Every so often, someone captures an important concept and expresses it in such a way that it penetrates and takes root in society. Douglas McGregor’s book, The Human Side of Enterprise, stands like a lighthouse over the sea of literature on leadership. This book and his famous “Theory Y” speech, delivered at MIT’s Alfred P. Sloan School of Management in 1957, changed the entire concept of organizational life.1 The following are the four propositions and five beliefs of Theory X in contrast to the four dimensions of Theory Y.

Two Theories of Management—X and Y2

Theory X: Four Propositions and Five Beliefs

The conventional view of management’s task can be stated broadly in terms of four propositions:

  1. Management is responsible for organizing the elements of productive enterprise—money, materials, equipment, people—in the interest of economic ends.
  2. With respect to people, this is a process of directing their efforts, motivating them, controlling their actions, and modifying their behavior to fit the needs of the organization.
  3. Orders, suggestions, and planning emanate from the top of the organization and are channeled to the bottom.
  4. Without active intervention by management, people would be passive—even resistant—to organizational needs. They must therefore be persuaded, rewarded, punished, and controlled—their activities must be directed. This is management’s task. It is often summed up by saying that management consists of getting things done through other people.

Behind this conventional theory, there are five beliefs—less explicit, but widespread:

  1. The average person is by nature lazy—working as little as possible.
  2. The average person lacks ambition, dislikes responsibility, and prefers to be led.
  3. The average person is inherently self-centered and indifferent to organizational needs.
  4. The average person is by nature resistant to change.
  5. The average person is gullible and is the ready dupe of the charlatan and demagogue.

Bureaucratic organizational structures and managerial policies, practices, and programs reflect these assumptions.

Theory Y: Four Dimensions

McGregor proposed a theory of managing people based on different assumptions about human nature and motivation. The broad dimensions of such a theory are as follows:

  1. Management is responsible for organizing the elements of productive enterprise—money, materials, equipment, people—in the interest of economic ends.
  2. People are not by nature passive or resistant to organizational needs. They can become so as a result of experience in organizations.
  3. The motivation, potential for development, capacity for assuming responsibility, and  readiness to direct behavior toward organizational goals are all present in people. Management does not put them there. Enlightened management makes it possible for people to recognize and develop these characteristics for themselves.
  4. The essential task of management is to arrange organizational conditions and methods of operation so that people can achieve their own goals best by directing their efforts toward organizational objectives.

This is a process primarily of creating opportunities, releasing potential, removing obstacles, encouraging growth, and providing guidance. It is a liberating and empowering process in contrast to a system of beliefs, policies, and practices that can best be described as “management by control.”

McGregor married the ideas of social psychologist Kurt Lewin to the theories of Abraham Maslow. To these, he added his own perspective drawn from his experiences as a professor and practicing leader. The essence of McGregor’s message is that people react not to an objective world, but to a world fashioned from their own perceptions and assumptions about what the world is like. Not content to merely describe alternative theories, McGregor went on to identify leadership strategies that could be used to create enlightened workplaces.3

McGregor emphasized the human potential for growth, elevated the importance of the individual in the enterprise, and articulated a caring approach to leadership that undergirds all types of organizations. McGregor’s prescriptions for an enlightened workplace are as follows.4

  • The practice of inclusion versus exclusion, based on democratic ideals; the active involvement of all concerned.
  • Mutual satisfaction of individual needs and group goals through effective interpersonal relationships between leaders and followers.
  • Leadership influence relies not on techniques of coercion, compromise, and bargaining, but on openness, honesty, and working through differences.
  • A conception of humanity that is optimistic versus pessimistic, and that argues for humanistic treatment of people as valuable and valued, as opposed to objects for manipulation and control.
  • A transcending concern for human dignity, worth, and growth, is captured best by the phrase “respect for the individual.”
  • A belief that human goodness is innate, but that it can be thwarted by a dysfunctional environment, and that one’s full potential can best be achieved in a healthy climate characterized by trust, respect, and authentic relationships.
  • The importance of free individuals to have courage to act and accept responsibility for consequences.

To show the difference enlightened leadership can make, contrast conditions in two investment firms.

Firm 1. This firm refers to one-half of its staff as the professionals and the rest of the employees as office staff. While the office staff members, primarily secretaries, do not expect to earn the wages of college graduates with multiple degrees, they resent the inference that if one group is professional, it follows that everyone else is unprofessional. In this firm, morale is low, turnover is high, and work productivity is reduced.

Firm 2. This firm considers its investment counselors and support staff to be directly associated. One or more counselors and a secretary form a team, and the company ties the secretary’s bonus and other forms of recognition to the performance of the people he or she supports. Here, esprit de corps runs at stratospheric levels, performance is high, and the firm is prosperous.

Firm 2 puts into practice McGregor’s prescriptions for inclusion, shared goals, respect for all people, and personal responsibility. Research shows managers with theory Y assumptions are better at accomplishing organizational objectives and better at tapping the potential of employees.5

Ricardo Semler of Semco, a Brazilian manufacturer of industrial products, shares the beliefs of a theory Y leader; “We simply do not believe our employees have an interest in coming in late, leaving early, or doing as little as possible. These are the same people who raise children, join the PTA, and elect mayors and presidents. They are adults and at Semco they are treated like adults. We get out of their way and let them do their jobs.6


1. D. McGregor, The Human Side of Enterprise 25th Anniversary Edition (New York: McGraw-Hill, 1985): republished 2006 with J. Cutcher-Gershenfeld.

2. D. McGregor, The Human Side of Enterprise; and D. McGregor, “The Human Side of Enterprise,” Management Review (November 1957).

3. D. McGregor, Leadership and Motivation (Cambridge, MA: MIT Press, 1966).

4. D. Jacobs, review of D. McGregor, The Human Side of Enterprise, in Academy of Management Review 29 (2004): 293-296.

5. W. Brown, 13 Fatal Errors Managers Make and How You Can Avoid Them (Berkley Publishing, 1995): and J. Hall and S. Donnell,  “Managerial Achievement,” Human Relations 32 (1979): 77-101.

6. R. Semler, Maverick (New York: Random House, 2001).