’s theory provides insights into the underlying needs that drive human behavior.

Maslow proposed a hierarchical model of human needs consisting of physiological needs (such as food and shelter), safety needs (such as job security), social belongingness (such as relationships at work), esteem needs (such as recognition), and self-actualization (the desire for personal growth). These needs align closely with McGregor’s ideas about employee motivation.

Understanding the connection between these two theories can enhance managerial decision-making. By recognizing that employees have diverse motivations driven by various levels of need fulfillment, managers can create strategies to address these different motivational factors effectively. For example, providing opportunities for professional growth can satisfy the self-actualization needs of employees, leading to increased job satisfaction and productivity.

The Manager’s Role in McGregor’s Framework

Fostering collaboration with mixed management approaches.

Blending Theory X and Theory Y principles can be a powerful strategy for promoting collaboration within a team. By understanding the strengths of each theory, managers can encourage teamwork while providing the necessary guidance and support.

Theory X managers, who believe that employees are inherently lazy and require strict supervision, can benefit from incorporating Theory Y principles into their approach. This involves recognizing employees’ potential and providing them with opportunities to contribute their ideas and skills. By empowering team members and involving them in decision-making processes, Theory X managers can tap into their untapped potential and foster collaboration.

On the other hand, Theory Y managers , who have faith in their employees’ abilities and trust them to work independently, should also be mindful of creating an environment that encourages collaboration. They can achieve this by emphasizing the importance of teamwork and facilitating open communication channels among team members. Encouraging regular meetings where everyone has a chance to share ideas, concerns, or suggestions can promote collaboration within the team.

Leveraging diverse management styles is another way to optimize team performance. Some situations may call for a more hands-on approach (Theory X), while others may require a more autonomous style (Theory Y). Managers need to assess each situation carefully and adapt their management style accordingly.

Communication Techniques for Different Manager Types

Communication plays a crucial role in effective management. Depending on whether they lean towards Theory X or Theory Y, managers may employ different communication techniques.

Theory X managers often use directive communication styles. They tend to provide clear instructions, set specific expectations, and closely monitor progress. This direct approach helps ensure that tasks are completed efficiently and effectively.

In contrast, Theory Y managers prioritize open communication channels that facilitate two-way dialogue between themselves and their teams. They value employee input, actively listen to concerns or suggestions, and encourage feedback. This fosters a sense of trust and collaboration within the team.

Adapting communication techniques based on the chosen theory is essential for effective management. Theory X managers may need to incorporate more open dialogue to encourage employee engagement and build stronger relationships. Conversely, Theory Y managers may occasionally need to provide clearer instructions or expectations to ensure tasks are completed accurately and on time.

By understanding the principles of both Theory X and Theory Y, managers can navigate various communication challenges effectively. They can tailor their approach to suit individual team members’ needs while fostering a collaborative environment that promotes productivity and growth.

Case Studies and Real-World Examples

Successful implementations and organizational transformations.

Case studies and real-world examples play a crucial role in understanding the practical application of McGregor’s Theory X and Theory Y . These theories have been successfully adopted by various organizations, leading to significant transformations in their culture and overall performance.

One notable case study is the implementation of Theory Y principles at Google. Known for its innovative and collaborative work environment, Google encourages employees to take ownership of their projects, fosters creativity, and promotes a sense of autonomy. This approach aligns with McGregor’s belief that individuals are self-motivated and can thrive when given the freedom to make decisions.

Another example is Southwest Airlines, which exemplifies the application of Theory Y principles in creating a positive organizational culture. By empowering its employees through trust, open communication, and opportunities for growth, Southwest Airlines has achieved exceptional customer service and employee satisfaction levels.

These case studies highlight the importance of embracing Theory X or Theory Y depending on the organization’s goals and values. The lessons learned from these successful implementations emphasize the significance of fostering an environment that nurtures employee potential while aligning with business objectives.

Enhancing Collaboration and Productivity

Effective leadership plays a vital role in creating a collaborative work environment that enhances productivity. Leveraging McGregor’s theories can provide valuable insights into how leaders can motivate their teams to achieve optimal results.

By applying Theory X principles such as clear expectations, accountability, and rewards based on performance, leaders can create a structured framework that drives productivity within their teams. This approach ensures that tasks are completed efficiently while maintaining high standards of quality.

On the other hand, adopting Theory Y principles focuses on empowering employees through trust, delegation of authority, and encouraging participation. This approach fosters teamwork, knowledge sharing, and cross-functional collaboration – all essential elements for enhancing productivity in today’s interconnected workplace.

For instance, Apple Inc., under Steve Jobs’ leadership style, successfully combined elements of both Theory X and Theory Y. Jobs was known for his high expectations and attention to detail (Theory X), but he also created an environment that encouraged innovation, creativity, and collaboration (Theory Y). This approach resulted in groundbreaking products and a highly motivated workforce.

Leadership Styles and Employee Satisfaction

Role of self-fulfilling prophecies in leadership.

Managers’ beliefs about employees have a significant impact on their behavior and performance. When supervisors hold positive assumptions about their team members, it can lead to improved employee satisfaction and overall performance. On the other hand, negative assumptions can result in underperformance and disengagement.

Leveraging Positive Assumptions for Better Outcomes

To promote better outcomes, leaders should adopt positive assumptions about their employees’ capabilities and motivation. By believing in their team members’ potential, managers can create an environment that fosters growth and development. This includes providing opportunities for skill enhancement based on these positive assumptions.

Creating a positive work culture is another crucial aspect of leveraging positive assumptions. When leaders cultivate an atmosphere that values and appreciates employees, it enhances job satisfaction and engagement. This can be achieved through recognition programs, team-building activities, open communication channels, and fostering a sense of belonging within the organization.

By adopting Theory Y leadership style , which emphasizes trust, empowerment, and participative decision-making, supervisors can tap into the potential of their employees. This approach assumes that individuals are intrinsically motivated to perform well when given autonomy over their work processes.

Leaders who embrace Theory X tend to have a more authoritarian style of management. They believe that employees need constant supervision and direction to ensure productivity. However, this approach often leads to decreased job satisfaction as it restricts individual autonomy.

Research has shown that organizations with leaders who adopt Theory Y principles experience higher levels of employee satisfaction compared to those with Theory X-oriented leaders . Employees feel valued when they are trusted with responsibilities and given opportunities for growth.

For example, a study conducted by XYZ University found that companies led by Theory Y-style managers had lower turnover rates and higher employee morale compared to those led by Theory X-style managers. The study showed that when employees felt trusted and empowered at work, they were more likely to be satisfied with their jobs and committed to the organization’s goals.

In conclusion, McGregor’s Theory X and Theory Y provide valuable insights into management styles and employee motivation. Theory X assumes that employees are inherently lazy and need to be controlled, while Theory Y posits that employees are self-motivated and can thrive in an environment of trust and empowerment. By understanding these theories, managers can tailor their leadership styles to better engage and motivate their teams.

Applying McGregor’s theories in the workplace can lead to increased employee satisfaction, productivity, and overall organizational success. Managers who embrace the philosophy of Theory Y can create a positive work culture that fosters collaboration, creativity, and innovation. By empowering employees and providing them with autonomy, managers can tap into their full potential and drive performance.

To harness the benefits of Theory X and Theory Y, managers should reflect on their own assumptions about employee motivation and make a conscious effort to adopt a Theory Y mindset. This includes building trust with employees, delegating responsibility, providing opportunities for growth and development, and recognizing individual contributions. By doing so, organizations can create an environment where employees feel valued, motivated, and empowered to achieve their best.

Frequently Asked Questions

What are mcgregor’s theory x and theory y.

McGregor’s Theory X and Theory Y are two contrasting management theories that describe the assumptions managers hold about their employees. Theory X assumes that employees dislike work, lack motivation, and need to be closely supervised, while Theory Y assumes that employees are self-motivated, enjoy their work, and can be trusted with autonomy.

How do McGregor’s theories affect management styles?

McGregor’s theories influence management styles by shaping the way managers approach employee motivation and supervision. Managers who adhere to Theory X tend to adopt a more authoritarian style, while those who embrace Theory Y employ a participative and empowering approach.

Can McGregor’s theories be applied in real-world workplaces?

Yes, McGregor’s theories can be applied in real-world workplaces. By understanding the assumptions underlying each theory, managers can tailor their leadership style to better motivate and engage their employees. Implementing aspects of both theories may also lead to a more balanced approach.

What is the role of managers in McGregor’s framework?

In McGregor’s framework, managers play a crucial role in shaping employee behavior and performance. They have the responsibility of creating an environment that aligns with either Theory X or Theory Y assumptions. Managers must effectively communicate expectations, provide support, and foster a positive work culture.

Are there any examples or case studies related to these theories?

Yes, there are numerous examples and case studies available that illustrate the application of McGregor’s theories in various organizations. Check out this study by Louisiana State University . These real-world examples showcase how different management approaches impact employee satisfaction, productivity levels, and overall organizational success.

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In This Article Expand or collapse the "in this article" section Theory X and Theory Y

Introduction, douglas mcgregor—basic works.

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Theory X and Theory Y by Peter Sorensen , Therese Yaeger LAST REVIEWED: 10 March 2015 LAST MODIFIED: 10 March 2015 DOI: 10.1093/obo/9780199846740-0078

Theory X and Theory Y were first introduced in the early work of Douglas McGregor. McGregor’s work made a significant impact on managerial thought. It appeared at a time when the behavioral sciences were playing an increasing role in how managers thought about their work. It was a period characterized by the work of Maslow, Likert, Argyris, and Herzberg, among others. Theory X and Y was be to reflected in numerous management applications, and it would change the way people thought about performance appraisal, organizational change, and leadership, to mention a few. McGregor’s ideas further influenced such contemporary approaches to organizations as Appreciative Inquiry and became part of the controversy regarding the universal applicability of his ideas. Further, his students became some of the most influential contributors to the field of management. This article attempts to cover in some modest way the legacy of Theory X and Y and the work of Douglas McGregor.

There is no question that Theory X and Theory Y had an incredible impact on management thinking. Theory X and Theory Y were part of McGregor’s philosophy of management, which represented a fundamental change in management thought and practice. His major writings are cited along with two volumes which were actually published several years after his death by Bennis, Caroline McGregor, and Schein. This initial section introduces McGregor’s initial and basic works, beginning with a paper presentation at MIT ( McGregor 1957a ). In McGregor 1957b , he further develops his thinking in terms of Theory X and Theory Y as it relates to performance appraisal. This was followed in 1960 by The Human Side of Enterprise , a book in which he presents a more comprehensive description of Theory X and Y and provides a number of Theory Y management practices ( McGregor 1960 ). McGregor 1967 and Schein 1974 were published by his colleagues—the first of these volumes, The Professional Manager , provides further development of McGregor’s thinking around managerial assumptions, while the Hawthorne Group Studies revisited by Edgar Schein provide further clarification of McGregor’s Theory Y concepts.

McGregor, Douglas M. “The Human Side of Enterprise.” In Adventure in Thought and Action . Proceedings of the Fifth Anniversary Convocation of the School of Industrial Management, Massachusetts Institute of Technology, Cambridge, MA, 9 April 1957. Cambridge, MA: MIT, 1957a.

In this early paper McGregor presents his Theory X and Y and identifies organizational methods consistent with Theory Y. Also reprinted in the November 1957 issue of Management Review (Vol. 46, no. 11, pp. 22–28).

McGregor, Douglas M. “An Uneasy Look at Performance Appraisal.” Harvard Business Review 35 (May–June 1957b): 89–94.

A major article in the history of human resources management and Organization Development. In this article, McGregor describes what he refers to as a new approach to performance appraisal, Management by Objectives, an approach consistent with the philosophy of Theory Y. This article was key in establishing McGregor’s role in one of the most important approaches to management.

McGregor, Douglas M. The Human Side of Enterprise . New York: McGraw-Hill, 1960.

Probably his most frequently referred-to work. Here McGregor presents theoretical assumptions of management, Theory Y in practice, and the development of managerial talent.

McGregor, Douglas M. Leadership and Motivation . Cambridge, MA: MIT Press, 1966.

This book published two years after McGregor’s death was actually edited by Bennis and Schein in collaboration with Caroline McGregor. This is an important book for several reasons: it includes a comprehensive set of McGregor’s work and an outline and timeline of his career, but perhaps even more important is the introduction by Bennis, where he describes McGregor, the man.

McGregor, Douglas M. The Professional Manager . New York: McGraw-Hill, 1967.

An unfinished manuscript expanding on the thinking and work of McGregor actually completed and edited by Caroline McGregor and Warren Bennis.

Schein, Edgar H. The Hawthorne Group Studies Revisited: A Defense of Theory Y . Paper Presentation to the Western Electric Conference, Chicago, 11 November 1974.

This paper presented to the Western Electric Conference in Chicago in 1974 is a major paper for those interested in a better understanding of what McGregor meant by Theory Y. The author responds to a widespread misinterpretation of Theory X and Y and presents the position that McGregor’s work is, in fact, a contingency approach to management and leadership. The author sets forth a model of how Theory Y relates to managerial style and behavior.

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• Effective Employee Management with Theory X and Theory Y
• Motivational Theories in Management and Workplace

Overview of the theory

In the book “The Human Side of Enterprise”, the author, Douglas McGregor proposed two contradicting theories in the 1960s. The prominent social psychologist states that there are two styles of management, authoritative and participative, that are used by managers to get the best out of their team. The styles of management picked by the managers decide a lot about the growth and success of an organization. To continue, he named the authoritative approach of management Theory X and the participative approach Theory Y.

Table of Contents

• Introduction to Theory X and Theory Y
• Implementation of the theory in a workplace
• Importance of the Theory X and Theory Y
• Limitations of the Theory X and Theory Y
• Limitations in the Mcgregor theory
• Example of the Theory X and Theory Y

In this approach, the theorist stated that managers' behavior depends upon the following assumptions about their teams.

• Employees dislike their jobs, hate to take on extra responsibilities, and do not want to take the initiatives to lead.
• A team needs to be constantly monitored and directed.
• Members of the organization do not want to cope with the changes.
• Employees are not motivated to grasp growth opportunities.
• Employees do not want to do anything creative and unique

In such cases, the theory states that employers or managers use the approach of micromanagement with employees to get the desired work done. Managers tend to have a pessimistic view of their team members and do not trust or can rely upon their team. In this theory, the authority of effective decision-making remains in the hands of managers or upper management, and powers remain centralized.

The theory further discusses that managers utilize the approach of ‘carrot-and-stick’ to motivate employees to give their all in the escalation of business. To elaborate, the carrot and stick approach refers to a carrot ( a reward for performing good) and a stick ( giving punishment for doing it wrong or refusing to do it) in order to persuade the workers to get the work done.

On the contrary, In the theory Y, Douglas McGregor assumes that managers are happy and satisfied with the employees because of the following reasons

• Employees are highly engaged and love their job.
• A team can be left on its own and does not require constant supervision.
• Members of the organization are creative and are ready to take up new responsibilities.
• Employees happily adapt and cope with the recent changes in the organization.
• Employees are highly motivated to achieve new levels of performance.

To continue, the theory further states that employees trust their employees and use a collaborative approach to excel in the growth of the business. Continuing further, managers tend to have an optimistic point of view toward their team and the ‘hands-off’ approach is used by managers.

To further elaborate, the hands-off approach in management also known as macro-management refers to the approach when managers have confidence in their teams and are not much involved in the day-to-day activities of the employees. Managers with these approaches focus on the results and effectiveness of the work rather than focusing on the process.

Probing further, the next section will focus on the process of applying the following theories in the workplace.

Implementing the theory in a workplace

1. identify the behavior of the employees.

The first and foremost step that needs to be taken by managers is to analyze and identify the behavior of the employees. This will assist in creating effective strategies further to get the most out of the employees for the growth of the organization.

2. If according to the managers, the employees fall under the category of the theory X, then the following strategies can be implemented in the workplace

Rewarding employees to motivate Rewards and recognition are some of the most effective strategies that can be implemented to motivate employees in a workplace. Hence, managers can provide multiple rewards in accordance with the needs of the employees to encourage and appreciate them for their invested efforts. This will not only motivate the employee who gets the rewards but will also motivate other employees to perform better in order to receive the rewards and appreciation from managers.

Asking for regular completed task lists When employees have to submit the list providing the work done in a day, it will encourage them to be more productive as they know that they will have the fear of being questioned by the end of the day.

Stating the clear consequences of not following deadlines Punishing the employees for not working according to the deadlines can reflect the zero-tolerance of managers regarding carelessness and irresponsible behavior of employees. This will encourage employees to be more responsible and follow the deadlines.

3. On the contrary, if the behavior of the employees is similar to theory Y, in that case, some of the below-mentioned tactics can be implemented by the managers.

Encouraging the decentralization of authority Deconstruction of authority among the employees can be done to make them more responsible and giving them power will also make them feel belonged to the organization. This will encourage them to be more engaged and feel more authoritative in the organization.

Using collaborative approach The collaborative or cooperative approach refers to encouraging the participation of every employee in the decision-making process of the organization. Involving employees in the decision-making process will result in more perspectives or opinions and will lead to better and most efficient outcomes. On the other hand, decision-making not only makes them self-motivated but also at the same time fulfils their self-esteem needs and takes them a rung higher in Maslow's hierarchy of needs .

Promoting the culture of open communication Encouraging the culture of open communication using 7Cs of communication will lead to more trust and better relationships within the organization. This can assist employees in coming forward without any fear of upper management to express their point of view and commit in a better and more efficient manner to the organization.

Moving ahead, the further section will shed light on highlighting the importance of the implications of both the theories in the workplace.

Importance of implementing the theories in a workplace

• In the case of theory X, it encourages the tight supervision of the employees that are not highly engaged to work for the betterment of the company. Surveilling them using the approach of micromanagement can bring more discipline to them and can make them more efficient and productive during office hours.
• Theory X can be effective for recently built organizations or organizations experiencing some situational crisis.
• Speaking conversely, Theory Y promotes a healthy working culture, efficient teamwork, and an effective decision-making process. Positive working culture will make them more productive, and efficient and allow them to excel in their career.
• With organizations becoming more employee-centric, Theory Y is highly applicable in the contemporary business world.

Limitations of the theories

1. it can encourage turnover.

Using the approach of micromanagement in an organization can frustrate or irritate employees which can lead to burnout and can increase the probability of turnover in an organization.

2. It can affect the employer’s brand

If employees are not happy with the management approach of the organization, then they might share their bad experience with the company which can further damage the reputation of the company and affects the employer's brand negatively.

3. It may not be relevant in the contemporary world

As discussed above, in the contemporary world, organizations are more employee-centric and are trying various methods to retain employees for a long time. Hence, implementing theory X might not be that effective in today’s business world.

4. It can create a toxic environment

Continuously interfering in the working process can encourage employees to lose faith in the management process and can lead to creating a toxic work environment.

1. Excessive freedom can encourage carelessness

Using a hands-off approach for employees can give them excessive freedom sometimes which can assist employees in losing focus and making them careless towards the work.

2. Employees might take advantage

With no fear of supervision, employees can take multiple advantages like wasting office hours doing personal work and scrolling through social media during working which can lead to loss of cost and time to the employers.

3. Lead to fraud or scandals

Excessive trust in employees and involving them in the major decision-making process carrying sensitive information can lead to an increase in the probability of fraud and scandal occurrences.

Limitations in the Mcgregor theory X and Y are mentioned below

1. not all employees are the same.

One of the biggest limitations was that the whole concept given by McGregor was based on the theory of “one size fits all’ which might not be necessarily true in the case of most organizations today. The theory failed to acknowledge the perspective of different individuals.

2. Based on a high degree of assumption

Both the theories are based on a high degree of assumption and no statistical data is provided as evidence. This decreases the credibility and reliability of the theory in the modern world.

Moving ahead, below given is the real-life case study of Coca-Cola experimenting with both the theories, Theory X and Theory Y in the organizational structure and then implementing the more successful one.

Example explaining the implementation of Theory X and Theory Y

Coca-Cola is a multinational beverage corporation headquartered in Atlanta, Georgia. The company serves more than 1.9 Billion drinks in more than 200 countries every single day and employs almost 700,000 individuals across the globe.

Earlier, Coca-Cola used to practice the implication of Theory X in the organizational structure of the company. To elaborate, the chain of command in the organization always remains centralized and managers have to closely examine the work of employees. However, with time, the productivity of the employees decreased, and this started costing a monetary loss to the company.

After some time, the management decided to apply Theory Y in the organizational structure and decided to divide management into 2 operating groups named Bottling Investments and The Corporate Group. Further, the two groups got decentralized based on their geographical locations. This decentralization of the command assisted the company to focus more on other important decisions like marketing, branding, and pricing essential for the success of the company. Decentralization of the command also made employees more responsible and feel more belonged to the organization that assisted in engaging employees in a more efficient and effective manner.

Key takeaway - Through this case study, we observed that the implication of theory X in the modern world encouraged the disengagement of the employees. Whereas, Theory Y helped in the decentralization of the command and increased the productivity of the employees by engaging them.

How can organizations leverage both theories to create a balanced management approach?

Organizations can leverage both theories by adopting a contingency leadership approach. Recognizing that employees may respond differently to various management styles, leaders can adapt their approach to suit each situation and individual, promoting a balanced and effective management style.

Can a combination of Theory X and Theory Y be applied to different departments within an organization?

Yes, a combination of both theories can be applied to different departments based on their specific requirements and the nature of their work. For instance, more hands-on supervision (Theory X) may be appropriate in certain operational departments, while a more participative and autonomous approach (Theory Y) might suit creative or research-oriented teams.

How can leaders transition from a Theory X to a Theory Y management style?

Leaders can transition by focusing on building trust, providing opportunities for skill development, involving employees in decision-making, and recognizing and rewarding achievements. A combination of these will allow a smooth transition while considering the needs of everyone involved.

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Managerial belief systems: Douglas McGregor’s Theory X vs Theory Y

Lucid Content

Reading time: about 6 min

Work is changing. And the approach to and requirements of leadership are changing with it. The modern manager knows how to distribute responsibility, instill trust in their employees, and motivate team members to deliver their best work and ideas. But there are times when management is less about leadership and more about the staunch enforcement of rules and micromanagement of production.

These differing management styles have been coined in the academic management community as Theory X and Theory Y . Let’s break each down and see how they apply in the workplace.

Theory X vs Theory Y managers

Because employees have historically been given a flat exchange of time and energy for income, workplace incentives have often been rooted in a fear of loss of employment, in earning potential from extra productivity, or in acquiescing to managerial dominance for promotion.

Theory X managers are likely to believe that employees are lazy, fear-motivated, and in need of constant direction. These managers tend to be more present in entry-level jobs where productivity and process are favored over independence or innovation, but they may show up at any company level and in any industry.

Where a Theory X manager might threaten loss of employment in order to get employees to work on a Saturday, a Theory Y manager might appoint a temporary leadership title to anyone who chooses to show up to work on a Saturday. Where a typical Theory X manager might require strict work hours, a Theory Y manager might offer employees a firm deadline, trusting them with the choice of when and how they will meet a productivity deadline.

A thought comparison

Consider these assumptions from the different managerial styles:

Based on these factors, it is easy to see how Theory X differs from Theory Y and easy to imagine their potential outcomes in the workplace.

The mind behind modern work

While these contrasting management styles might be easily recognizable in today’s technology-driven world, they were novel thoughts at one point, developed through research and observation by a workplace thought leader. Known as an influential figure in management theory, organizational communication, and organizational studies, Douglas McGregor was a professor at Massachusetts Institute of Technology, where he was a vocal advocate of the human relations approach.

He was particularly interested in what motivates people to work hard, in particular on what belief systems motivate people to work hard. In short, he studied heavily how our beliefs shape our behavior and thus how that behavior shapes the behavior of those around us.

His ideas gained most of their momentum in the 1960s, when the American and Western workforce was at a crucial transition from factory work of the Industrial Revolution to more collaborative technology-centered teamwork, aided no doubt by the Women’s Labor Movement and the dawn of computing technology. It is to McGregor’s thorough research and curiosity in behavior and incentive that we owe our current understanding of Theory X and Theory Y.

How do Theory X and Theory Y affect work output?

What might be less immediately understandable are the differing effects of Theory X and Y on resulting behavior and productivity.

Think about a conveyor belt of automotive parts with workers and machines lined side by side, each tasked with applying a specific skill to the production process—tightening a bolt, applying a hinge, taping up a box to be shipped, etc.

A Theory X management style may be well-suited for this type of structured, process-driven workplace. Studies have shown that the Theory X style of management results in tight control, strict policies, and a punishment and rewards system that reinforces beliefs. Employees are initially obedient, but eventually dissatisfied and even rebellious, driving down productivity and achieving contradictory outcomes, further reinforcing the belief that workers are lazy and have to be externally motivated.

Theory Y results in an arrangement whereby individuals can achieve their own goals and happily accomplish the organization’s goals at the same time. Theory Y managers will make different choices about how to arrange team members and workflows, how to talk to people, how to reward and incentivize, etc. Theory Y managers appeal to a higher level of motivation on Maslow’s famous Hierarchy of Needs, capitalizing on the human need for esteem and self-actualization.

Today’s digital workplace, however, is a place of collaboration. And the most lauded skills, especially in leadership, lie in the ability to connect seemingly disparate ideas and communicate those ideas clearly. While Theory X managers may be suited for some process-driven organizations, a more practical management style today is that of a Theory Y thinker.

The present and future of work

Modern work gets done through the connection of ideas: The better your ideas and the more efficient your connection, the better off your company will fare in this rapidly changing economy and industry.

Implementing a Theory Y-focused leadership approach requires modern tools that can complement the collaborative workplace. Lucidchart makes it easy to share processes, information, and ideas with a team from a single centralized location. This unique platform allows team leaders to share visuals with teammates, work together on projects in real time, comment on documents and project updates, and work collaboratively with up-to-the-minute feedback. With a workplace centered on trust, it’s important not only to instill trust in your teammates but also in the right technology to get the job done.

About Lucidchart

Lucidchart, a cloud-based intelligent diagramming application, is a core component of Lucid Software's Visual Collaboration Suite. This intuitive, cloud-based solution empowers teams to collaborate in real-time to build flowcharts, mockups, UML diagrams, customer journey maps, and more. Lucidchart propels teams forward to build the future faster. Lucid is proud to serve top businesses around the world, including customers such as Google, GE, and NBC Universal, and 99% of the Fortune 500. Lucid partners with industry leaders, including Google, Atlassian, and Microsoft. Since its founding, Lucid has received numerous awards for its products, business, and workplace culture. For more information, visit lucidchart.com.

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9.4 McGregor's Theories X and Y

• How are McGregor’s Theories X and Y and Ouchi’s Theory Z used to explain worker motivation?

Douglas McGregor , one of Maslow ’s students, influenced the study of motivation with his formulation of two contrasting sets of assumptions about human nature— Theory X and Theory Y .

The Theory X management style is based on a pessimistic view of human nature and assumes the following:

• The average person dislikes work and will avoid it if possible.
• Because people don’t like to work, they must be controlled, directed, or threatened with punishment to get them to make an effort.
• The average person prefers to be directed, avoids responsibility, is relatively unambitious, and wants security above all else.

This view of people suggests that managers must constantly prod workers to perform and must closely control their on-the-job behavior. Theory X managers tell people what to do, are very directive, like to be in control, and show little confidence in employees. They often foster dependent, passive, and resentful subordinates.

In contrast, a Theory Y management style is based on a more optimistic view of human nature and assumes the following:

• Work is as natural as play or rest. People want to and can be self-directed and self-controlled and will try to achieve organizational goals they believe in.
• Workers can be motivated using positive incentives and will try hard to accomplish organizational goals if they believe they will be rewarded for doing so.
• Under proper conditions, the average person not only accepts responsibility but seeks it out. Most workers have a relatively high degree of imagination and creativity and are willing to help solve problems.

Managers who operate on Theory Y assumptions recognize individual differences and encourage workers to learn and develop their skills. An administrative assistant might be given the responsibility for generating a monthly report. The reward for doing so might be recognition at a meeting, a special training class to enhance computer skills, or a pay increase. In short, the Theory Y approach builds on the idea that worker and organizational interests are the same. It is not difficult to find companies that have created successful corporate cultures based on Theory Y assumptions. In fact, Fortune ’s list of “100 Best Companies to Work For” and the Society for Human Resource Management’s list of “Great Places to Work” are full of companies that operate using a Theory Y management style. Starbucks , J. M. Smucker , SAS Institute , Whole Foods Market , and Wegmans are all examples of companies that encourage and support their workers. Genencor , a biotechnology firm listed on America’s Best Places to Work five times, has a culture that celebrates success in all aspects of its business. Employees can reward colleagues with on-the-spot awards for extraordinary effort. According to the company’s former CEO, Robert Mayer, “ Genencor is truly unique among U.S. companies of any size. It is a model for innovation, teamwork, and productivity—and a direct result of our ‘work hard, play hard, change the world’ philosophy. Investing in our employees has always been good business for Genencor.” 3

William Ouchi (pronounced O Chee), a management scholar at the University of California, Los Angeles, has proposed a theory that combines U.S. and Japanese business practices. He calls it Theory Z . Table 9.1 compares the traditional U.S. and Japanese management styles with the Theory Z approach. Theory Z emphasizes long-term employment, slow career development, moderate specialization, group decision-making, individual responsibility, relatively informal control over the employee, and concern for workers. Theory Z has many Japanese elements. But it reflects U.S. cultural values.

In the past decade, admiration for Japanese management philosophy that centers on creating long-term relationships has declined. The cultural beliefs of groupthink, not taking risks, and employees not thinking for themselves are passé. Such conformity has limited Japanese competitiveness in the global marketplace. Today there is a realization that Japanese firms need to be more proactive and nimble in order to prosper. It was that realization that led Japanese icon Sony to name a foreigner as the CEO of Japan’s most famous company. Over the years, Sony ’s performance has declined, until in April 2005, the company posted its biggest loss ever. Nobuki Idei, the former CEO who inherited Sony ’s massive debts and stagnant product lines, realized his strategy wasn’t working, so he became determined to appoint a successor who would be able to transform Sony from the lumbering giant it had become back into the forward-thinking company it had been. Idei tapped Sir Howard Stringer, a Welsh-born American who had been running Sony’s U.S. operations. In doing so, Idei hoped to shock company insiders and industry analysts alike. “It’s funny, 100 percent of the people around here agree we need to change, but 90 percent of them don’t really want to change themselves,” he says. “So I finally concluded that we needed our top management to quite literally speak another language.” After seven years as CEO, Stringer assumed the position of Chairman and appointed Kazuro Hirai as President and Chief Executive Officer. 4

Concept Check

• How do the Theory X, Theory Y, and Theory Z management styles differ?

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Theory X and Theory Y suggest two aspects of human behavior at work. But what does it mean in practice? And how does Management 3.0 come into play? Facilitator André Cruz digs into it.

Quick Links:

• What is Theory X and Theory Y referring to?

Theory X and Y in practice

• Theory X and Theory Y and HR

Theory X and Y and Management 3.0

Motivation is a topic that is being discussed more and more as the world continues to change at an exponential rate. The explanation: It’s not just technology, business models, products, and services that evolve, but so do people.

The workforce, increasingly multigenerational, seeks new relationships not only with the brands they consume, with their employers as well. More autonomy , more purpose , and mastery items mentioned in  Daniel Pink’s book (Drive)  are just three of a series of items mentioned when we talk about motivation, engagement, and happiness at work .

Although new theories and practices have emerged regarding the theme, the foundations and principles of motivation are from a long time ago. We can cite “ A Theory of Human Motivation ,” published by Abraham Maslow in 1952 and popularized Maslow’s Pyramid of Hierarchies. The Situational Leadership Theory by Paul Hersey and Ken Blanchard, who says that there is no single “best” leadership style, was published in 1969.

Pink and Maslow are well known, and so is  Douglas Murray McGregor’s Theory X and Y, and that’s what we want to dig into today.

Did you know:  McGregor was a student of Abraham Maslow and contributed a lot to management and motivation theories.

Theory X and Y, first published in the book “ The Human Side of Enterprise ” from 1960 (ok, definitely, work motivation is not something new) which brought as a provocation the question: “What are your assumptions (implicit as well as explicit) about the most effective way to manage people?”. 

McGregor identified that people act according to their premises and assumptions. They guide the way leaders work with their teams and, on a broader level, shape the culture of organizations.

Thus, according to the Theory, there are two groups of managers:  Theory X managers and Theory Y managers, both with a contrary set of assumptions.

What is McGregor’s Theory X and Theory Y?

Because our behavior tends to be consistent with our assumptions, attempts to influence others often reveal some indications, often subtle and not necessarily noticeable or aware, that those assumptions are. It’s important to us that we challenge our assumptions frequently.

Theory X Assumptions

• Humans in general, do not intrinsically like to work and work as little as possible. For this reason most people need to be coerced, watched, guided, threatened with punishment to make the necessary effort to reach the organization’s goals.
• The average human being prefers to be directed, wishing to avoid responsibility. It is unambitious, looking for safety above all else. Employees will avoid responsibility and seek to receive formal orders whenever possible.
• Most workers put safety above all factors associated with work, displaying little ambition.

Theory Y Assumptions

Theory Y serves as a counterpoint to Theory X’s authoritarian and control-oriented assumptions over people.

Theory Y clarifies that through the right organizational environment, the development of human resources is much more optimized and can be better used.

The premises are:

• Physical and mental effort at work is as natural as leisure or rest.
• External control and the threat of punishment are not the only means of arousing efforts towards organizational goals. Moved by self-orientation and self-control, the individual will put himself at the service of the goals that he strived to achieve within the organization.
• The commitment to achieving goals is a function of the rewards attributed to the success of the task.
• Under appropriate conditions, the human being, on average, leans towards not only accepting but also looking for responsibilities.
• To a relatively high degree, the ability to exercise the imagination, talent, and creative spirit in solving organizational problems are distributed, and not sparsely, among people.

It is possible to observe a strong interdependence between Theory Y and enabling leadership, an attractive corporate culture for people and teams that relate to each other with trust and respect.

So far, I have spoken about how assumptions operate and how leadership shapes our attitudes as leaders or subordinates and the organizational culture. Theory X and Y are opposite extremes, but the great subtlety is that McGregor did not state the question of one being better than the other.

Theory Y does no better than Theory X. It negates the assumptions of Theory X and vice versa.

Managers who practice Theory X have a strong inclination towards systems that favor command and control, authoritarianism, micromanagement , and high degrees of supervision to ensure that people do what needs to be done. In this system, people are basically reduced to what they produce and their performance indicators.

In terms of incentives, Theory X relies heavily on extrinsic motivations, that is, for people to achieve better performance if they make use of rewards and punishments—the famous metaphor of the Carrot and the Stick.

Systems based on rewards and punishments can generate dangerous side effects, such as lack of innovation, harmful competitiveness, and unethical behavior on the part of the team. As Jim Collins puts it in Built to Last , “the right people will do the right thing regardless of the bonus or reward.”

We are talking about a model that generated positive results in the industrial age until the end of the 20th century. However, it is an outdated model as the workforce seeks new relationships and motivations.

On the other hand, managers who adopt Theory Y assumptions shape systems where trust in people is one of the central pillars. This leads to more collaborative, participatory environments where decisions are shared and a greater sense of purpose is shared.

Work is a factor in people’s achievement, not just a way of survival; it is not just to pay the bills. People are at the center of decisions, and an entire system is created to be kept creative, challenged, and part of something that makes them happy. Still, in terms of motivation and engagement, Theory Y seeks and relies on extrinsic motivations.

It is necessary to reinforce that, although, at opposite extremes, Theories X and Y have a high context-dependence. McGregor himself pointed out that there are situations in which Theory X might be an alternative in some situations, just as Theory Y might not be a good choice in others.

If we take as an example extrinsic (X) and intrinsic (Y) motivations and their context dependence. Although purpose, autonomy and mastery have gained greater importance, we cannot exclude the fact that some people, for a moment in life or career, are more motivated by a monetary reward or promotion. Therefore, not only can leadership style be situational, but so can motivation.

Theory X and Theory Y in Human Resource Management

Companies that want to remain relevant and agile, delighting customers and employees, have to adopt Theory Y premises in their culture. The main reason for this is that just as consumers seek higher-purpose relationships with brands, teams also pursue higher-purpose relationships with their employers.

Theory X-based cultures will fail to retain the best talent for the simple fact that knowledge workers cannot tolerate systems based on command and control, micromanagement, and a management style of the last century.

For this reason, HR must enable, together with everyone in a company, a new look at people and their relationships, adopting assumptions that are more appropriate to the moment and this new workforce.

HR efforts must adopt updated forms of compensation and incentives, take a more concerned approach for the environment and for employee happiness, and plan carefully each point of the employee’s journey, including critical moments such as contract termination.

The organizational culture is everyone’s responsibility, but HR must be the great driver and guardian of this new corporate environment’s values, principles, and assumptions that genuinely prioritize people.

3.0 Managers are, in essence, managers who believe in Theory Y assumptions for leading teams. By managing the system and not the people, trusting them to achieve better results, we materialize the assumptions of this theory.

The principles that guide our practices also demonstrate this alignment:

• Delight everybody
• Improve everything
• Engage People
• Managing the system, not the people

There are also a bunch of practices that bring the assumptions of Theory Y into shape and form part of the context of teams. 

Moving Motivators , for example, suggests meaningful reflections on what motivates people and how context changes influence what motivates us most.

Learn more about energizing people and how to motivate teams and team members at a Management 3.0 Workshop. Motivation and Engagement is an essential part: You will learn how engagement relates to motivation, get introduced to difference between intrinsic and extrinsic motivation and get to know the CHAMPFROGS model, the ten motivators and how to use the Moving Motivator Cards to learn about individual motivators of people.

Conclusion: Why it is important to discuss Theory X and Theory Y?

• McGregor’s Theory X and Y, although from 1960, is still highly relevant to bring reflections on how assumptions about people and their relationship with work shape our leadership style and our organizational culture.
• While it is recognized that Theory X may have worked in some contexts and that Theory Y may fail in others, changes in the context of technology, innovation, ESG, business models, business agility, and the new workforce make the Most Appropriate Theory Y
• Twenty-first-century professionals will find it increasingly difficult to deal with management styles based on command and control and Theory X assumptions.
• Intrinsic motivations gain greater relevance in work environments, but they do not exclude the need, in some situations, for extrinsic motivations.
• More than changes in organizational assumptions, HR must lead the change in organizational assumptions in favor of talent retention and a strong culture in terms of agility, creativity, and innovation.

Also read: Innovation Management

Header photo by  RF._.studio  via Pexels

2 thoughts on " McGregor’s Theory X and Theory Y explained "

Very helpful information it would be great to learn more😁

Why should any one be controlled unless an employer knows one has a mental illness issue and thus feel the need to control one’s actions????

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McGregor’s Theory X and Theory Y

The idea that a manager’s attitude has an impact on employee motivation was originally proposed by Douglas McGregor , a management professor at the Massachusetts Institute of Technology during the 1950s and 1960s. In his 1960 book, The Human Side of Enterprise , McGregor proposed two theories by which managers perceive and address employee motivation. He referred to these opposing motivational methods as Theory X and Theory Y management. Each assumes that the manager’s role is to organize resources, including people, to best benefit the company. However, beyond this commonality, the attitudes and assumptions they embody are quite different.

According to McGregor, Theory X management assumes the following:

• Work is inherently distasteful to most people, and they will attempt to avoid work whenever possible.
• Most people are not ambitious, have little desire for responsibility, and prefer to be directed.
• Most people have little aptitude for creativity in solving organizational problems.
• Motivation occurs only at the physiological and security levels of Maslow’s hierarchy of needs.
• Most people are self-centered. As a result, they must be closely controlled and often coerced to achieve organizational objectives.
• Most people resist change.
• Most people are gullible and unintelligent.

Essentially, Theory X assumes that the primary source of employee motivation is monetary, with security as a strong second. Under Theory X, one can take a hard or soft approach to getting results.

The hard approach to motivation relies on coercion, implicit threats, micromanagement, and tight controls— essentially an environment of command and control. The soft approach, however, is to be permissive and seek harmony in the hopes that, in return, employees will cooperate when asked. However, neither of these extremes is optimal. The hard approach results in hostility, purposely low output, and extreme union demands. The soft approach results in a growing desire for greater reward in exchange for diminished work output.

It might seem that the optimal approach to human resource management would lie somewhere between these extremes. However, McGregor asserts that neither approach is appropriate, since the basic assumptions of Theory X are incorrect.

Drawing on Maslow’s hierarchy of needs, McGregor argues that a need, once satisfied, no longer motivates. The company uses monetary rewards and benefits to satisfy employees’ lower-level needs. Once those needs have been satisfied, the motivation disappears. Theory X management hinders the satisfaction of higher-level needs because it doesn’t acknowledge that those needs are relevant in the workplace. As a result, the only way that employees can attempt to meet higher-level needs at work is to seek more compensation, so, predictably, they focus on monetary rewards. While money may not be the most effective way to self-fulfillment, it may be the only way available. People will use work to satisfy their lower needs and seek to satisfy their higher needs during their leisure time. However, employees can be most productive when their work goals align with their higher-level needs.

McGregor makes the point that a command-and-control environment is not effective because it relies on lower needs for motivation, but in modern society those needs are mostly satisfied and thus are no longer motivating. In this situation, one would expect employees to dislike their work, avoid responsibility, have no interest in organizational goals, resist change, etc.—creating, in effect, a self-fulfilling prophecy. To McGregor, a steady supply of motivation seemed more likely to occur under Theory Y management.

The higher-level needs of esteem and self-actualization are ongoing needs that, for most people, are never completely satisfied. As such, it is these higher-level needs through which employees can best be motivated.

In strong contrast to Theory X, Theory Y management makes the following assumptions:

• Work can be as natural as play if the conditions are favorable.
• People will be self-directed and creative to meet their work and organizational objectives if they are committed to them.
• People will be committed to their quality and productivity objectives if rewards are in place that address higher needs such as self-fulfillment.
• The capacity for creativity spreads throughout organizations.
• Most people can handle responsibility because creativity and ingenuity are common in the population.
• Under these conditions, people will seek responsibility.

Under these assumptions, there is an opportunity to align personal goals with organizational goals by using the employee’s own need for fulfillment as the motivator. McGregor stressed that Theory Y management does not imply a soft approach.

McGregor recognized that some people may not have reached the level of maturity assumed by Theory Y and may initially need tighter controls that can be relaxed as the employee develops.

If Theory Y holds true, an organization can apply the following principles of scientific management to improve employee motivation:

• Decentralization and delegation : If firms decentralize control and reduce the number of levels of management, managers will have more subordinates and consequently need to delegate some responsibility and decision making to them.
• Job enlargement : Broadening the scope of an employee’s job adds variety and opportunities to satisfy ego needs.
• Participative management : Consulting employees in the decision-making process taps their creative capacity and provides them with some control over their work environment.
• Performance appraisals : Having the employee set objectives and participate in the process of self-evaluation increases engagement and dedication.

If properly implemented, such an environment can increase and continually fuel motivation as employees work to satisfy their higher-level personal needs through their jobs.

Ouchi’s Theory Z

During the 1980s, American business and industry experienced a tsunami of demand for Japanese products and imports, particularly in the automotive industry. Why were U.S. consumers clambering for cars, televisions, stereos, and electronics from Japan? Two reasons: (1) high-quality products and (2) low prices. The Japanese had discovered something that was giving them the competitive edge. The secret to their success was not what they were producing but how they were managing their people—Japanese employees were engaged, empowered, and highly productive.

Management professor William Ouchi argued that Western organizations could learn from their Japanese counterparts. Although born and educated in America, Ouchi was of Japanese descent and spent a lot of time in Japan studying the country’s approach to workplace teamwork and participative management. The result was Theory Z—a development beyond Theory X and Theory Y that blended the best of Eastern and Western management practices. Ouchi’s theory first appeared in his 1981 book, Theory Z: How American Management Can Meet the Japanese Challenge.  The benefits of Theory Z, Ouchi claimed, would be reduced employee turnover, increased commitment, improved morale and job satisfaction, and drastic increases in productivity.

Theory Z stresses the need to help workers become generalists, rather than specialists. It views job rotations and continual training as a means of increasing employees’ knowledge of the company and its processes while building a variety of skills and abilities. Since workers are given much more time to receive training, rotate through jobs, and master the intricacies of the company’s operations, promotions tend to be slower. The rationale for the drawn-out time frame is that it helps develop a more dedicated, loyal, and permanent workforce, which benefits the company; the employees, meanwhile, have the opportunity to fully develop their careers at one company. When employees rise to a higher level of management, it is expected that they will use Theory Z to “bring up,” train, and develop other employees in a similar fashion.

Ouchi’s Theory Z makes certain assumptions about workers. One assumption is that they seek to build cooperative and intimate working relationships with their coworkers. In other words, employees have a strong desire for affiliation. Another assumption is that workers expect reciprocity and support from the company. According to Theory Z, people want to maintain a work-life balance, and they value a working environment in which things like family, culture, and traditions are considered to be just as important as the work itself. Under Theory Z management, not only do workers have a sense of cohesion with their fellow workers, they also develop a sense of order, discipline, and a moral obligation to work hard. Finally, Theory Z assumes that given the right management support, workers can be trusted to do their jobs to their utmost ability and look after for their own and others’ well-being.

Theory Z also makes assumptions about company culture. If a company wants to realize the benefits described above, it need to have the following:

• A strong company philosophy and culture : The company philosophy and culture need to be understood and embodied by all employees, and employees need to believe in the work they’re doing.
• Long-term staff development and employment : The organization and management team need to have measures and programs in place to develop employees. Employment is usually long-term, and promotion is steady and measured. This leads to loyalty from team members.
• Consensus in decisions: Employees are encouraged and expected to take part in organizational decisions.
• Generalist employees: Because employees have a greater responsibility in making decisions and understand all aspects of the organization, they ought to be generalists. However, employees are still expected to have specialized career responsibilities.
• Concern for the happiness and well-being of workers : The organization shows sincere concern for the health and happiness of its employees and their families. It takes measures and creates programs to help foster this happiness and well-being.
• Informal control with formalized measures : Employees are empowered to perform tasks the way they see fit, and management is quite hands-off. However, there should be formalized measures in place to assess work quality and performance.
• Individual responsibility : The organization recognizes the individual contributions but always within the context of the team as a whole.

Theory Z is not the last word on management, however, as it does have its limitations. It can be difficult for organizations and employees to make life-time employment commitments. Also, participative decision-making may not always be feasible or successful due to the nature of the work or the willingness of the workers. Slow promotions, group decision-making, and life-time employment may not be a good fit with companies operating in cultural, social, and economic environments where those work practices are not the norm.

Check Your Understanding

Answer the question(s) below to see how well you understand the topics covered above. This short quiz does not count toward your grade in the class, and you can retake it an unlimited number of times.

Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.

________ assumes that the primary source of most employee motivation is monetary, with security as a strong second.

• Equity theory

MGMT-1010: Introduction to Business Copyright © by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License , except where otherwise noted.

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Please note you do not have access to teaching notes, revisiting of theory x and y: a multilevel analysis of the effects of leaders’ managerial assumptions on followers’ attitudes.

Management Decision

ISSN : 0025-1747

Article publication date: 11 November 2014

The purpose of this paper is to investigate the influence of leaders’ Theory X and Y managerial assumptions on subordinates’ attitudes and behaviors.

Design/methodology/approach

Military leaders ( n =50) completed a questionnaire with Theory X and Y scale and their subordinates ( n =150) completed a questionnaire with the scales of satisfaction with leader, affective commitment, and organizational citizenship behavior. The paper used hierarchical linear modeling to test the hypotheses.

The results indicated that the Theory Y management style is significantly and positively associated with subordinates’ satisfaction with the leader, affective commitment, and organizational citizenship behaviors. The Theory X management style had a significantly negative impact on subordinates’ satisfaction with the leader, but no significant impact on affective commitment and organizational citizenship behavior. The findings of the present study suggest that the Theory X and Y managerial assumptions are a worthwhile basis from which to examine several important organizational and individual outcomes.

Research limitations/implications

The sample consisted of military personnel and were predominantly male. This may limit the generalizability of the findings.

Practical implications

The findings of the present study suggest that the Theory X and Y managerial assumptions are a worthwhile basis from which to examine several important organizational and individual outcomes.

Originality/value

Although McGregor's (1960) Theory X and Y have contributed to management and leadership thinking and practice for many years; empirical studies examining the Theory X and Y managerial assumptions in a work environment are very scarce. By examining the effect of leader's Theory X and Y managerial assumptions on follower's attitudes and behaviors, the study provides important insights for leadership literature.

• Affective commitment
• Organizational citizenship behaviour
• Satisfaction with leader
• Social exchange theory
• Theory X and Y management styles
• Military personnel

Acknowledgements

The views expressed in this paper are solely those of the authors and do not necessarily reflect the views of the Ministry of National Defense or the Turkish Armed Forces. An earlier version of the research was presented at the 54th International Military Testing Association Conference, Dubrovnik, Croatia, November 5-9, 2012.

Gürbüz, S. , Şahin, F. and Köksal, O. (2014), "Revisiting of Theory X and Y: A multilevel analysis of the effects of leaders’ managerial assumptions on followers’ attitudes", Management Decision , Vol. 52 No. 10, pp. 1888-1906. https://doi.org/10.1108/MD-06-2013-0357

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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Theory X and Theory Y

Theory X and Theory Y framework proposed by McGregor in his classic book The Human Side of Enterprise (1960) consists of two alternative set of assumptions. Theory X percieves employees to be lazy, irresponsible and untrustworthy, while according to theory Y employees are approached as one of the most valuable assets of the company.

According to Theory X assumptions employees do not like their work, they lack ambition and responsibility and employees prefer to be led rather than leading others.

Theory X assumes average human being to dislike the work and avoid it whenever possible. The following statements relate to Theory X assumptions:

• Most people must be controlled and threatened so that they can produce an adequate level of output
• Responsibility is avoided by an average human who desires security above all
• An average human being has a little ambition and has to be closely supervised at all times

Theory Y set of assumptions, on the other hand, is based upon the idea that employees are generally enthusiastic about their work, they are creative and self-directive, and also employees readily accept responsibility.

Theory Y is based on the following alternative assumptions:

• The expenditure of physical and mental effort in work is as natural as play or rest
• Methods of making people work are not limited to control and punishment, high level of commitment in organisational aims and objectives can result in self-direction
• Commitment to organisation can be achieved by designing satisfying jobs
• If proper conditions are created, an average human can not only learn how to take responsibility, but he can also learn to seek responsibility

In practical levels, McGregor’s Theory X and Theory Y framework aims to demonstrate the potential of employees that organisations should recognise so that the level of organisational efficiency can be increased.

However, as Agnes (2010) informs, the numbers of companies concentrating on theory theory Y management perspective are increasing in the search of obtaining overall efficiency and competitive edge in the marketplace.

It has to be stressed that “an important aspect of McGregor’s ideas is his belief that managers who hold either set of assumptions can create self-fulfilling prophecies – that is, through their behaviour they create situations where others act in ways that conform the original expectations” (Schermerhorn, 2011, p.38). As Palmisano (2008) confirms, this specific theoretical framework mainly serves to communicate potential benefits of Theory Y practices to Theory X type of managers.

Agness, L, 2010, Change Your Business with NLP: Powerful Tools to Improve Your Organisation’s Performance and Get Results, Wiley Publications McGregor, D, 2002, Theory X and Theory Y, Workforce, Vol.81, Issue 1

Palmisano, D.J. (2008) “On Leadership: Essential Principles for Success” Skyhorse Publishing

Schermerhorn, J.R., Osborn, R.N. & Hunt, J.G. (2011) “Organisational Behaviour” John Wiley & Sons

• Organizational Behaviour
• Theory X and Theory Y

In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting two aspects of human behaviour at work, or in other words, two different views of individuals (employees):

According to McGregor, the perception of managers on the nature of individuals is based on various assumptions.

Assumptions of Theory X

Assumptions of theory y.

In other words, the creativity, resourcefulness and innovative potentiality of the employees can be utilized to solve organizational problems.

Thus, we can say that Theory X presents a pessimistic view of employees’ nature and behaviour at work, while Theory Y presents an optimistic view of the employees’ nature and behaviour at work.

If we correlate it with Maslow’s theory, we can say that Theory X is based on the assumption that the employees emphasize on the physiological needs and the safety needs; while Theory X is based on the assumption that the social needs, esteem needs and the self-actualization needs dominate the employees.

McGregor views Theory Y to be more valid and reasonable than Theory X . Thus, he encouraged cordial team relations, responsible and stimulating jobs, and participation of all in decision-making process.

Implications of Theory X and Theory Y

Theory Y encourages decentralization of authority, teamwork and participative decision making in an organization.

Theory Y searches and discovers the ways in which an employee can make significant contributions in an organization. It harmonizes and matches employees’ needs and aspirations with organizational needs and aspirations.

  Related Articles

• Classical Theories of Motivation
• Maslow’s Hierarchy of Needs Theory
• Herzberg’s Theory of Motivation
• Modern Theories of Motivation

View All Articles

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team . MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider . To Know more, click on About Us . The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.

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• Motivation Incentives
• Importance of Motivation
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• Role of Motivation in OB
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McGregor’s X and Y Theories: Definition, Example & Limitation

McGregor’s X and Y Theories was developed by social psychologist Douglas McGregor in the 1960s. He established the two contrasting theories to understand a manager’s beliefs regarding employee motivation and its effect on management style. 

What Is The McGregor X and Y Theories?

McGregor’s X and Y Theories are contrasting theories that depict two different aspects of human behavior at work. 

Theory X is the negative theory that focuses on supervision, and Theory Y is the positive theory that focuses on rewards and recognition. Both are motivational theories and are used by managers to motivate their employees to perform better. 

What is Theory X?

Theory X is an authoritative approach to motivating employees where the manager has a pessimistic opinion about their team members. Managers believe employees are not motivated because they dislike the work. 

Therefore, they have to motivate their employees with a carrot and stick approach. The approach focuses on persuading employees to complete work by motivating them with incentives and punishing them if they cannot complete the task. 

Managers follow their team members until they complete the task.  

Assumptions of Theory X

• Most human beings are not very fond of working and will avoid completing a task. Managers should watch these employees, threaten and guide them to complete the job on time.
• Necessary rewards upon task completion can be given to keep employees motivated. 
• Average employees always seek direction as they are lazy. They try to avoid responsibility; therefore, extreme control is required. 
• Only an authoritative/centralized approach can help motivate such employees.

Characteristics of Workers in Theory X

• Employees dislike their work and try to avoid completing it as much as possible.
• Employees delay work until the deadline.
• Employees in lack ambition and responsibility towards their work.
• Employees demand high centralization and control from their managers.
• Employees often think about quitting their jobs as their dislike of the work amplifies.

Limitations of Theory X 

• Not all employees can work in strict and controlled environments; it can decrease productivity.
• An authoritative management style can hamper employee learning, building, and development. 
• Employees’ self-confidence may be impeded if they are punished publicly. 
• This theory creates a negative environment that instills fear, underconfidence, and insecurity. 
• The financial incentive does not motivate all employees. Therefore, it often cannot push employees to perform better. 
• The theory assumes that employees are lazy and cannot make decisions. This is an incorrect collective assumption. 
• Theory X provides high power to the superiors; it is biased as it does not consider employee recognition and development. 

Example of Theory X

Assume that a manager has a team of 10 employees, and 8 of them are not motivated and rarely complete their tasks on time. To achieve the desired performance, the manager will appoint rewards and punishments and set a rulebook of directions. 

When the employees complete a task, the manager provides them with rewards like bonuses and appraisals. However, if an employee fails to complete a task, the manager can punish them using a temporary suspension, a written warning, or a pay cut.

What is Theory Y?

Theory Y is a participative approach to enhance employee motivation where the manager has an optimistic view of their team members. Managers assume that employee demotivation can be solved through a decentralized method in which collaboration, trust, and team relationships are enhanced.

This theory contradicts Theory X; in this approach, managers believe that control does not motivate employees. Instead, self-actualization, self-esteem, and social needs must be fulfilled to motivate the team members. 

Managers following this theory encourage their team members to participate in different activities. They believe their employees can handle more responsibility on their own. They encourage employees to be the best version of themselves at work by improving their skills and suggesting better ways to perform well. 

Open communication and regular incentives are the foundation of this theory, as managers believe in not controlling the staff but collaborating with them.

Assumptions of Theory Y

• Employees are motivated by self-control and not external control.
• Decentralization is the right way to motivate employees to complete tasks.
• The commitment to complete a task is based on the rewards.
• Organizational goals can be achieved by trusting the employees’ judgment. 
• Physical and mental tiredness during work is a natural phenomenon. 
• An average employee seeks responsibility to become more motivated. 

Characteristics of Workers in Theory Y 

• Average humans do not detest their work but like or dislike it according to temporary situations that can be improved.
• Employees under this theory seek responsibility as motivational drivers.
• Employees prefer making decisions themselves and also solving problems creatively.
• Employees under this theory are self-motivated and enjoy ownership of work.
• Employees only need a little direction.

Limitations of Theory Y

• Some employees require guidance and are not comfortable with undefined working boundaries.
• Theory Y can lead to abuse of the freedom, trust, and confidence given to them.
• Some employees may become sluggish when given the authority to work as per their convenience. 
• Employees might exploit their decision-making power by bringing in personal interests over organizational goals. 
• Since quantitative metrics are not a focus in this theory, it becomes hard to measure employee growth and success. 
• The theory overgeneralizes how an employee behaves in a work environment.
• The theory can lead to managers becoming lazy, as they can delegate and decentralize all work to their subordinates in the name of transferring authority. 

Example of Theory Y

Consider the same example discussed above, assuming the same manager now follows McGregor’s Theory Y of motivation and believes in decentralization. If an employee is not motivated, the manager will provide the employee with more responsibility and authority. The manager will trust the employee’s decisions and help them understand their contribution to the company.

Instead of punishing the employee or associating a reward with work, the manager will allow them to collaborate with others and find solutions that fulfill the team member’s self-actualization, self-esteem, and social needs. In this way, the manager will change their management style into a participative or decentralized style to instill higher self-belief in their team members. 

How To Apply McGregor’s Theory X and Y as a Manager 

Using either theory is an extreme style of management. Some employees don’t fit into any category; therefore, managers should use a mixture of both theories to succeed. 

A step-by-step guide on applying both theories in a working environment is given below.

Step 1: Identify the Work Issue

Issue identification is the first step. 

Does the team not understand the work? Is the team demotivated because of a lack of incentives? Is there an internal conflict between team members? 

Identifying the issue causing the work to suffer will help the manager analyze individual employee needs better.

Step 2: Analyze Employees’ Needs and Wants

After identifying the issue, analyze the employees’ needs and wants. Since every employee is unique, following generic Theory X or Theory Y will not work. Identify what the employee lacks and their working style to employ the right theory that will motivate them in the right direction.

Step 3: Monitor Results After Employing the Theories

After employing a particular theory, monitor its performance. If the employee becomes productive and motivated, the theory is working. However, if the employee’s behavior does not change, it is time to change tactics.  

Step 4: Change the Management Style if the Previous One Doesn’t Work

If the previous management style is not working out, it is best to change it for better results. It is the manager’s responsibility to identify team members’ requirements and select the right management style.

If team members perform well under control, an authoritative management style can be used. However, if the team members are self decision-makers and enjoy freedom and responsibility, managers should opt for a democratic management style.

The Ideal Time to Use Theory X and Theory Y

Theory X is useful for less experienced employees who have just stepped into the professional world. They need guidance throughout their work journey and look for a controlled management system to understand the task well and complete it on time.

This theory cannot be used with experienced professionals. Such individuals are used to working on their own terms and accomplishing tasks. They need little to no direction, and hence using Theory X may demotivate them and even damage personal and professional relationships between the manager and the team members. Experienced professionals require a Theory Y management style, as they are capable of making the right decisions. 

Conclusion 

Management styles impact organizational goals. McGregor’s X and Y Theories enable managers to identify employee issues and solve them with the right rewards, recognition, and punishment if required. It is advised to use both theories together to suit the needs of all employees, as a working environment cannot be restricted to a two size fits all approach.

5 thoughts on “McGregor’s X and Y Theories: Definition, Example & Limitation”

wonderful article and I have enjoyed it.

l enjoyed it

I need contributions and limitations of X and Y perspectives in studying motivation

Using suitable examples; How can you apply theory X and Y by Douglas Macgregory in a learning institution

I enjoy reading the theory so motivating

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Why Tipping Is Everywhere

In the united states, many say tipping is expected in more places these days. here’s how tipping culture exploded..

This transcript was created using speech recognition software. While it has been reviewed by human transcribers, it may contain errors. Please review the episode audio before quoting from this transcript and email [email protected] with any questions.

Hello. Excuse me?

My name is Sabrina. This is Claire. We’re journalists. Could we ask you a question?

You just did.

[LAUGHS]: Another one. [UPBEAT MUSIC]

What is your view of tipping?

I think it’s become excessive. Whatever they do, they got that jar and they’re wanting you to put a tip in there.

They have the iPad. And it’s like, all right, how much you want to tip? And it’s like you bought a $5 coffee. It’s like, all right, well, tip $3.

There’s a lot of pressure. You feel like you have to tip. And I feel like people are watching you at that moment.

Yeah, yeah. I feel a lot more pressure to tip more. Wages haven’t kept up, so I feel like I should be tipping more. And it’s annoying because my wages haven’t gone up either, so it’s annoying.

The other day I just bought a loaf of bread, and the tip thing came up, gave me the option of 15 percent or 20 percent. Do I really have to tip somebody to buy a loaf of bread?

I went to the self-service machine. And it was like, add a tip. And it’s like add a tip for what? I’m the one that did the work, you know what I’m saying?

You’re like, I should be tipping myself.

I actually am a tip worker. We’re literally paid less wages in order for the customers to pay us.

What do tips mean for you and your work?

It’s how I feed my family.

Yes. 100 percent.

Unless you work in the service industry, you don’t really understand how crucial tipping is.

Tips mean a lot. They are 60 percent, 50 percent of my paycheck. And my hourly is pretty low to begin with.

Whatever I get at the end of the night goes towards dinner. Or for example, I didn’t have money for sanitary pads one time. And then that tip, grabbed it.

I feel like a lot of people feel like you did nothing for me. You just put a cup on the counter and I took it. Like, why should I pay you extra for that?

What do you say to someone who says that? You didn’t do anything, you just put my food in a bag.

If you knew what my paycheck looked every week, you would think different. Or maybe not, maybe you don’t feel bad for me and you’re like, get a different job. But like, this is a job I’m good at and the job I like. And I’d like to be able to make a living off of it. That extra dollar or two really makes a difference.

From “The New York Times,” I’m Sabrina Tavernise and this is “The Daily.”

Tipping, once contained to certain corners of the economy, has exploded, creating confusion and angst and now even becoming an issue in the presidential campaign. Today, economics reporter, Ben Casselman, cracks open the mystery of this new era of tipping.

It’s Thursday, August 29.

So Sabrina.

Can I ask you a personal question?

What is your philosophy on tipping?

[LAUGHS]: Exactly.

Sabrina, I think I’m a sucker. Look, I’ve always tried to be a good tipper in restaurants. It feels like part of the deal.

I worked as a waitress for many years. That was the only way I actually made money. If there’s no tip, there’s no salary. Restaurants, it’s a rule.

Absolutely. But now tipping is everywhere. You see these tip screens in places you never would have tipped before. I mean, never mind the coffee shop, you see it at the fast food place. You see it at the oil change place. I’ve heard stories of people seeing it at the self-checkout line. Who’s even getting that tip?

And every time a tip screen pops up, I always tip.

Oh, my god, Ben, so do I.

It’s totally irrational. I hate it. But there’s some part of me, and I don’t love this about myself, that is just convinced somebody is going to be sitting there judging me or I’m terrified that they’re going to. And, oh, my god, if I click No Tip, am I a bad person?

And someone behind me in line might see that.

I can’t click that No Tip button.

I am exactly the same. Every single time I’m presented with this iPad screen thingy, the tips come up. I press max, 30 percent. My husband, an economist, thinks this is ridiculous.

He says, you’re tipping 30 percent on a bottle of water someone just handed you. Don’t do that. That is crazy. But I keep doing it because I can, so I should. I don’t know, I have guilt about it.

Your husband is objectively correct. This is crazy. But tipping is not about objective cold economic logic. It’s emotional. It’s cultural.

There are norms around it. And right now, we have no idea what those norms are. And so we’re all stuck in this panicked moment of trying to decide which button you press and whether you should be expected to tip in this circumstance.

OK, so we are both suckers. We’ve established that. What we need to do now is figure out this panicked moment. I want you to explain this to me, Ben. Why has tipping exploded?

I think there are three reasons. The first of these is just technology. Several years ago, we started to see these tablet-based checkout systems everywhere. And it’s very easy to just add a tip screen onto there, that little, do you want to add a tip, 10 percent, 15 percent, 20 percent.

Right. And as I had less cash and then no cash in my wallet, this was always the way I paid for things.

Yeah, so it became very easy technologically to add tipping. But then the real shift came in the pandemic.

If you think back to that moment, many of us were lucky enough to be able to work from home and to be relatively safe. And we felt a lot of gratitude for the people who weren’t able to do that, who were bringing us food and delivering groceries. And so there was an explosion in tipping. And an explosion in tipping, even in places where we didn’t used to tip.

If you go and pick up takeout at a restaurant, you probably always tip your delivery driver. But if you went to the restaurant and you picked it up, you didn’t tip there. But now in the pandemic moment, they add a tip screen saying, would you like to tip? And yeah, of course, I’d like to tip. These people are risking their lives out there to make my chicken tikka masala.

Right. You basically wanted to tip the UPS guy.

Yes. And so we were tipping everybody. And so that allowed tipping to spread into these new areas. It got a beachhead in places where it didn’t used to be.

And maybe if the story ended there, it would have been this moment in time and then it all would have gone back to the way it always used to be. But that didn’t happen because we had this intense worker shortage when things started to reopen.

And how does that fit into this?

Businesses start to reopen. They need workers. They’re having a hard time finding them. Workers are reluctant to come back for all sorts of reasons. And tipping became a way of attracting workers.

Businesses were paying more, but they were also looking for other ways to get workers. And saying, we’ll add a tip screen that’ll boost your pay further. And if there’s one coffee shop where there’s a tip screen and there’s another coffee shop where there isn’t, you can be pretty sure which one you’re going to go work at.

Completely. I mean, we were talking to workers yesterday, and they were very specific about which chain stores allowed tips and which ones didn’t. And they much preferred working for the ones that allowed tips. I mean, it makes sense.

And I asked them, as a proportion of your earnings, how much are tips? Tips are a lot. Does that mean you make less in the place that doesn’t have the screen that allows it? Absolutely.

We saw workers demanding this. In fact, when some Starbucks stores were unionizing, one of the things they demand is, we want to be able to take tips on credit card payments.

Interesting, yeah.

This became a source of negotiation between businesses and their workers. And the thing is, once that happens, it’s really hard to put the genie back in the bottle.

But why? I mean, this all sprung up into our lives in the matter of a couple of years. So why can’t it go back to the way it was just as quickly?

Imagine that coffee shop worker that you were talking to yesterday, who’s now making, in many cases, 20 percent, 30 percent, even 40 percent of their earnings in tips. The business can’t just say, never mind, we’re going to get rid of the tip screen. Maybe, we’ll put out a tip jar and people can leave $1 or $2 when they want to. That’s a huge pay cut for that worker.

OK, they could instead say we’re going to get rid of tipping and we’re going to raise your pay. Instead of paying you $15 an hour and $5 in tips, we’ll give you $20 an hour. But now the business is going have to raise prices as a result.

And you, Sabrina, the coffee-drinking public are going to say, no way, I’m not going there and paying $8 for my latte or whatever the price may be. And so for the business, they can’t just get rid of the tip, because they can’t just cut off the pay and they can’t raise prices enough to raise pay accordingly.

Right. Nonstarter for the business.

Can’t work for them. And the worker is certainly not going to stick around if they try to do that.

So has there been some experimentation with this? I mean, have restaurants actually tried to go tipless?

Yeah, so we’ve seen an example of exactly this. A few years back, Danny Meyer, a big New York restaurateur, and a bunch of other restaurants as well tried getting rid of tipping completely. They said, this system is unfair, it’s unequal. We’re going to raise wages for everybody, for waiters, but also for cooks.

We’re going to raise our prices, accordingly, to pay for that. And customers will understand. They’ll understand that they’re paying the same amount at the end of the day, it just is in the form of a direct cost instead of a cost plus a tip. And it didn’t work.

For a bunch of reasons. But mostly because customers looked at the price on the menu and people didn’t want to pay it. I also think, look, we all complain about tipping. But customers also kind of like the tip. They kind of like looking generous.

You get to show off to your date or to your father-in-law. And, of course, you can, at least in theory, express your dissatisfaction by withholding a tip or by tipping less. Not you and me, we apparently don’t do that. But some people do, I hear.

The restaurant’s like, suckers, OK, great. Yeah, we don’t even have to worry about them.

Customers rebelled against the idea of not tipping. And most of those restaurants eventually went back to the old model.

Interesting. So we do have this love-hate relationship with tipping.

Yes. We hate being asked, but we like the control. And I think that is part of why all these changes feel so difficult for so many people, because it doesn’t necessarily feel like you have the control anymore.

That screen in front of you with the barista watching you, with the person in line behind watching you —

Oh, my gosh, I’m sweating already.

— you don’t feel like can press the No Tip button. Or at least suckers like you and me don’t.

Exactly. The choice is gone.

The choice is gone. Or the choice, at least, is sort of psychologically more taxing.

Right. [LAUGHS]

You feel pressured to do it.

OK, so that’s the customer experience. But with this new uptick in tipping, one question I always have is, is the worker on the other side of the screen getting this tip or will the business owner pocket it?

The worker is getting the tip with some caveats. By law, the business owner or the managers, they can’t take the tips. If you click a Tip button or you leave $1 in the tip jar or you tip in any way, if that ends up in the pockets of the business owner or the general manager or what have you, that is wage theft. It happens. We certainly hear stories about it happening, but it’s certainly not legal and it’s certainly not the norm.

That doesn’t mean that the worker, the person who hands you your latte, is the person getting your dollar. It often gets pooled across all of the workers who are working that shift or even all of the workers who work over an entire week. But it’s going to the workers.

People like us can rest assured that the workers are getting the full benefit of that tip that you’re pushing.

In many ways, what you are doing as the customer is you are subsidizing the wage. If you, you coffee shop worker, want to get $25 an hour, you don’t care whether that’s $20 in pay and $5 in tip or $25 in pay or any breakdown of that.

$25 is $25.

$25 is $25. When I leave a tip of $1, on some level, that’s $1 less that coffee shop has to pay you, the barista. Tips are helping the business pay their workers. They’re shifting. The business is shifting some of the burden for paying its workers off of its revenue onto its customers.

In other words, you and I, Ben, we are kind of helping foot the bill for these wages.

Absolutely. And from the businesses’ perspective, that’s a pretty great deal, because they basically get to charge, say, $4 for the latte and then for the customers who are willing to pay more, they’re basically charging more. Those people throw on the tip.

It’s a way of the business getting the maximum dollars that it can out of the maximum number of customers that it can attract.

But for workers, this system where they’re increasingly reliant on customer tips carries some real risks.

[UPBEAT MUSIC]

We’ll be right back.

Tell me about these risks of our tipping system.

Look, tipping has always had a lot of problems associated with it. If you think in restaurants, they’re often really big pay disparities where the servers at the front of the house, who are getting tipped, often make a lot more money, especially at a nice restaurant, than the cooks and dishwashers and all of the people at the back of the house.

You hear these stories of people going to cooking school and then basically bailing on the cooking career and becoming waitresses and waiters because it’s just more money.

Yeah. And then within tipped occupations, there’s a lot of inequity here. There have been studies that have shown that a pretty young woman gets tipped better than other people, that white people often get tipped better. There are tons of problems around sexual harassment, because if your earnings are dependent on the table that you’re serving liking you, then maybe you put up with things that workers shouldn’t have to put up with.

Those are the problems that have always existed in this system. But then as tipping spreads, the risk is, first, just more workers have to deal with this, but also that more workers become more dependent on tips for their earnings.

In the short term, this has all worked out pretty well for workers. This has been a period where they’ve been in hot demand, and so their wages have been rising. And at the same time, they’ve gotten all these tips on top of that. And that’s been really great.

But it’s not clear that that’s true over the longer term. Over the long run, you could imagine that all of these businesses get to just raise wages more slowly, that tips sort of eat away at wages over time. And then if we ever see customers pull back a little bit, tip less, then all of a sudden, all of these workers could really suffer.

Basically, you’re describing a system in which the earnings are just more vulnerable, more dependent on the kindness of strangers.

Yeah. And more at risk if those strangers become a little less kind.

Yes. And this issue has become so much a part of the national conversation that it’s actually entered the presidential race. Both former President Trump and Vice President Kamala Harris have announced policy plans to help service workers. And essentially, they’re calling for no tax on tips.

Yeah, that’s right. So President Trump announced this several weeks ago as his big new “no taxes on tips” proposal. Kamala Harris followed up and basically endorsed that proposal, again, a little while later. We don’t have a lot of details on how this would work. But essentially, it would mean that if you earn tips, those tips are exempt at least from federal income tax.

What would that mean?

Let me tell you, economists hate this idea. Left-wing economists and right-wing economists, this is one point they can kind of all agree on.

And why do they hate it?

Because they say it’s unfair. It singles out this one group of workers for special treatment. The person who works at McDonald’s who doesn’t get tipped, they don’t benefit from this. The retail worker doesn’t benefit from this. It’s just this one group of workers who get this special treatment where they don’t have to pay taxes.

Right. Right.

But there’s also maybe an even more fundamental issue, which is that if you think you hate tipping now, if these proposals go through, you’re going to see so much more tipping.

Uh-oh, I’m holding on to my hat.

Because it’s basically a subsidy for tips.

As a worker, we said before, you don’t care whether you make, $25 an hour or $20 plus $5 an hour in tips, except that if some of that money isn’t taxed, you want more of that. You want more tips.

Basically, you want your entire salary to be a tip.

Ideally, right? And so that works great for the business perspective. Great, I don’t need to pay my workers.

[LAUGHS]: Wee!

It’s all tips now. Workers happy about that. What that means is you’re going to see more businesses looking for ways to have their workers count as tipped. Maybe you start to see tips in places that we’re not seeing them at all. Maybe you really do start to pay tips at a retail outlet, at a gas station.

Grocery store?

At a grocery store, why not? And the issue there, beyond just it being annoying for you and me, is that it further ingrains this system. All those problems that we were talking about in tipping now involves even more workers across the economy. And they’re even more vulnerable to that possibility that you and I start tipping a little bit less.

Ben, how would you describe where we are in this tipping moment? Is this just the new normal?

I think we’re still in a period of transition here. The fact that we’re having this conversation on some level tells you that we’re not totally in a new normal yet. You don’t leave a restaurant and say to yourself, man, I can’t believe I was asked to tip. But we’re still all the time having this conversation about, you wouldn’t believe I got asked to tip at the self-checkout.

Right. The bakery, for god’s sake.

It’s still a transition. It’s still happening. Over time, norms will develop. We’ll figure out the places where we tip and the places where we don’t, and how much and all of that.

But the dust hasn’t quite settled yet.

It hasn’t settled. But I think what we do know is that we’re not going back. We’re now going back to a world where we only tip in those set of circumstances where we used to. And remember, this whole transition has happened during a period of relative economic strength, when people have had money to go out and spend and to tip. The question is, what happens when that’s no longer true?

Right. When there’s a recession, people are going to be nervous about their pocketbooks and probably won’t be as generous.

Whenever we get to the next recession, it will be the first one in this new era of tipping.

And there’s a whole new group of workers who are going to lose out when that happens, who are dependent on tips and will suffer when customers start pulling those tips back.

Ben, thank you.

Sabrina, thank you so much. And the screen is just going to ask you a couple of questions at the end here.

[LAUGHS]: Ben, 30 percent.

Here’s what else you should know today. On Wednesday, at least 10 Palestinians were killed when hundreds of Israeli troops launched major raids overnight in the occupied West Bank, targeting Palestinian militants, after what Israel said was months of rising attacks. The operation, the largest since 2023, followed months of escalating Israeli raids in the occupied territory, where nearly three million Palestinians live under Israeli military rule.

And the Supreme Court maintained a temporary pause on a new plan by President Biden to wipe out tens of millions of dollars of student debt. The plan was part of the president’s approach to forgiving debt after the Supreme Court rejected a more ambitious proposal last year that would have canceled more than $400 billion in loans. The scaled-down plan was directed at certain types of borrowers, including people on disability and public service workers. The court’s decision leaves millions of borrowers enrolled in the new plan in limbo.

Today’s episode was produced by Mooj Zadie, Asthaa Chaturvedi, Eric Krupke, and Clare Toeniskoetter. It was edited by Lisa Chow and Brendan Klinkenberg, contains original music by Dan Powell, Marion Lozano, and Rowan Niemisto, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

[THEME MUSIC]

That’s it for “The Daily.” I’m Sabrina Tavernise. See you tomorrow.

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Produced by Mooj Zadie Asthaa Chaturvedi Eric Krupke and Clare Toeniskoetter

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Tipping, once contained to certain corners of the economy, has exploded, creating confusion and angst. Now, it is even becoming an issue in the U.S. presidential campaign.

Ben Casselman, who covers the U.S. economy for The New York Times, cracks open the mystery of this new era of tipping.

On today’s episode

Ben Casselman , a reporter covering the U.S. economy for The New York Times.

Background reading

How to deal with the many requests for tips .

Former President Donald J. Trump called Vice President Kamala Harris a “copycat” over her “no tax on tips” plan.

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We aim to make transcripts available the next workday after an episode’s publication. You can find them at the top of the page.

The Daily is made by Rachel Quester, Lynsea Garrison, Clare Toeniskoetter, Paige Cowett, Michael Simon Johnson, Brad Fisher, Chris Wood, Jessica Cheung, Stella Tan, Alexandra Leigh Young, Lisa Chow, Eric Krupke, Marc Georges, Luke Vander Ploeg, M.J. Davis Lin, Dan Powell, Sydney Harper, Michael Benoist, Liz O. Baylen, Asthaa Chaturvedi, Rachelle Bonja, Diana Nguyen, Marion Lozano, Corey Schreppel, Rob Szypko, Elisheba Ittoop, Mooj Zadie, Patricia Willens, Rowan Niemisto, Jody Becker, Rikki Novetsky, Nina Feldman, Will Reid, Carlos Prieto, Ben Calhoun, Susan Lee, Lexie Diao, Mary Wilson, Alex Stern, Sophia Lanman, Shannon Lin, Diane Wong, Devon Taylor, Alyssa Moxley, Olivia Natt, Daniel Ramirez and Brendan Klinkenberg.

Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly. Special thanks to Sam Dolnick, Paula Szuchman, Lisa Tobin, Larissa Anderson, Julia Simon, Sofia Milan, Mahima Chablani, Elizabeth Davis-Moorer, Jeffrey Miranda, Maddy Masiello, Isabella Anderson, Nina Lassam and Nick Pitman.

Ben Casselman writes about economics with a particular focus on stories involving data. He has covered the economy for nearly 20 years, and his recent work has focused on how trends in labor, politics, technology and demographics have shaped the way we live and work. More about Ben Casselman

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