The Human Side of Enterprise – Douglas McGregor

“There’s nothing new under the sun.”  You might have heard that aphorism before.  I think about it every time I see another new leadership book that promises to uncover the true secrets of organizational success.  At fifty years old, you won’t find anything new in The Human Side of Enterprise.  You will find some solid thinking about some of the timeless principles that guide organizational success.  Way before getting an MBA was trendy, Douglas McGregor was approaching business as a science.

Big Thought

“All managerial decisions and actions rest on assumptions about behavior.”  If you assume that people are lazy and unmotivated, you will be forced to work through carrots and sticks.  If you assume that people are capable and looking for opportunities to engage, you will create collaborative opportunities.  How you lead and manage flows how you perceive the inherent nature of people.

Ideas, Implications, and Questions

• The definitions of Theory X and Theory Y:
  • Theory X
    • 1. The average human being has an inherent dislike of work and will avoid it if he can.
    • 2. Because of this human 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 organizational objectives.
    • 3. The average human being prefers to be directed, wishes to avoid responsibility, has relatively little ambition, want security above all. (pg 45)
  • Theory Y
    • 1. The expenditure of physical and mental effort in work is as natural as play or rest.
    • 2. External control and the threat of punishment are not the only means for bringing about effort toward organizational objectives. Man will exercise self-direction and self-control in the service of objectives to which he is committed.
    • 3. Commitment to objectives is a function of the rewards associated with their achievement.
    • 4. The average human being learns, under proper conditions, not only to accept but to seek responsibility.
    • 5. The capacity to exercise a relatively high degree of imagination, ingenuity, and creativity in the solution of organizational problems is widely, not narrowly, distributed in the population.
    • 6. Under the conditions of modern industrial life, the intellectual potentialities of the average human being are only partially utilized. (pg 65)
• I often talk to clients about the need for regular and consistent feedback, not just quarterly or annual performance reviews. McGregor comes to the same conclusion about the uselessness of performance appraisals spaced far apart (pg 105).  If you are looking to engage people in the vision of the organization, and you want to give them information that will let them make meaningful adjustments to their performance, you can’t just meet with them once a year.  I think this is why most people are terrified of performance reviews – it’s more about judgement than improvement.
• “Is managerial leadership-or its potential-a property of the individual, or is it a term for describing a relationship between people?” (pg 247).  This is an especially prescient question considering today we are inundated with articles about the “19 Qualities that All Leaders Possess“.  It’s interesting how these lists are full of contradictory ideas.  Douglas was onto something when he was looking at leadership as a quality of the relationship between people instead of a rote series of behaviors or attitudes.  He also writes, “It is more fruitful to consider leadership as a relationship between the leader and the situation than as a universal pattern of characteristics possessed by certain people.” (pg 243)

• One thing that stood out to me was Douglas’s belief in the predictive power of the social sciences.  He does a better job than most in tempering his faith in ascribing the same certainty to the social sciences as physics or chemistry, but I still think he overstates its power sometimes.  It’s always important to keep in mind that there are a lot of variables that can’t be accounted for in a social science discipline.
• Even before Stephen Covey would use the idea in the Seven Habits of Highly Effective People, Douglas recognized interdependence as an important part of the modern business world: “Interdependence is a central characteristic of the modern, complex society and that influence, much more than authority, is central to success in such a context”
• Douglas writes about the challenges of organization change on a human level: “These changes in managerial attitude do not always come easily. There’s often some tough learning involved.  It is not easy… to adjust to what may seem to him (the manager) to be a severe loss of power. He is faced squarely with his actual dependence downward and laterally.” (pg 158).  If there is a reason why many organizations are still run by Theory X assumptions, it’s this: Change has to happen on an individual level, and individual change and growth is hard. That’s why you still see so many organizations still run by traditional command and control mentalities.
• Here’s a simple and powerful take on how to create participation and involve more people in creative delegation:
  • 1. analyze a problem in arriving at the best solution you could find.
  • 2. call your subordinates together to discuss the problem
  • 3. leave the meeting with a better solution than the one you began with

Should you read this book? Who should read this book?

In a world full of MBAs touting their latest theories and flavor of the month business books, The Human Side of Enterprise is a solid foundation on the strategies of business leadership.  I don’t think it’s for everyone, but if you are working in a large organization, or tasked with creating organizational change or development, it’s well worth the read.