A Theory X manager makes the following general assumptions:

• Work is inherently distasteful to most people, who will attempt to avoid work whenever possible.

• Most people are not ambitious, have little desire for responsibility, and prefer to be directed.

• Most people have little capacity for creativity in solving organizational problems.

• Motivation occurs only at the physiological and security levels of Maslow's Hierarchy of Needs

• Most people are self-centered. As a result, they must be closely controlled and often coerced to achieve organizational objectives

• Most people resist change.

• Most people are gullible and not particularly intelligent.

Essentially, Theory X assumes that the primary source of most employee motivation is money, with security as a strong second.

Hard Approach | Soft Approach
Under Theory X, management approaches to motivation can range from a hard approach to a soft approach.

The hard approach to motivation relies on coercion, implicit threats, close supervision, and tight controls -- essentially an environment of command and control. The soft appoach is to be permissive and seek harmony with the hope that in return employees will cooperate when asked to do so. However, neither of these extremes is optimal. The hard approach results in hostility, purposely low-output, and hard-line union demands. The soft approach results in increasing desire for greater reward in exchange for diminishing work output.

It would appear that the optimal approach to human resource management would be lie somewhere between these extremes. However, McGregor asserts that neither approach is appropriate since the fundamental assumptions of Theory X are incorrect.

The Problem with Theory X
Drawing on Maslow's Needs Hierarchy, McGregor argues that a need, once satisfied, no longer motivates. Under Motivation Theory X, the firm relies on money and benefits to satisfy employees' lower needs, and once those needs are satisfied the source of motivation is lost. Theory X management styles, in fact, hinder the satisfaction of higher-level needs.

Consequently, the only way that employees can attempt to satisfy their higher level needs in their work is by seeking more compensation, so it is quite predictable that they will focus on monetary rewards. While money may not be the most effective way to self-fulfillment, in a Theory X environment it may be the only way. Under Theory X, people use work to satisfy their lower needs, and seek to satisfy their higher needs in their leisure time. Unfortunately, employees can be most productive when their work goals and higher level needs are in alignment.

McGregor makes the point that a command and control environment is not effective because it relies on lower needs as levers of motivation, but in modern society those needs already are satisfied and thus no longer motivate. In this situation, one would expect employees to dislike their work, avoid responsibility, have no interest in organizational goals, resist change, etc., thus creating a self-fulfilling prophecy. From this reasoning, McGregor proposed an alternative: Theory Y.

Motivational Theory Y
The higher-level needs of esteem and self-actualization are continuing needs in that they are never completely satisfied. As such, it is these higher-level needs through which employees can best be motivated.

In strong contrast to Theory X, a Theory Y manager makes the following general assumptions:

• Work can be as natural as play if the conditions are favorable.

• People will be self-directed and creative to meet their work and organizational objectives if they are committed to them.

• People will be committed to their quality and productivity objectives if rewards are in place that address higher needs such as self-fulfillment.

• The capacity for creativity spreads throughout organizations.

• Most people can handle responsibility because creativity and ingenuity are common in the population.

• Under these conditions, people will seek responsibility.

Under these assumptions, there is an opportunity to align personal goals with organizational goals by using the employee's own need for fulfillment as the motivator. McGregor stressed that Theory Y management does not imply a soft approach.

McGregor recognized that some people may not have reached the level of maturity assumed by Theory Y and therefore may need tighter controls that can be relaxed as the employee develops.

Applying Theory Y Management - Business Implications
If Theory Y holds true, an organization can use these principles of scientific management to improve employee motivation:

• Decentralization and Delegation - If firms decentralize control and reduce the number of levels of management, managers will have more subordinates and consequently will be forced to delegate some responsibility and decision making to them.

• Job Enlargement - Broadening the scope of an employee's job adds variety and opportunities to satisfy ego needs.

• Participative Management - Consulting employees in the decision making process taps their creative capacity and provides them with some control over their work environment.

• Performance Appraisals - Having the employee set objectives and participate in the process of evaluating how well they were met.

If properly implemented, such an environment would result in a high level of motivation as employees work to satisfy their higher level personal needs through their jobs.