Comparison of Theories X and Y

Both theories have certain assumptions about human nature. In fact, they are reverse sides of a coin, one representing head and the other representing tail. Thus, these assumptions seem to be mutually exclusive. The difference between two sets of assumptions can be visualized as follows :

1. Theory X assumes human beings to be inherently distasteful towards work. Theory Y assumes that for human beings work is as natural as play.

2. Theory X emphasizes that people do not have ambitions and try to avoid responsibilities in jobs. The assumptions under theory Y are just the reverse.

3. According to theory X; most people have little capacity for creativity while according to theory Y, the capacity for creativity is widely distributed in the population.

4. In theory X, motivating factors are the lower needs. In theory Y, higher order needs are more important for motivation, though unsatisfied lower needs are also important.

5. In theory X, people lack self-motivation and require to be externally controlled and closely supervised to get maximum output from them. In theory Y, people are self-directed and creative and prefer self-control.

6. Theory X emphasizes scalar chain system and centralization of authority in the organization while theory Y emphasizes decentralization and greater participation in the decision-making process.

7. Theory X emphasizes autocratic leadership; theory Y emphasizes democratic and supportive leadership styles.

Urwick's Theory Z

Much after the propositions of theories X and Y by McGregor, the three theorists- Lyndall Fowner Urwick (March 3, 1891 - Dec. 1983), Rangnekar and William G. Ouchi (born in 1943) propounded the third theory labelled as Z theory. The two propositions in Urwick's theory are that :

(i) Each individual should know the organizational goals precisely and the amount of contribution through his efforts towards these goals.

(ii) Each individual should also know that the realization of organizational goals is going to satisfy his/her needs positively.

History of Theory Z

Professor Ouchi spent years researching Japanese companies and examining American companies using the Theory Z management styles. By the 1980's, Japan was known for the highest productivity anywhere in the world, while America had fallen drastically. Ouchi wrote a book called Theory Z How American Business Can Meet the Japanese Challenge (1981), in this book; Ouchi shows how American corporations can meet the Japanese challenges with a highly effective management style that promises to transform business in the 1980's. The secret to Japanese success, according to Ouchi, is not technology, but a special way of managing people. "This is a managing style that focuses on a strong company philosophy, a distinct corporate culture, long-range staff development and consensus decision-making" (Ouchi, 1981). Ouchi shows that the results show lower turn-over, increased job commitment and dramatically higher productivity.

William Ouchi doesn't say that the Japanese culture for business is necessarily the best strategy for the American companies but he takes Japanese business techniques and adapts them to the American corporate environment. Much like McGregor's theories, Ouchi's Theory Z makes certain assumptions about workers. Some of the assumptions about workers under this theory include the idea that workers tend to want to build happy and intimate working relationships with those that they work for and with, as well as the people that work for them. Also, Theory Z workers have a high need to be supported by the company and highly value a working environment in which such things as family, cultures and traditions and social institutions are regarded as equally important as the work itself. These types of workers have a very well developed sense of order, discipline, a moral obligation to work hard and a sense of cohesion with their fellow workers. Finally, Theory Z workers, it is assumed, can be trusted to do their jobs to their utmost ability, so long as management can be trusted to support them and look out for their well being (Massie & Douglas, 1992).

One of the most important pieces of this theory is that management must have a high degree of confidence in its workers in order for this type of participative management to work. This theory assumes that workers will be participating in the decisions of the company to a great degree. Ouchi explains that the employees must be very knowledgeable about the various issues of the company, as well as possessing the competence to make those decisions. He also points out; however, that management sometimes has a tendency to underestimate the ability of the workers to effectively contribute to the decision making process (Bittel, 1989). But for this reason, Theory Z stresses the need for the workers to become generalists, rather than specialists and to increase their knowledge of the company and its processes through job rotations and constant training. Actually, promotions tend to be slower in this type of setting, as workers are given a much longer opportunity to receive training and more time to learn the ins and outs of the company's operations. The desire, under this theory, is to develop a work force, which has more of a loyalty towards staying with the company for an entire career and be more permanent than in other types of settings. It is expected that once an employee does rise to a position of high level management, they will know a great deal more about the company and how it operates and will be able to use Theory Z management theories effectively on the newer employees (Luthans, 1989, p. 36).

Further abstraction from the list above:

1. Individual needs depend on the prior experience of the individual.

2. Only the most fundamental needs are common to all people and cultures.

3. All actions are in an attempt to fulfill needs (selfishly or unselfishly) rather than motivated by some intrinsic property of humans.

This leads me to a seemingly strongly individualistic stance on motivation. However, although not stated explicitly it should be remembered that any of these statements could be made about the need to give charitably, share with one's community, achieve nirvana, etc. and so can and should be considered in a multi-cultural context as well as a purely western individualistic way.

Performance-related Pay (PRP) : Performance related pay assumes that people will be more motivated if they are paid more for success or desired behaviours. Although this is instinctively intuitive for most people, the actuality is that PRP doesn't work and that paying people for their performance can actually de-motivate people: Why performance related pay doesn't work

An aside for those reading to understand how to motivate people at work: Many people come to motivation in an organizational context from the perspective of 'the staff are not motivated enough'. However in looking for tools to apply to others they show their fundamental belief that other people are defective in some way and need to be changed, i.e. the people are evil philosophy.

People are intrinsically and extrinsically motivated either way (i.e., good or evil theories), within the typical organizational context it is safe to assume that people are motivated to do a job to a required standard and get resources and recognition in exchange. The role of the person questioning why their staff are not motivated should be to ask what aberration of the system of work is making people act in this unnatural (i.e., de-motivated) way and not to ask what is wrong with the people whilst assuming that their systems are perfect.

Fundamentally, you can't change other people and so you have to change yourself and organizations instead. Giving up trying to change others is the most powerful leadership move anyone can make.

In Urwick's view, the above two make people ready to behave positively to accomplish both organizational and individual goals.

However, Ouchi's theory Z has attracted the lot of attention of management practitioners as well as researchers. It must be noted that Z does not stand for anything, but is merely the last alphabet in the English language.

Theory Z is based on the following four postulates :

Fig. 5.8: Theory Z Model (Adopted from Urwick).

Table 5.2: Personality on an Individual

1. Strong Bond between Organization and Employees.

2. Employee Participation and Involvement.

3. No Formal Organization Structure.

4. Human Resource Development.

Ouchi's theory Z represents the adoption of Japanese management practices (group decision making, social cohesion, job security, holistic concern for employees, etc.,) by the American companies. In India Maruti-Suzuki, Hero-Honda, etc., apply the postulates of theory Z.