McGregor proposed that all management practices stem from managers' personal

"theories" regarding the basic nature of people. McGregor proposed that the way in which
a manager interacts with superiors, peers and especially subordinates depends on the
manager's philosophy regarding cause and effect relationships in human behavior.
For example, the manager who assumes that subordinates generally cannot be trusted will
select a cluster of management practices which, in that manager's thinking, will best
compensate for, or capitalize on those perceived characteristics of subordinates. This
manager may attempt to maintain control through close supervision, demands for strict
adherence to rules, and threats of punishment. Such external controls seem clearly
appropriate to the manger who believes human beings are basically unreliable and
irresponsible.
Theory y of characteristic
Effort in work is as natural as work and play.
People will apply self-control and self-direction in the pursuit of organisational objectives,
without external control or the threat of punishment.
Commitment to objectives is a function of rewards associated with their achievement.
People usually accept and often seek responsibility.
The capacity to use a high degree of imagination, ingenuity and creativity in solving
organisational problems is widely, not narrowly, distributed in the population.
In industry the intellectual potential of the average person is only partly utilised.
Theory Y Management
Theory Y assumes that employees are happy to work, are creative and enjoy taking on
additional duties. Theory Y managers and supervisors are sometimes called hands-off
managers. Hands-off managers usually give their employees more freedom and trust with
the hope that the result will be happier workers who will go the extra mile for the company.
Also, hands-off managers will often involve their employees in the decision-making
process. For example, a hands-off manager may ask the staff to help interview a new
candidate that has just applied for a job.
















Definition
Theory-Y assumptions are: physical and mental effort are natural and most people
(depending on the work environment) find work to be a source of satisfaction, they
generally, on their own motivation, exercise self-control, self-direction, creativity, and
ingenuity in pursuit of individual and collective (company) goals, they either seek
responsibility or learn to accept it willingly, and that their full potential is not tapped in
most organizations. These assumptions serve as powerful behavioral models reflected in the
way an organization is structured.

Theory-Y believers create trust based firms with empowered employees.
These concepts were introduced by the US college-administrator and professor Douglas
McGregor (1906-64) in his 1960 book 'The Human Side Of Enterprise.

Theory Y

Work is as natural as play and rest
People will exercise self-direction if they are committed to the objectives
Commitment to objectives is a function of the rewards associated with their achievement
People learn to accept and seek responsibility
Creativity, ingenuity, and imagination are widely distributed among the population. People
are capable of using these abilities to solve an organisational problem
People have potential
With Theory Y assumptions, managements role is to develop the potential in employees and
help them to release that potential towards common goals.















THEORY Y

This is a more dignified and enlightened management style. Theory Y managers assume
people will perform well if treated positively, and that higher order needs dominate most
individuals. People are viewed as "assets" that should be valued and developed. It is based on
six basic assumptions:

1. The physical and mental effort of work is as natural as play, so the average person does not
inherently dislike work.
2. People will exercise self-direction and self-control in order to achieve objectives.
3. Rewards of satisfaction and self-actualization come from the effort to achieve objectives.
4. The average person learns not only to accept but to seek responsibility.
5. Most people have a capacity for imagination, ingenuity and creativity.
6. The intellectual potential of most people is only partially realized.

In practice Theory Y managers tend to be participative when making decisions, and value
both results andrelationships. These managers tend to delegate and empower their people
because they trust them and feel they will do good work (i.e., managers are "coaches").
Priorities will be given to developing positive work environments, and expressing regular
recognition and appreciation. These managers will also feel that people are important and
worth developing. People working for these managers tend to feel appreciated and dignified,
and will generally have good morale and feel motivated.

THeory Y is a participative style of management which assumes that people will exercise self-
direction and self-control in the achievement of organisational objectives to the degree that they
are committed to those objectives. It is management's main task in such a system to maximise
that commitment.
Theory Y gives management no easy excuses for failure. It challenges them to innovate, to
discover new ways of organising and directing human effort, even though we recognise that the
perfect organisation, like the perfect vacuum, is practically out of reach. McGregor urged
companies to adopt Theory Y.
There are parallels with Abraham Maslow's hierarchy of needs, and Maslow was indeed
greatly influenced by McGregor. So much so that he tried to introduce Theory Y into a
Californian electronics business, but found that the idea in its extreme form did not work
well. All individuals, he concluded, however independent and mature, need some form of
structure around them and some direction from others.