4.Theory X and Theory Y

According to Mcgregor, organizations especially which has a centralized decision-making process and a hierarchical pyramid are based on several assumptions about human nature or the employees and motivation. These assumptions are called Theory X and Theory Y by Mcgregor and it is all about two different viewpoints about the employees by the superiors or the management (Dobre, 2013).

Theory X believes that employees want to be directed, they do not want to assume responsibility by trying to evade responsibility and value safety above all (Dobre, 2013). Further, it is believed that employees are motivated by financial rewards and by the threat of punishment. Managers or superiors who possess Theory X viewpoint on their subordinates tend to execute rigorous supervision and control over the employees due to the belief that rigid external control should be executed when dealing with irresponsible employees (Dobre, 2013). According to Dobre (2013) Theory X could be applicable to employees whose physiological and safety needs are not satisfied. There could be instances where a directive and controlling behavior is required to assist in developing some employees until they become creative and self-directed. Hence, there are employees who are motivated in the work with higher commissions (Tietjen and Myers, 1998).For instance, the organization which I work, a leading diversified conglomerate in Sri Lanka is having a Credit Controlling Division in which there are several newly joined employees who do not have much working experience. These employees are more sensitive for extrinsic rewards such as incentives and salary increments and need to be closely monitored and guided until they are self-directed.

However, Mcgregor himself began to question the validity of Theory X, especially in the contemporary context and democratic society. Consequently, Mcgregor has concluded that Theory X is not universally applicable, as the assumptions about human nature may not be accurate in all the circumstances (Dobre, 2013). In addition to that, most of the management practices developed based on Theory X assumptions were not able to motivate individuals to work for attaining the organizational goals (Dobre, 2013). In a leading trading company in Sri Lanka, imports and Procurement division’s head heavily relied on Theory X and as a result of it the labor turnover of the Imports and Procurement division went up.

Theory Y practices concentrates on creating a pleasant work environment and aligning the individuals’ goals with the organizational goals. Theory Y believes that people are energetic, reliable and fond of work. It further assumes that people are self-directed and creative if the employees are properly motivated. In this context, employees become more productive since the employees are carrying out their duties willingly and tend to take responsibilities (Dobre, 2013). According to Theory Y, employees do wish to work and be productive and the act of doing well at work is itself a strong motivator and employees look for responsibilities and ways to be productive once the employees are allowed to work on their own.  The managers or superiors who embrace the  Theory Y are the effective leaders who could fulfill the psychological contract of employees (Mohamed and Nor,2013).One of the main challenges for the management is to exploit the full potential of each employee and the motivated employees will achieve their own goals by driving themselves towards goal achievement (Dobre,2013).