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a few paragraphs explaining how reading “Theory X, Y, Z” and watching the media piece, “Theory,” affected your definition of theory. Explain why it might be useful to make a connection between actual management situations and theory. Next, explain how theory can inform the actual practice of management. Provide an example for your own experience or observation to support your statements. To conclude your post, explain which of the management theories presented in the Day 4 Readings seem to be the most useful and why. Theory X,Y,Z Drawing upon the conventions of the scientific community, Douglas McGregor (1906 – 1964) postulated two theories that he designated with alphabetic characters: Theory X and Theory Y. These theories represent pure archetypes of managerial beliefs about the nature of people that, in turn, influence their managerial and leadership behavior. Theory X Theory X is the belief that people are passive, dislike work, avoid responsibility, need to be closely supervised and told what to do. Furthermore, people are self-centered, prone to resist change and aren’t very intelligent. According to psychologists, people have a natural tendency to become congruent; that is, we attempt to behave in ways consistent with our beliefs. Thus, managers who believe in Theory X behave accordingly and tend to supervise their subordinates closely, doubt their capabilities, refuse to delegate significant tasks, and insist that very detailed records be kept of their time and productivity. Theory X managers are suspicious of any initiative, creativity or other efforts by employees to do well. A common manifestation of a Theory X manager is a harsh authoritarian approach to working with others characterized by frequent threats, references to transactional rewards or punishments, and the disregard for the welfare of employees. An atmosphere of distrust, fear, intimidation, and disrespect are everyday aspects of work for people who have a supervisor who believes Theory X. 1 Theory Y At the other extreme, Theory Y is the belief that people find work natural and life affirming. People seek out responsibility, are trustworthy and want to perform their best, take initiative and be creative. A Theory Y manager delegates work, practices consensus seeking behavior, encourages innovation and creativity among subordinates, and minimizes hierarchical differences acting more as a colleague than as a supervisor with direct reports. Indeed, in Theory Y, supervision is not an important practice as such. The relationship that develops between a Theory Y manager and subordinates is usually comfortable and focused on accepting mutual responsibility for the achievement of their collective objectives. There is an interest in each other as people while they willingly contribute their best efforts using all of their combined abilities. The workplace is characterized by trust, respect for each person, high integrity, the free flow of communications and shared decision-making. Exemplars of Theory X and Y Historical figures such as Adolph Hitler (1889 – 1945), Joseph Stalin (1879 – 1953), and Mao Tse-Tung (1893 – 1976) exemplified the Theory X leader while Franklin (1882 – 1945) and Eleanor (1882 –1962) Roosevelt, Mahatma Gandhi 1869 – 1948), and Nelson Mandela (b. 1918) exemplified the Theory Y leader. The former counted on fear to influence others and destroyed much of what they ruled while the latter raised the hopes and aspirations of people throughout the world. 2 Stalin, Hitler and Mao were larger than life individuals fortunately rare on the world stage; but, in the contemporary business world they are complemented by equally destructive corporate leaders. Albert J. Dunlap (b.1937), the CEO who orchestrated the financial collapse of Sunbeam Corporation, a company once proudly associated with quality household products, is reviled for his slash and burn techniques for turning companies around. His approach to turning companies around was to institute massive layoffs and to dismember corporate assets to raise cash and quickly remove liabilities. Despite the often huge human cost of his turnarounds, he was financially successful thereby winning the respect of shareholders of the stagnant companies he was hired to lead. Prior to joining Sunbeam he was CEO of Scott Paper where he reconfirmed his fearsome reputation as “chainsaw Al” because when he merged the company with Kimberly-Clark he, in his own words, “cut back 70 percent of upper management and eliminated more than 11,200 total jobs, 35 percent of the Scott payroll.” In addition, he sold off pieces of the company that included another 6,000 jobs. But, according to him, once “…the bloodletting had ended…20,000 people had secure jobs once again.” For his efforts, over a mere 20 months, he received a package of rewards totaling $100 million. Even in the age of excess with seemingly daily accounts of corporate debacles and abuse, Dunlap is still the most popular embodiment of the Theory X leader. He became a lightening rod for this style of leading and managing with the publication of his 3 book, Mean Business: How I save Bad Companies and Make Good Companies Great that detailed his draconian strategy. When he moved on to Sunbeam Dunlap ultimately faced his dénouement. As part of the settlement with the Securities and Exchange Commission that charged Dunlop with defrauding investors he agreed to pay a fine of $500,000 and was barred from ever again being an executive in a public company. In addition, Dunlap paid $15 million to settle a class action suit brought by investors for questionable accounting practices and misleading claims. Theory Y Exemplars There are two popular Theory Y exemplars in business, though not of the stature of a Roosevelt or Mandela. One is Herb Kelleher (b. 1931), founder and CEO of Southwest Airlines who retired in 2001 as CEO and the other is Ricardo Semler (b.1959) of Semco (Brazil). What makes these two men exemplars of Theory Y is their fierce commitment to the belief that the workplace should be a respectful of people and encourage them to bring out their best. As Kelleher said, “You have to treat your employees like your customers. When you treat them right, then they will treat your outside customers right. That has been a powerful competitive weapon for us. You’ve got to take the time to listen to people’s ideas. If you just tell somebody no, that’s an act of power and, in my opinion, an abuse of power. You don’t want to constrain people in their thinking.” http://www.fortune.com/fortune/articles/0,15114,373551-4,00.html 4 Southwest, under Kelleher, never had a lay off and was the only airline to be profitable throughout the last thirty years, its entire existence – even during the aftermath of the events of September 11, 2001 and the slowdown in air travel. Southwest is known to be a fun place to work where everyone pitches in to get planes ready to fly safely and efficiently. It isn’t unusual to see Captains helping flight attendants or customer service personnel helping baggage handlers. The point is that consistently applying Theory Y beliefs proved to be successful. For Ricardo Semler, at Semco (a manufacturer of industrial mixers and other products), “We simply do not believe our employees have an interest in coming in late, leaving early, and doing as little as possible…After all, these same people raise children, join the PTA, elect mayors, governors, senators and presidents. They are adults. At Semco, we treat them like adults. We trust them. We don’t make our employees ask permission to go to the bathroom, or have security guards search them as they leave for the day. We get out of their way and let them do their jobs.” (Semler, 1993:59) Believing is Seeing There is an aspect of the Theory X, Theory Y belief systems that is quite instructive to all leaders. It is the self-fulfilling prophesy. You see what you believe. Remember, psychologists remind us that in our need to seek congruence we manifest our beliefs. Rather like seeing the glass as either half filled or half empty, we approach our relations with and expectations of people with an idea of the outcome firmly embedded in our minds. Thus, Theory X believers will 5 expect and find people who demonstrate irresponsible behavior confirming their beliefs. Equally true the Theory Y believer will tend to see the good in people and behave accordingly. The self-fulfilling prophesy is at work in either case. We see and act on the manifestation of our beliefs. Theory X and Theory Y Effectiveness Writing in Leadership: Theory Application and Skill Development, Lussier and Achua report that “A study of over 12,000 managers explored the relationship between managerial achievement and attitudes toward subordinates. The managers with Theory Y attitudes were better at accomplishing organizational objectives and better at tapping the potential of subordinates. The managers with strong Theory X attitudes were far more likely to be in the low achieving group.” (Lussier and Achua, 2001:49) Utilizing this insight, it may be possible to create a Theory Y organization since an organization can choose its employees, train them and remove them. Others argue that social engineering at that level is neither possible nor desirable. Since the world consists of both types of people an organization will be most adaptive if it also consists of, and learns to deal with, both kinds of employees. Yet, Theory X leaders will tend to be unable to accommodate Theory Y subordinates since they are incapable of the trust required to unleash their 6 potential while Theory Y leaders are more likely to be adaptive to Theory X subordinates and able to provide the necessary controls and supervision. Theory Z After McGregor’s theories became well established in the business lexicon, various authors used the title Theory Z to designate their own theoretical contribution to the management literature. There are two important versions. The first and most relevant to the continuum established by McGregor, is psychologist Abraham Maslow’s (1908 – 1970) Theory Z. The other, the more popular version but unrelated to McGregor’s work is William Ouchi’s (b. 1944) Theory Z that represents a hybrid of Japanese and American management styles. It is Ouchi’s Theory Z that has been accepted into the management canon. Maslow’s Theory Z After a study of the management literature, Maslow was convinced that while Theory Y was reflective of the self-actualization stage in his hierarchy of human needs wherein people express their greatest potential in creative, substantial and meaningful ways, they may not do so in a transcendent manner. For him, a large segment of self-actualizers strove for and experienced a transcendent state where peak experiences were common, where B-values were an everyday expression of who they are, where their focus was more on ultimate states, humanity as beyond deficiency, people beyond the need for supervision, employees not defined solely as receivers of a paycheck but fully expressive and in service to a higher calling for which the organization is merely an instrument. 7 “Being Values: truth, beauty, wholeness, dichotomy-transcendence, aliveness- process, uniqueness, perfection, necessity, completion, justice, order, simplicity, richness, effortlessness, playfulness, and self-sufficiency.” (Maslow, 1971: 106) At this level the individual seems to occupy a special status and those he or she “leads” take on a relationship not unlike devoted acolytes who feel honored to be of service. This is found in the rarest of circumstances. In historical terms Mohandas Gandhi (1869 – 1948) may best fit the model of a fully self-actualized transcendent leader. Perhaps a Dr. Albert Schweitzer (1875 – 1965) does as well. Unfortunately, transcenders are not common. Perhaps a Ralph Nader (b. 1934) or a John Gardner (1912 – 2002) might come close – people who can and do see the full potential of human possibilities and understand how simple and practical, how doable a better world is to create but who are frustrated by the mediocre, the shortsighted, the fearful, the unimaginative, the non-risk taker, the pedestrian unsure of what is right, unfamiliar with the B-values, unable to act outside the system, who lacks the confidence that comes from personal peak experience of the B-values that clarify the worth, the necessity of the higher purposes. Little supplementary research has been picked up on this theme by management scholars. Ouchi’s Theory Z When Japan became the second largest economy in the world and began to win vast markets in the US, industry after industry fell victim to its 8 competitive strength – particularly in automobiles, consumer electronics, photography, steel and toys. This alarmed American industry. Many thought a new era of second-class economic status was settling in on America. As expected, interest in the Japanese management style grew dramatically. Ouchi’s book (1981) was an immediate best-seller. He explained the two styles of management (American and Japanese) and suggested a hybrid: Theory Z. Organizations using Theory Z are characterized as workplaces where employment is long term, layoffs are a last resort; workers are multi-talented, share responsibility for the whole and are willing to learn new skills; the organization is flat so promotions take longer and there are fewer promotions in a career; consensual decision making is routine with individuals encouraged to suggest new ideas and innovations in work processes; and, workers are judged on objective performance not obedience. (Ouchi, 1981) Ouchi’s Theory Z really isn’t an extension of McGregor’s Theories X and Y because they are not based on an underlying belief structure about the nature of people. It is a model suggested to utilize the best from both Japanese and American management practices to improve the performance of organizations in both places (Theory Z was also a best-seller in Japan). John Nirenberg Further Reading 9 Dunlap A. J. with Andelman, B. (1996). Business: How I Save Bad Companies and Make Good Companies Great. New York: Times Business. Freiberg, K. and J. (1996). NUTS!: Southwest Airlines: Crazy Recipe for Business and Personal Success by. Austin, TX: Bard Press. Laing, J. (1997). “High Noon at Sunbeam,” Barons, June 16. Lussier, R, and Achua, C. (2001). Leadership: Theory, Application and Skill Development. Cincinnati, OH: South-Western College Publishing Maslow, A. H (1971). The Farther Reaches of Human Nature. New York: Viking. McGregor, D. (1957).“The Human Side of Enterprise,” Management Review, November. Ouchi, W. (1981). Theory Z:How American Business Can Meet the Japanese Challenge. Reading, MA: Addison-Wesley. Semler, R. (1993). Maverick: The Success Story Behind the World’s Most Unusual Workplace. New York: Warner Books.

 

a few paragraphs explaining how reading “Theory X, Y, Z” and watching the media piece, “Theory,” affected your definition of theory. Explain why it might be useful to make a connection between actual management situations and theory. Next, explain how theory can inform the actual practice of management. Provide an example for your own experience or observation to support your statements. To conclude your post, explain which of the management theories presented in the Day 4 Readings seem to be the most useful and why.

 

 

 

Theory X,Y,Z
Drawing upon the conventions of the scientific community, Douglas

McGregor (1906 – 1964) postulated two theories that he designated with alphabetic characters: Theory X and Theory Y. These theories represent pure archetypes of managerial beliefs about the nature of people that, in turn, influence their managerial and leadership behavior.

Theory X

Theory X is the belief that people are passive, dislike work, avoid responsibility, need to be closely supervised and told what to do. Furthermore, people are self-centered, prone to resist change and aren’t very intelligent.

According to psychologists, people have a natural tendency to become congruent; that is, we attempt to behave in ways consistent with our beliefs. Thus, managers who believe in Theory X behave accordingly and tend to supervise their subordinates closely, doubt their capabilities, refuse to delegate significant tasks, and insist that very detailed records be kept of their time and productivity. Theory X managers are suspicious of any initiative, creativity or other efforts by employees to do well. A common manifestation of a Theory X manager is a harsh authoritarian approach to working with others characterized by frequent threats, references to transactional rewards or punishments, and the disregard for the welfare of employees. An atmosphere of distrust, fear, intimidation, and disrespect are everyday aspects of work for people who have a supervisor who believes Theory X.

1

Theory Y

At the other extreme, Theory Y is the belief that people find work natural and life affirming. People seek out responsibility, are trustworthy and want to perform their best, take initiative and be creative. A Theory Y manager delegates work, practices consensus seeking behavior, encourages innovation and creativity among subordinates, and minimizes hierarchical differences acting more as a colleague than as a supervisor with direct reports. Indeed, in Theory Y, supervision is not an important practice as such. The relationship that develops between a Theory Y manager and subordinates is usually comfortable and focused on accepting mutual responsibility for the achievement of their collective objectives. There is an interest in each other as people while they willingly contribute their best efforts using all of their combined abilities. The workplace is characterized by trust, respect for each person, high integrity, the free flow of communications and shared decision-making.

Exemplars of Theory X and Y

Historical figures such as Adolph Hitler (1889 – 1945), Joseph Stalin (1879 – 1953), and Mao Tse-Tung (1893 – 1976) exemplified the Theory X leader while Franklin (1882 – 1945) and Eleanor (1882 –1962) Roosevelt, Mahatma Gandhi 1869 – 1948), and Nelson Mandela (b. 1918) exemplified the Theory Y leader. The former counted on fear to influence others and destroyed much of what they ruled while the latter raised the hopes and aspirations of people throughout the world.

2

Stalin, Hitler and Mao were larger than life individuals fortunately rare on the world stage; but, in the contemporary business world they are complemented by equally destructive corporate leaders. Albert J. Dunlap (b.1937), the CEO who orchestrated the financial collapse of Sunbeam Corporation, a company once proudly associated with quality household products, is reviled for his slash and burn techniques for turning companies around. His approach to turning companies around was to institute massive layoffs and to dismember corporate assets to raise cash and quickly remove liabilities. Despite the often huge human cost of his turnarounds, he was financially successful thereby winning the respect of shareholders of the stagnant companies he was hired to lead.

Prior to joining Sunbeam he was CEO of Scott Paper where he reconfirmed his fearsome reputation as “chainsaw Al” because when he merged the company with Kimberly-Clark he, in his own words, “cut back 70 percent of upper management and eliminated more than 11,200 total jobs, 35 percent of the Scott payroll.” In addition, he sold off pieces of the company that included another 6,000 jobs. But, according to him, once “…the bloodletting had ended…20,000 people had secure jobs once again.” For his efforts, over a mere 20 months, he received a package of rewards totaling $100 million. Even in the age of excess with seemingly daily accounts of corporate debacles and abuse, Dunlap is still the most popular embodiment of the Theory X leader. He became a lightening rod for this style of leading and managing with the publication of his

3

book, Mean Business: How I save Bad Companies and Make Good Companies Great that detailed his draconian strategy.

When he moved on to Sunbeam Dunlap ultimately faced his dénouement. As part of the settlement with the Securities and Exchange Commission that charged Dunlop with defrauding investors he agreed to pay a fine of $500,000 and was barred from ever again being an executive in a public company. In addition, Dunlap paid $15 million to settle a class action suit brought by investors for questionable accounting practices and misleading claims.

Theory Y Exemplars

There are two popular Theory Y exemplars in business, though not of the stature of a Roosevelt or Mandela. One is Herb Kelleher (b. 1931), founder and CEO of Southwest Airlines who retired in 2001 as CEO and the other is Ricardo Semler (b.1959) of Semco (Brazil).

What makes these two men exemplars of Theory Y is their fierce commitment to the belief that the workplace should be a respectful of people and encourage them to bring out their best. As Kelleher said, “You have to treat your employees like your customers. When you treat them right, then they will treat your outside customers right. That has been a powerful competitive weapon for us. You’ve got to take the time to listen to people’s ideas. If you just tell somebody no, that’s an act of power and, in my opinion, an abuse of power. You don’t want to constrain people in their thinking.” http://www.fortune.com/fortune/articles/0,15114,373551-4,00.html

4

Southwest, under Kelleher, never had a lay off and was the only airline to be profitable throughout the last thirty years, its entire existence – even during the aftermath of the events of September 11, 2001 and the slowdown in air travel. Southwest is known to be a fun place to work where everyone pitches in to get planes ready to fly safely and efficiently. It isn’t unusual to see Captains helping flight attendants or customer service personnel helping baggage handlers. The point is that consistently applying Theory Y beliefs proved to be successful.

For Ricardo Semler, at Semco (a manufacturer of industrial mixers and other products), “We simply do not believe our employees have an interest in coming in late, leaving early, and doing as little as possible…After all, these same people raise children, join the PTA, elect mayors, governors, senators and presidents. They are adults. At Semco, we treat them like adults. We trust them. We don’t make our employees ask permission to go to the bathroom, or have security guards search them as they leave for the day. We get out of their way and let them do their jobs.” (Semler, 1993:59)

Believing is Seeing

There is an aspect of the Theory X, Theory Y belief systems that is quite instructive to all leaders. It is the self-fulfilling prophesy. You see what you believe. Remember, psychologists remind us that in our need to seek congruence we manifest our beliefs. Rather like seeing the glass as either half filled or half empty, we approach our relations with and expectations of people with an idea of the outcome firmly embedded in our minds. Thus, Theory X believers will

5

expect and find people who demonstrate irresponsible behavior confirming their beliefs. Equally true the Theory Y believer will tend to see the good in people and behave accordingly. The self-fulfilling prophesy is at work in either case. We see and act on the manifestation of our beliefs.

Theory X and Theory Y Effectiveness

Writing in Leadership: Theory Application and Skill Development, Lussier and Achua report that “A study of over 12,000 managers explored the relationship between managerial achievement and attitudes toward subordinates. The managers with Theory Y attitudes were better at accomplishing organizational objectives and better at tapping the potential of subordinates. The managers with strong Theory X attitudes were far more likely to be in the low achieving group.” (Lussier and Achua, 2001:49)

Utilizing this insight, it may be possible to create a Theory Y organization since an organization can choose its employees, train them and remove them. Others argue that social engineering at that level is neither possible nor desirable. Since the world consists of both types of people an organization will be most adaptive if it also consists of, and learns to deal with, both kinds of employees. Yet, Theory X leaders will tend to be unable to accommodate Theory Y subordinates since they are incapable of the trust required to unleash their

6

potential while Theory Y leaders are more likely to be adaptive to Theory X subordinates and able to provide the necessary controls and supervision.

Theory Z

After McGregor’s theories became well established in the business lexicon, various authors used the title Theory Z to designate their own theoretical contribution to the management literature. There are two important versions. The first and most relevant to the continuum established by McGregor, is psychologist Abraham Maslow’s (1908 – 1970) Theory Z. The other, the more popular version but unrelated to McGregor’s work is William Ouchi’s (b. 1944) Theory Z that represents a hybrid of Japanese and American management styles. It is Ouchi’s Theory Z that has been accepted into the management canon.

Maslow’s Theory Z

After a study of the management literature, Maslow was convinced that while Theory Y was reflective of the self-actualization stage in his hierarchy of human needs wherein people express their greatest potential in creative, substantial and meaningful ways, they may not do so in a transcendent manner. For him, a large segment of self-actualizers strove for and experienced a transcendent state where peak experiences were common, where B-values were an everyday expression of who they are, where their focus was more on ultimate states, humanity as beyond deficiency, people beyond the need for supervision, employees not defined solely as receivers of a paycheck but fully expressive and in service to a higher calling for which the organization is merely an instrument.

7

“Being Values: truth, beauty, wholeness, dichotomy-transcendence, aliveness- process, uniqueness, perfection, necessity, completion, justice, order, simplicity, richness, effortlessness, playfulness, and self-sufficiency.” (Maslow, 1971: 106)
At this level the individual seems to occupy a special status and those he or she “leads” take on a relationship not unlike devoted acolytes who feel honored to be of service.

This is found in the rarest of circumstances. In historical terms Mohandas Gandhi (1869 – 1948) may best fit the model of a fully self-actualized transcendent leader. Perhaps a Dr. Albert Schweitzer (1875 – 1965) does as well. Unfortunately, transcenders are not common. Perhaps a Ralph Nader (b. 1934) or a John Gardner (1912 – 2002) might come close – people who can and do see the full potential of human possibilities and understand how simple and practical, how doable a better world is to create but who are frustrated by the mediocre, the shortsighted, the fearful, the unimaginative, the non-risk taker, the pedestrian unsure of what is right, unfamiliar with the B-values, unable to act outside the system, who lacks the confidence that comes from personal peak experience of the B-values that clarify the worth, the necessity of the higher purposes. Little supplementary research has been picked up on this theme by management scholars.

Ouchi’s Theory Z

When Japan became the second largest economy in the world and began to win vast markets in the US, industry after industry fell victim to its

8

competitive strength – particularly in automobiles, consumer electronics, photography, steel and toys. This alarmed American industry. Many thought a new era of second-class economic status was settling in on America. As expected, interest in the Japanese management style grew dramatically. Ouchi’s book (1981) was an immediate best-seller. He explained the two styles of management (American and Japanese) and suggested a hybrid: Theory Z. Organizations using Theory Z are characterized as workplaces where employment is long term, layoffs are a last resort; workers are multi-talented, share responsibility for the whole and are willing to learn new skills; the organization is flat so promotions take longer and there are fewer promotions in a career; consensual decision making is routine with individuals encouraged to suggest new ideas and innovations in work processes; and, workers are judged on objective performance not obedience. (Ouchi, 1981)

Ouchi’s Theory Z really isn’t an extension of McGregor’s Theories X and Y because they are not based on an underlying belief structure about the nature of people. It is a model suggested to utilize the best from both Japanese and American management practices to improve the performance of organizations in both places (Theory Z was also a best-seller in Japan).

John Nirenberg Further Reading

9

Dunlap A. J. with Andelman, B. (1996). Business: How I Save Bad Companies and Make Good Companies Great. New York: Times Business.

Freiberg, K. and J. (1996). NUTS!: Southwest Airlines: Crazy Recipe for Business and Personal Success by. Austin, TX: Bard Press.

Laing, J. (1997). “High Noon at Sunbeam,” Barons, June 16.
Lussier, R, and Achua, C. (2001). Leadership: Theory, Application and Skill

Development. Cincinnati, OH: South-Western College Publishing
Maslow, A. H (1971). The Farther Reaches of Human Nature. New York: Viking.

McGregor, D. (1957).“The Human Side of Enterprise,” Management Review, November.

Ouchi, W. (1981). Theory Z:How American Business Can Meet the Japanese Challenge. Reading, MA: Addison-Wesley.

Semler, R. (1993). Maverick: The Success Story Behind the World’s Most Unusual Workplace. New York: Warner Books.

 

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