Theory X / Theory Y reflects Douglas McGregor's suggestion in The Human Side of Enterprise that managers tend to fall into two categories, in terms of how they see human nature. Theory X managers take a 'carrot and stick' approach when motivating subordinates. They assume that workers are inherently resistant to labor and will do all they can to avoid doing work so as to gain the maximum amount of profit for the least amount of effort. They may assume responsibility, but will do so for personal profit alone. Theory Y managers assume that workers are internally motivated, rather than externally motivated.
The essential problem with Theory X approaches, McGregor contended, is that once basic needs are satisfied, they are no longer motivational. Once a worker has enough money for life expenses and reaches a certain salary level, continually using money to motivate him or her is of little use. This paper will suggest that Theory Y notions of internal motivation are supported by the current success of Google, one of the most innovative companies thus far of the 21st century. Google's approach is unique in that it assumes employees want to work, and allows them to use the workplace to create their own projects and initiatives. Even its more externally-motivated employee rewards reinforce organizational principles of making work fun and rewarding employee initiatives.
One of the reasons McGregor was intent upon challenging Theory X was because it had a long-standing place (even though it was not labeled as such) in the history of management. Taylorism or the idea of scientific management that viewed individual actions of workers with hostility was at the core of Theory X In scientific management, actions by workers were broken down to ensure that employees moved in the most efficient way possible. Leisure was discouraged, and any type of personal relationship between workers or management was seen as potentially seditious. Taylor feared unionization, and also believed that workers did not want to work quickly, do a good job, and take pride in their work. His theory was founded upon the idea that "employees take great care never to work at a good pace for fear that this faster pace would become the new standard. If employees are paid by the quantity they produce, they fear that management will decrease their per-unit pay if the quantity increases" (Frederick Taylor, 2011, Net MBA). Taylor believed that management should conduct scientific studies to determine the best ways to produce goods and services for consumers and tell workers that they needed to obey such dictates.
Rather than a 'scientific' approach to management, Theory Y is based upon a popular humanistic theory, Maslow's Hierarchy of Needs. All workers have basic needs such as the biological and physiological needs of "air, food, drink, shelter, warmth, sex, sleep, etc." And safety needs such as "protection from elements, security, order, law, limits, stability, etc. (Chapman 2010). From a business point-of-view, these needs are met by paying workers reasonable salaries for their labor. However, once these needs are met, other needs must be addressed, such as belongingness and love needs "work group, family, affection, relationships, etc., "esteem needs - self-esteem, achievement, mastery, independence, status, dominance, prestige, managerial responsibility, etc., and "self-actualization needs - realizing personal potential, self-fulfillment, seeking personal growth and peak experiences" (Chapman 2010).
Workers must be paid a living wage and cannot be satisfied by empty corporate mission statements alone -- they will notice if they are not given decent benefits and if performance is not graded fairly. However, they also have esteem-related needs and desire a workplace that is pleasant to go to every day. Ultimately, they seek to fulfill a larger mission with their work. It is this type of need that Theory Y addresses. Theory Y assumes: "Work can be as natural as play and rest; People will be self-directed to meet their work objectives if they are committed to them; People will be committed to their objectives if rewards are in place that address higher needs such as self-fulfillment; Under these conditions, people will seek responsibility; Most people can handle responsibility because creativity and ingenuity are common in the population" (Theory X and Theory Y, 2011, Net MBA).
The principles of Theory Y are clearly at play at the Google organization, which views its workers as a source of creativity and inspiration. As an information technology company, the workers effectively 'are' the company -- it is their efforts that make it profitable and cutting-edge. This concept is completely the reverse of Theory X or Taylorism which viewed the corporate owners as the only innovators, and managers as the lion-tamers of lazy, hostile employees. Engineers at Google are even given free range to pursue and construct their own personal projects: "We offer our engineers "20-percent time" so that they're free to work on what they're really passionate about. Google Suggest, AdSense for Content, and Orkut are among the many products of this perk" (Engineer's life, 2011, Google).
Google encourages a lack of hierarchy and creativity amongst all employees: "At Google, we know that every employee has something important to say, and that every employee is integral to our success. We provide individually-tailored compensation packages that can be comprised of competitive salary, bonus, and equity components, along with the opportunity to earn further financial bonuses and rewards" (Life at Google, 2011, Google). There are certain 'Theory Y' elements to Google, of course, in the sense that it offers many apparent perks, such as free fitness classes, food, and on-site medical clinics and dry-cleaning. But the motivation is not merely an exchange relationship. It is also designed to enable employees to focus on higher aspects of work fulfillment -- the higher points of Maslow's pyramid -- by taking care of lower-level needs.
A more recent theory of motivational needs known as ERG theory also seems to explain Google's rationale behind its motivational structure. ERG stands for: Existence, or "physiological and safety needs," Relatedness, or "social and external esteem needs," and Growth: "self-actualization and internal esteem needs" (ERG, 2011, Net MBA). This theory suggests that all human beings have different types of needs but unlike Maslow, believes that needs can be satisfied simultaneously -- some people may be satisfied if their 'relatedness' needs are taken care of even though some of their physiological needs are incompletely addressed. An example of this might be someone who is a starving artist, sacrificing his or her biological needs to achieve self-actualization through work. Google also seems to embody this concept, by striving to fulfill employee's needs simultaneously. It offers competitive wages and benefit packages, combined with many additional perks. The presence of free food at the Google cafeteria meets a physiological need, but also communicates the value the company places on its employees. Yet it also serves a highly practical value for the company, effectively keeping employees 'in house' rather than venturing outward and possibly loosing focus from their work. Even Google benefits such as free massages and yoga classes help to keep employees healthy in body and mind and better workers.
Arguably one of the reasons the incentive structure at Google is so effective, however, is because it is uniquely attuned to the type of workers attracted to Google, workers who are highly motivated and extremely excited by the intellectual challenges their work provides. The reason the workplace is so successful and able to embody Theory Y principles of management is because workers are receptive to being motivated by challenges, and do not seek to avoid work. However, advocates of Theory Y would state that treating workers poorly becomes a self-fulfilling prophesy and one reason why the workers in Taylor's scientific management studies seemed so unmotivated was because they…