McGregor's Theory X and Theory Y

Theory X

In this theory, which has been proven counter-effective in most modern practice, management assumes employees are inherently lazy and will avoid work if they can and that they inherently dislike work. As a result of this, management believes that workers need to be closely supervised and comprehensive systems of controls developed.

A hierarchical structure is needed with narrow span of control at each and every level.

According to this theory, employees will show little ambition without an enticing incentive program and will avoid responsibility whenever they can. According to Michael J. Papa (Ph.D., Temple University; M.A., Central Michigan University; B.A., St. John’s University), if the organizational goals are to be met, theory X managers rely heavily on threat and coercion to gain their employee's compliance.

Beliefs of this theory lead to mistrust, highly restrictive supervision, and a punitive atmosphere.

The Theory X manager tends to believe that everything must end in blaming someone. He or she thinks all prospective employees are only out for themselves. Usually these managers feel the sole purpose of the employee's interest in the job is money. They will blame the person first in most situations, without questioning whether it may be the system, policy, or lack of training that deserves the blame.

A Theory X manager believes that his or her employees do not really want to work, that they would rather avoid responsibility and that it is the manager's job to structure the work and energize the employee.

One major flaw of this management style is it is much more likely to cause Diseconomies of Scale in large businesses.
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Theory Y

In this theory, management assumes employees may be ambitious and self-motivated and exercise self-control. It is believed that employees enjoy their mental and physical work duties.

According to Papa, to them work is as natural as play[1]. They possess the ability for creative problem solving, but their talents are underused in most organizations. Given the proper conditions, theory Y managers believe that employees will learn to seek out and accept responsibility and to exercise self-control and self-direction in accomplishing objectives to which they are committed.

A Theory Y manager believes that, given the right conditions, most people will want to do well at work. They believe that the satisfaction of doing a good job is a strong motivation. Many people interpret Theory Y as a positive set of beliefs about workers.

A close reading of The Human Side of Enterprise reveals that McGregor simply argues for managers to be open to a more positive view of workers and the possibilities that this creates. He thinks that Theory Y managers are more likely than Theory X managers to develop the climate of trust with employees that is required for human resource development.

It's here through human resource development that is a crucial aspect of any organization. This would include managers communicating openly with subordinates, minimizing the difference between superior-subordinate relationships, creating a comfortable environment in which subordinates can develop and use their abilities. This climate would include the sharing of decision making so that subordinates have say in decisions that influence them.

This theory is a positive view to the employees, meaning that the employer is under a lot less pressure than someone who is influenced by a theory X management style.



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(Source: Wikipedia.org)

The limitations of a balanced scorecard approach to performance measurement

(1) The balanced scorecard attempts to identify the chain of cause and effect relationships which will provide the stimulus for the future success of an organisation. Advocates of a balanced scorecard approach to performance measurement suggest that it can constitute a vital component of the strategic management process.

However, Robert Kaplan and David Norton, the authors of the balanced scorecard concept concede that it may not be suitable for all firms.

Norton suggests that it is most suitable for firms which have a long lead time between management action and financial benefit and that it will be less suitable for firms with a short-term focus. However, other flaws can be detected in the balanced scorecard.

(2) The balanced scorecard promises to outline the theory of the firm by clearly linking the driver/outcome measures in a cause and effect chain, but this will be difficult if not impossible to achieve.

The precise cause and effect relationships between measures for each of the perspectives on the balanced scorecard will be complex because the driver and outcome measures for the various perspectives are interlinked. For example, customer satisfaction may be seen to be a function of several drivers, such as employee satisfaction, manufacturing cycle time and quality. However, employee satisfaction may in turn be partially driven by customer satisfaction and employee satisfaction may partially drive manufacturing cycle time. A consequence of this non-linearity of the cause and effect chain (i.e., there is non-linear relationship between an individual driver and a single outcome measure), is that there must be a question mark as to the accuracy of any calculated correlations between driver and outcome measures. Allied to this point, any calculated correlations will be historic. This implies that it will only be possible to determine the accuracy of cause and effect linkages after the event, which could make the use of the balanced scorecard in dynamic industries questionable. If the market is undergoing rapid evolution, for example, how meaningful are current measures of customer satisfaction or market share?
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These criticisms do not necessarily undermine the usefulness of the balanced scorecard in presenting a more comprehensive picture of organisational performance but they do raise doubts concerning claims that a balanced scorecard can be constructed which will outline a clear cause and effect chain between driver and outcome measures and the firm’s financial objectives.

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The potential benefits and limitations that may arise from the adoption of a balanced scorecard approach to performance measurement

(1) A broader business perspective
Financial measures invariably have an inward-looking perspective. The balanced scorecard is wider in its scope and application. It has an external focus and looks at comparisons with competitors in order to establish what constitutes best practice and ensures that required changes are made in order to achieve it. The use of the balanced scorecard requires a balance of both financial and non-financial measures and goals.


(2) A greater strategic focus
The use of the balanced scorecard focuses to a much greater extent on the longer term. There is a far greater emphasis on strategic considerations. It attempts to identify the needs and wants of customers and the new products and markets. Hence it requires a balance between short term and long term performance measures.


(3) A greater focus on qualitative aspects
The use of the balanced scorecard attempts to overcome the over-emphasis of traditional measures on the quantifiable aspects of the internal operations of an organisation expressed in purely financial terms. Its use requires a balance between quantitative and qualitative performance measures. For example, customer satisfaction is a qualitative performance measure which is given prominence under the balanced scorecard approach.


(4) A greater focus on longer term performance
The use of traditional financial measures is often dominated by financial accounting requirements, for example, the need to show fixed assets at their historic cost. Also, they are primarily focused on short-term profitability and return on capital employed in order to gain stakeholder approval of short term financial reports, the longer term or whole life cycle often being ignored.


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JIT Backflusing Example

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JIT - Types of Time (Waste)

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JIT Backflusing

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ABC Cost Hierarchy - Example

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