This is the traditional theory of human behaviour, which makes the following assumptions about human nature:
1. Management is responsible for organizing the elements of productive enterprises -money, material, equipment, people – in the interest of economic ends.
2. With reference to people, it is a process of directing their efforts, motivating them, controlling their actions, modifying their behaviour in order to be in conformity with the needs of the organisation.
3. Without this active intervention by management, people would be passive – even resistant to organisational needs. Hence they must be persuaded, rewarded, punished and properly directed.
4. The average human being has an inherent dislike of work and will avoid it if he can.
5. He lacks ambition, dislikes responsibility and prefers to be led.
6. He is inherently self-centred, indifferent to organisational needs.
7. He is by nature resistant to change.
8. He is gullible, not very bright.
The assumptions of theory Y, according to McGregor are as follows:
1. Work is as natural as play or rest, provided the conditions are favourable, the average human being does not inherently dislike work.
2. External control and the threat of punishment are not the only means for bringing about efforts towards organisational objectives. Man can exercise self-control and self-direction in the service of objectives to which he is committed.
3. Commitment to objectives is a result of the rewards associated with their achievement. People select goals for themselves if they see the possibilities of some kind of reward that may be material or even psychological.
4. The average human being, under proper conditions does not shirk responsibility, but learns not only to accept responsibility but also to seek it.
5. His capacity to exercise a relatively high degree of imagination, ingenuity and creativity in the solution of organisational problems is widely, not narrowly distributed in the population.
6. Under conditions of modern industrial life the intellectual potentialities of people are only partially utilised. As a matter of fact, men, have unlimited potential.