姝 Academy of Management Review 2004, Vol. 29, No. 2, 293–311.

Book Review Essay: Douglas McGregor— The Human Side of Enterprise in Peril

downsizing, pension insecurity, and aggressive investors seeking immediate return, it is useful to reconsider McGregor’s call to honor the unfulfilled potential of employees. The recent publication of Douglas McGregor, Revisited: Managing the Human Side of the Enterprise, by Gary Heil, Warren Bennis, and Deborah C. Stephens, makes it especially timely to look back at McGregor’s work. McGregor’s Theories X and Y are still prominently featured in textbooks on management and organizational theory. However, contemporary management scholars have largely rejected McGregor’s arguments, preferring contingency theories emerging from empirical studies. Even leading disciples of McGregor seem to follow the fashion and downplay the critical moral core of his thinking. Partly as a result, management scholars fail to perceive the need for profound reforms in organizations. HSE is best known for its juxtaposition of Theory X and Theory Y management philosophies. Theory X is the still persistent view that workers are ordinarily passive and resistant to the legitimate expectations of management and the organization. Alternatively, Theory Y, McGregor’s favored view, assumes that workers seek fulfillment from work and will prosper in an environment inviting their creative involvement. Throughout the book, McGregor subjects customary management practices to careful scrutiny. He uncovers the arbitrary core of performance appraisal and merit pay and scores managerial manipulation of the illusion of participation. In HSE McGregor disputes the motivational value of traditional forms of merit pay in which employees receive small variations in compensation based on subjective assessments of performance. Instead, he favors group rewards based on objective measures of unit performance and substantial awards for the few outstanding performers. With the decline of unions and the corresponding increase in managerial

The Human Side of Enterprise, by Douglas McGregor. New York: McGraw-Hill, 1960. Douglas McGregor, Revisited: Managing the Human Side of the Enterprise, by Gary Heil, Warren Bennis, and Deborah C. Stephens. New York: Wiley, 2000. By David Jacobs, Hood College, Frederick, Maryland.1

The study of the history of ideas is a useful corrective for the cataloging of theories that characterizes much scholarship and textbooks in management. Management theory has not developed in a linear fashion in which each new theory outdoes its antecedents. Rather, the historic context of scholarly work has influenced its development. Researchers are inevitably affected by the swirl of events and by their personal values, which are themselves shaped by prior experience. Understanding the context of ideas, including historical and biographical factors, does not diminish their value. Indeed, ideas demonstrate their value in the context of experience. THE HUMAN SIDE OF ENTERPRISE Famed MIT scholar and father of Theory Y management, Douglas McGregor published The Human Side of Enterprise (HSE) some forty years ago. If newer were necessarily better, HSE would now only merit a footnote. However, McGregor was an astute judge of the organizations of his era, and his moral perspective on human relations remains valuable even in altered circumstances. In fact, in this era of

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I particularly thank George Strauss for his comments on early drafts of this essay. 293

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discretion, merit pay of the sort that McGregor challenged is common practice. HSE is still a pleasure to read. It is clearly written, and it reveals a nondogmatic but inquiring mind at work. Contemporary management students might miss the bright colors and multiple fonts of today’s texts, but they would benefit from exposure to this classic. McGregor’s thinking reminds one that there was a period in which many management thinkers accepted the legitimacy of unions. For example, Mary Van Kleeck, a Russell Sage Foundation researcher on human resource issues, grew increasingly committed to trade unionism and economic planning in the 1920s and 1930s. She embraced an “interpretation” of scientific management that prioritized workers and working conditions over company profits (Oldenziel, 2000). Neil Chamberlain (1948) explored the union challenge to management control and found managers anticipating a kind of codetermination. McGregor strove to build a new model of management recognizing the new union reality, and his concept of the integration of interests in the enterprise envisioned a fundamental change in direction. Theory Y is compatible with collective bargaining, much more so than the unitarist-oriented human relations doctrines that predated it and most contingency models that followed it. A history of ideas perspective on McGregor highlights these discontinuities (as well as reveals McGregor’s debt to Abraham Maslow). McGregor’s years as president of Antioch College illustrate his willingness to experiment with participatory systems. Antioch pioneered the integrated work/study curriculum under the leadership of Arthur Morgan, better known for his stewardship of the Tennessee Valley Authority. As Antioch president, McGregor helped construct a model of college and community governance in which students played a decisive role. Antioch’s experimental nature and freewheeling politics led to an investigation by the House Un-American Activities Committee, and McGregor was obliged to defend its traditions of dissent and social reform (Scott Sanders, personal communication). McGregor later modified the extremely democratic views of his Antioch period. Factionalism among students and faculty, among other things, exhausted him and convinced him of the

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necessity of active leadership. When he retired, he commented: It took the direct experience of being a line executive and meeting personally the problems involved to teach me what no amount of observation of other people could have taught. I believed, for example, that a leader could operate successfully as a kind of adviser to his organization. I thought I could avoid being a “boss” . . . . . . I hoped to duck the unpleasant necessity of making difficult decisions . . . . . . I finally began to realize that a leader cannot avoid the exercise of authority any more than he can avoid responsibility for what happens to his organization (McGregor, cited in Bennis & Schein, 1966: 66 –70).

This new moderation did not, however, mean a repudiation of unionism or embrace of authoritarian management. TAKING ISSUE WITH MCGREGOR Edgar Schein (1975) underscored and rejected the distinctive moral thrust in McGregor’s work as he sought to amend Theory Y and render it more compatible with contingency theory. While he affirmed Theory Y as a more realistic view of human nature than Theory X, Schein took issue with McGregor’s moral claim that it is a responsibility of management to make it possible for people to recognize and develop their capacity for participation in decision making. Schein called McGregor’s larger vision “utopian” and embraced Theory Y as a practical guide for managers only in the higher levels of organizations. One wonders whether McGregor would endorse Schein’s narrower vision. CONTINGENCY THEORY The transition in management scholarship from Theory Y to contingency theory reflects a turn toward empirical research, but also a diminution of moral emphasis. McGregor based his arguments in part on impressionistic observation and practiced hypothesis testing only in a casual manner. His observations were clearly shaped by the cardinal value he assigned to the improved treatment of workers. Contingency theorists seek analytical rigor in a narrowly instrumental context: what managerial techniques enhance the standard measures of organizational effectiveness, de-emphasizing larger goals. Enhancing the personal growth of

2004

Book Reviews

employees is not ordinarily an explicit objective (see Hellriegel, Jackson, & Slocum, 2002). Robert Vecchio unintentionally admits the moral vacuum in many contingency theories: Contingency researchers do not simply pick one alternative over the other, but try to identify a set of conditions in which one style of supervision could be expected to yield superior results compared to the other style . . . For example, if you are in charge of a band of fascists, your subordinates might well expect and desire that you rule with an iron fist (2003: 12).

Not all contingency theorists have embraced this extreme position. Some have taken a third position, finding Theory X–style autocratic management conducive to performance in some contexts, while warning of likely negative social consequences (George Strauss, personal communication). This third position stresses “tradeoffs.” However, as Hackman (1985) argues, the management scholar typically does not contemplate the more radical workplace reforms that might elide tradeoffs and improve workers’ lives and organizational effectiveness. Influenced by the managerial audience, scholars leave off the table initiatives that call into question “(1) the authority structure of the organization, (2) the core technology used by the organization . . . [and] (3) fundamental managerial values and assumptions about how human resources are used in the organization and about the personal and financial rights of employees” (1985: 144). Hackman notes that management scholars are ordinarily inclined to limit their attention to programs readily acceptable to managers. That McGregor was not inclined to observe these constraints attests to the insights that the moral imagination brings. McGregor’s preference for participatory approaches was rooted in his moral outlook and concern for the underdog, unlike the many whose advocacy of participatory management was strategic and selective. McGregor’s moral outlook should not be considered as an expendable element of his thinking, Schein to the contrary. It reflects McGregor’s awareness of the consequences of management choice for workers, rather than a troubling subjectivity. Wicks and Freeman, following John Dewey, argue persuasively for the symbiosis of normative and empirical research (Wicks & Freeman, 1998).

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REVISITED AND REVISED Douglas McGregor, Revisited underscores the continued relevance of McGregor’s work to contemporary debates in management scholarship. It is noteworthy in its optimistic account of the contemporary application of Theory Y. Heil, Bennis, and Stephens argue that McGregor’s humanistic vision of organizations is closer to realization today than ever before. Bennis, a professor at the University of Southern California, was a student at Antioch while McGregor was president. Coauthors Heil and Stephens cofounded the Center for Creative Leadership in California. Heil, Bennis, and Stephens make this claim: The rise of the networked economy, the growing power of front-line workers, the shift in power from mass producer to individual consumer, and the increased capacity of the workplace to offer meaningful enterprise; all these conditions lend hope to a world of work that we could call “McGregorian” (p. viii).

The authors fail to emphasize the dark side of modern employment: stagnant wages, diminished benefits, job insecurity, and aggressive union avoidance by many employers (Wheeler, 2002). The authors are aware on some level that McGregor’s principles may be honored in the breach. While McGregor saw Scanlon joint union management/profit-sharing plans as the fulfillment of Theory Y, Heil, Bennis, and Stephens note that managers have often balked at involving workers to the degree contemplated in the Scanlon plans (p. 17). Undeterred, they quickly endorse the diluted tonic of open book management as an acceptable substitute. Breathlessly, eschewing distinctions, they state, “Participative management, knowledge workers, open-book management, values-based management, workgroups, and the democratic workplace were visions McGregor had for the world of business” (p. 36). The optimistic gloss provided by Heil and colleagues seems particularly out of place when managers seek greater authority without accountability. It is often the “tough and mean” CEO in the mold of Albert Dunlap who is celebrated in the business pages (Pfeffer, 1998: 148 – 154). The status quo is not as “McGregorian” as the writers claim.

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The authors of Douglas McGregor, Revisited, are to be commended for focusing attention on Douglas McGregor. The book includes excerpts from McGregor’s work, which will surely interest the reader. Unfortunately, Heil, Bennis, and Stephens do McGregor a disservice in their Panglossian optimism. Certainly, in his post-Antioch work McGregor was not a radical reformer. He was a reformer and experimenter nonetheless. The Human Side of Enterprise finds him somewhat less optimistic than before but still struggling to humanize organizations. His enduring legacy can be seen in the work of his successors at the MIT Sloan School of Management, where scholars like Thomas Kochan, Wanda Orlikowsky, Joel Cutcher-Gershenfeld, and others endeavor to sustain labor-friendly organizational studies (see Kochan, Orlikowsky, and CutcherGershenfeld, 2002). Another scholar in this mold is Jeffrey Pfeffer, whose book The Human Equation (1998) reflects a concern for workers’ rights as well as organizational effectiveness. Unfortunately, humanizing organizations is a project honored in the breach by the many who fail to see the lives behind the dependent variable. REFERENCES Bennis, W. G., & Schein, E. H. (with collaboration of Caroline McGregor). 1966. Leadership and motivation: Essays of Douglas McGregor. Cambridge, MA: MIT Press. Chamberlain, N. 1948. The union challenge to management control. New York: Harper. Hackman, J. R. 1985. Doing research that makes a difference. In E. E. Lawler, A. M. Mohrman, S. A. Mohrman, G. E. Ledford, & T. G. Cummings (Eds.), Doing research that is useful for theory and practice: 126 –149. San Francisco: Jossey-Bass. Hellriegel, D., Jackson, S., & Slocum, J. 2002. Management: A competency-based approach. Cincinnati: South-Western Publishing. Kochan, T., Orlikowsky, W., & Cutcher-Gershenfeld, J. 2002. Beyond McGregor’s Theory Y: Human capital and knowledge-based work in the 21st century organization. http://mitsloan.mit.edu/50th/beyondtheorypaper.pdf, accessed June 19, 2003. Oldenzeil, R. 2000. Gender and scientific management— women and the history of the Institute of Industrial Relations, 1922–1946.” Journal of Management History, 6(7): 323–344. Pfeffer, J. 1998. The human equation: Building profits by putting people first. Boston: Harvard Business School Press. Schein, E. 1975. In defense of Theory Y. Organizational Dynamics, 4(10): 17–30.

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Vecchio, R. P. 2003. Organizational behavior: Core concepts. Mason, OH: South-Western Publishing. Wheeler, H. 2002. The future of the American labor movement. New York: Cambridge University Press. Wicks, A., & Freeman, R. E. 1998. Organization studies and the new pragmatism: Positivism, anti-positivism, and the search for ethics. Organization Science, 9: 123–140.

Book Review Essay: Effective Governance in Managing Change—Common Perspective from Two Lenses Positive Organizational Scholarship: Foundations of a New Discipline, edited by Kim S. Cameron, Jane E. Dutton, and Robert E. Quinn. San Francisco: Berrett-Koehler, 2003. Redefining the Corporation: Stakeholder Management and Organizational Wealth, by James E. Post, Lee E. Preston, and Sybille Sachs. Stanford, CA: Stanford University Press, 2002. By Cam Caldwell, University of Houston–Victoria, Victoria, Texas.

Designing and implementing organizational change is widely acknowledged as the key challenge of governance in virtually every business field (Bloodgood & Morrow, 2003; Lawler, Benson, Finegold, & Conger, 2002). The complexity of organizational issues, the nature of environmental pressures, and the difficulty in obtaining stakeholder consensus are just three of the barriers to successful change, yet change is the universal constant (Christensen & Overdorf, 2000; Rieley & Clarkson, 2001). Over the past fifteen years, in academic and business research, scholars have recognized the importance of value-based and principle-centered change strategies for organizational governance. Both academicians and practitioners are demanding solutions that are both normative and instrumental; organizations must accomplish goals, generate profits, build stakeholder trust, and achieve socially responsible outcomes. In response to the need for new models of effecting change, two new books offer what might seem to be fundamentally diverse perspectives for guiding organizational change.