The Human Side of Enterprise

Favourite Management Book #1 – The Human Side of Enterprise

I first came across Douglas McGregor’s ideas early in my management career and they resonated deeply.

Douglas McGregor, then professor of Industrial Management at MIT, wrote his highly influential book in 1960 and it has become a management classic.

His Theory X and Theory Y are widely known, quoted and included in management courses.

His starting point was the deceptively simple question: “What are your assumptions (implicit as well as explicit) about the most effective way to manage people?”

This is a critical question because, as McGregor pointed out, every managerial act rests on assumptions, generalisations, and hypotheses (in other words, the theories we hold) whether we are conscious of them or not.

The two contrasting theories which he called X and Y are as follows:

Theory X

  • The average human being has an inherent dislike of work and will avoid it if he can.
  • Because of this characteristic of dislike of work, most people must be coerced, controlled, directed, threatened with punishment to get them to put forth adequate effort toward the achievement of organisational objectives.
  • The average human being prefers to be directed, wishes to avoid responsibility, has relatively little ambition, wants security above all.


Theory Y

  • The expenditure of physical and mental effort in work is as natural as play or rest.
  • External control and the threat of punishment are not the only means for bringing effort toward organisational objectives. Man will exercise self-direction and self-control in the service of objectives to which he is committed.
  • Commitment to objectives is a function of the rewards associated with their achievement.
  • The average human being learns, under proper conditions, not only to accept but to seek responsibility.
  • The capacity to exercise a relatively high degree of imagination, ingenuity, and creativity in the solution of organisational problems is widely, not narrowly distributed in the population.
  • Under the condition of modern industrial life, the intellectual potentialities of the average human being are only partially utilised.

The language may be of its time, but it’s worth quoting the theories in full because they are so rich and nuanced.

I think his key insights, which are as relevant today as ever, are that our underlying assumptions do affect the way we manage people, that these assumptions can be limiting and that they can also be self-fulfilling prophecies. The actions flowing from both mindsets can result in some of the behaviours that the manager expects to see, thus reinforcing the assumption.

In my experience, when you make a positive assumption and actively look for the best in people, they often exceed your expectations.

McGregor concluded that his purpose was not to entice management to choose sides over Theory X or Theory Y, but rather to urge an examination of its assumptions and make them explicit.

We would all do well to respond to this challenge in order to better understand ourselves and the way we manage people.

My copy of this book is the Annotated Edition published in 2006 by McGraw Hill, updated and with a new commentary by Joel Cutcher-Gershenfeld. ISBN 0-07-146222-8.