65. Douglas McGregor’s Theory X and Theory Y for small business

McGregor published his book, The Human Side of Enterprise, back in 1960, and it has been influential ever since. He suggested 2 approaches to management. Theory X managers believe that employees do not like work and have to be managed with carrot and stick to get anything done; Theory Y managers believe that people get intrinsic satisfaction from work and can be motivated by involvement and inclusion – the hard and soft schools of management, if you like, and with a strong relationship to Herzberg’s hygiene factors and motivators (see previous blog).

Now this is a thory for management in large organisations, and many have interpreted it as suggesting a new style of management to be preferred over an old-fashioned rigid method. At this level it is not very interesting to small business perhaps. But McGregor’s own view was about making people aware of these styles in order to adapt their own behaviour. At this point it becomes much more relevant to small business.

First, what is your approach to management? It will probably be a mix depending on the circumstances but you will tend toward one or the other end of the spectrum. This will condition how you respond to others – and we may not be just thinking of staff here, but also customers and suppliers. And within those customers and suppliers, there will be similar issues, both as individuals and within their corporate culture.

Now in certain circumstances, getting a result requires precision and focus and does not allow much latitude for individual expression; but in other situations a very different approach will be more productive. For instance, organising a delivery for a client against a deadline may require primarily a strict adherence to process, which, if followed rigidly, will deliver the result. But handling a complaint about a missed delivery may be a very different matter.

At the customer level, they may feel comfort at a Thoery X approach to the management of shipping their product, which suggests clear rules, everyone told exactly what to do and expected to do it, but they would probably be less happy with that approach to their complaint: wait in the queue and you will be dealt with; here is the form to fill in etc. They are much more likely to respond to an attempt to understand what problem has been created for them and an exploration of what can now be done to create the best outcome in the circumstances (and that best outcome may not be obvious without understanding the client circumstances). So both styles have their place.

At an organisational level, a Theory X organisation will have very rigid rules on purchasing your product and if you try to circumvent the process you will lose the sale. Whilst in a Theory Y organisation, making the sale may require you to get various parties on board before anyone is ready to make the decision to buy. Mix up the two and you could lose both sales.

From a staff effectiveness point of view, there are times when you want to be Theory X: for instance, in health & safety issues the rules will be rigid; there will be serious penalties for not follwing them. But if the issue is how best to handle a piece of new business, then results are likely to be far better if all involved have been consulted, their issues taken into account and an agreed best process determined. Collaborative working will favour Theory Y approaches.

If your natural instincts are Theory X, then you will benefit from consciously modifying your approach when the result will be better from collaboration; similarly, it is no use taking a “what do you think?” approach when absolute adherence to process is required – it will confuse the message. By adapting appropriately to both situations you will send a clearer signal of what you want.

So by understanding both your own approach and that of your customers and suppliers, you can better achieve effective results. It was this that McGregor was seeking to achieve in defining and understanding these two contrasting modes.