The Human Side of Enterprise – McGregor

The Human Side of Enterprise is a classic business book that when taking it's context into account, highlights some really useful things about the transition from pre-management to management to leadership.

It's not to be read looking for a model to recreate, but rather to better understand how our current models of leadership have evolved.

Notes

  • Part of the problem we had was around the progression of managing towards becoming a profession by having a growing corpus of knowledge focused at being able to predict and control and type of work.
  • This sort of meta-profession was not around before (maybe similar to the analyst?)
  • When all these men then have their profession in prediction and control, it becomes hard to seperate that.
  • You can see this in the journey from the small startup to the large Corp. when people move into purely managerial positions they feel a need to validate their worth (and ego) by controlling people. I’m not saying managers are not needed but that the ego of a manager is often conflicting with what is needed (to get out of the way).
  • The first underlying message that McGrgor is making is; much of managerial best practice has been created from subjective experience and armchair philosophising about how the world works. The scientific method needs to be infused into the profession so that theories/methods are tested and validated in a scientific manner.
  • Methods of control:
    • Physical coercion
    • Persuasion
    • Advise
  • McGregor hypothesises that the appropriateness of authority as a means of control is probably correlated with the degree of dependence of the subject.
    • The more dependant, the more effective and appropriate authority is.
  • These correlation by scales are much more practical and less romantic thant the spiral dynamic based theories.
  • McGregor makes the point that feels more apt to me than RO which is that; a) man is a wanting animal b) a satisfied need does not motivate behaviour. These two paint a picture of the evolution of management not based on human consciousness progressing but rather lower level human needs being satisfied and hence higher level needs becoming the drivers for motivation.
  • As people’s need focus moves higher up MHON, the bargaining power of the company diminishes, which in turn makes authoritative leadership less effective.
    • Previously when people struggle to feed themselves and cover their heads with a roof, a steady pay check is a direct solution to worker’s problems.
    • However, as workers need shift, the ability for the company to solve their needs get reduced, since their needs are more social, self-actualising.
    • The best the company can do is provide people with an environment to fulfil these needs, but they can’t fulfil them for them as before.
    • Hence, when companies use old authoritative management styles, resentment grows in the working people since they are not getting the environment to fulfil their current needs.
  • I still have an aversion to the idea of subordinate/boss.
    • This is likely a bias from my affinity to the unconventional.
    • I think not accepting this role difference is fallacious and potentially dangerous.
    • Like Abe was saying, there are people who are better suited to certain tasks.
    • WHen these people take on roles of leadership, we can respect them for their traits and find support/solidarity in the power dynamic.
    • I don’t think it’s that people don’t want a boss, (or even to always be their own boss), it’s that people want a boss they can respect.
  • Salaries typically served two purposes; 1) to provide a fair pay for given work in a given economy, 2) to motivate people in their work (control)
    • We can address the first one by finding accurate averages for work and paying X% above average.
    • We can address the second one, by not addressing it financially. Rather than motivating people through monetary reward, we can motivate them through ways that meet their “higher-level” needs.
    • E.g. pay people enough that money is not an issue, and create motivating environments outside of money.
    • IF you do use incentive rewards for people, using an equal percetage of base salary is more effective.
  • Any differentiation between individuals (especially regarding pay) is a potential source to create antagonism and unproductive motivations. Hence, eliminate all differentiations where the error of measurement is large (can create source of unfairness) and the value of differentiation is small (its a lose-lose since the incentives are too small).
  • Using personality tests to determine hires may be controversial (rather than just post-hire to optimise working relations)
  • When it comes to learning, nothing beats genuine interest and motivation. THis is what makes widespread company learning programs difficult and often less effective, they by definition, are not based on individual needs, desires, and interests.
  • Essay at the end of the book is all you need to read.

Quotes

  • "Progress in any profession is associated with the ability to predict and control, and this is true also of industrial management."
  • "So long as the manager fails to question the validity of his personal assumptions, he is unlikely to avail himself of what is available in science."
  • "Underlying the principles of classical organization theory are a number of assumptions about human behavior which are at best only partially true."
  • "If there is a single assumption which pervades conventional organizational theory it is that authority is the central, indispensable means of managerial control. This is the basic principle of organization in the textbook theory of management. The very structure of the organization is a hierarchy of authoritative relationships. The terms up and down within the structure refer to a scale of authority. Most of the other principles of organization, such as unity of command, staff and line, span of control, are directly derived from this one."
  • "True professional help, as typified by the exceptionally sophisticated and sensitive individual in any professional field, does not consist in playing God with the client, but in placing the professional’s knowledge and skill at the client’s disposal."
  • "The success of any form of social influence or control depends ultimately upon altering the ability of others to achieve their goals or satisfy their needs. The modification may be an enhancement of this ability (for example, through the offer of a product, the provision of professional advice, or the promise of a reward) or a curtailment of it (for example, through a disciplinary action, a jail sentence, the termination of employment, or the threat of a punishment)."
  • "the influence can occur only when there is some degree of dependence of the one party on the other. The dependence may be quite small or very great, it may be unilateral or mutual, but if there is no dependence there is no opportunity to control."
  • "Unless I perceive that you can somehow affect my ability to satisfy my needs, you cannot influence my behavior."
  • "It is fundamental, therefore, to any theory of organization that the nature of the dependency relationships be understood and allowed for. In the social, economic, and political milieu of the United States today the management of industry is becoming unable to rely on authority as the sole, or even the primary, method of accomplishing organizational objectives through people. Its dependence downward is too great to permit this unilateral means of control."
  • "Authority is perfectly appropriate as a means of influencing behavior under certain circumstances. There is nothing inherently wrong or bad about giving an order or making a unilateral decision. There are many circumstances, however, when the exercise of authority fails to achieve the desired results. Under such circumstances, the solution does not lie in exerting more authority or less authority; it lies in using other means of influence."
  • "Behind every managerial decision or action are assumptions about human nature and human behavior."
  • "The stress that management places on productivity, on the concept of “a fair day’s work,” on the evils of featherbedding and restriction of output, on rewards for performance—while it has a logic in terms of the objectives of enterprise—reflects an underlying belief that management must counteract an inherent human tendency to avoid work."
  • "Moreover, the principles of organization which comprise the bulk of the literature of management could only have been derived from assumptions such as those of Theory X. Other beliefs about human nature would have led inevitably to quite different organizational principles."
  • "Man is a wanting animal—as soon as one of his needs is satisfied, another appears in its place. This process is unending. It continues from birth to death. Man continuously puts forth effort—works, if you please—to satisfy his needs."
  • "A satisfied need is not a motivator of behavior!"
  • "When the physiological needs are reasonably satisfied, needs at the next higher level begin to dominate man’s behavior—to motivate him. These are the safety needs, for protection against danger, threat, deprivation. Some people mistakenly refer to these as needs for security."
  • "Man tends to live for bread alone when there is little bread."
  • "But the “carrot and stick” theory does not work at all once man has reached an adequate subsistence level and is motivated primarily by higher needs. Management cannot provide a man with self-respect, or with the respect of his fellows, or with the satisfaction of needs for self-fulfillment. We can create conditions such that he is encouraged and enabled to seek such satisfactions for himself, or we can thwart him by failing to create those conditions."
  • "But by making possible the satisfaction of lower-level needs, management has deprived itself of the ability to use the control devices on which the conventional assumptions of Theory X has taught it to rely: rewards, promises, incentives, or threats and other coercive devices."
  • "Direction and control are of limited value in motivating people whose important needs are social and egoistic."
  • "1. The expenditure of physical and mental effort in work is as natural as play or rest. The average human being does not inherently dislike work. Depending upon controllable conditions, work may be a source of satisfaction (and will be voluntarily performed) or a source of punishment (and will be avoided if possible). 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.* The most significant of such rewards, e.g., the satisfaction of ego and self-actualization needs, can be direct products of effort directed toward organizational objectives. 4. The average human being learns, under proper conditions, not only to accept but to seek responsibility. Avoidance of responsibility, lack of ambition, and emphasis on security are generally consequences of experience, not inherent human characteristics. 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."
  • "Acceptance of Theory Y does not imply abdication, or “soft” management, or “permissiveness.” As was indicated above, such notions stem from the acceptance of authority as the single means of managerial control, and from attempts to minimize its negative consequences. Theory Y assumes that people will exercise self-direction and self-control in the achievement of organizational objectives to the degree that they are committed to those objectives."
  • "Nevertheless, it is clear that authority is an appropriate means for control under certain circumstances—particularly where genuine commitment to objectives cannot be achieved."
  • "Of course, I don’t expect that I will necessarily see eye to eye with you on everything you have written down. I do take it for granted that we have a common purpose: We both want yours to be the best damned personnel department anywhere."
  • "specific words, in conveying to Harrison the essential point that he did not want to occupy the conventional role of boss, but rather, to the fullest extent possible, the role of a consultant who was putting all of his knowledge and experience at Harrison’s disposal in the conviction that they had a genuine common interest in Harrison’s doing an outstanding job."
  • "The necessity for a logical division of responsibilities within any organization is obvious. However, a position description is likely to become a strait jacket unless it is recognized to be a broad set of guidelines within which the individual literally makes his own job. The conception of an organization plan as a series of predetermined “slots” into which individuals are selectively placed denies the whole idea of integration."
  • "The important theoretical consideration, derived from Theory Y, is that the acceptance of responsibility (for self-direction and self-control) is correlated with commitment to objectives. Genuine commitment is seldom achieved when objectives are externally imposed. Passive acceptance is the most that can be expected; indifference or resistance are the more likely consequences. Some degree of mutual involvement in the determination of objectives is a necessary aspect of managerial planning based on Theory Y."
  • "The aim is to further the growth of the subordinate: his increased competence, his full acceptance of responsibility (self-direction and self-control), his ability to achieve integration between organizational requirements and his own personal goals."
  • "The most important point with respect to management by integration and self-control is that it is a strategy—a way of managing people. The tactics are worked out in the light of the circumstances. Forms and procedures are of relatively little value. I stress this point because it has been my frequent experience, ever since some of my colleagues and I began to talk publicly about target setting, to have people send or bring me forms (often with the heading “self-appraisal”) with the request that I tell them whether “this is all right” as a means of installing a new program."
  • "The manager who finds the underlying assumptions of Theory Y congenial will invent his own tactics provided he has a conception of the strategy involved. The manager whose underlying assumptions are those of Theory X cannot manage by integration and self-control no matter what techniques or forms are provided him."
  • "Performance appraisal is often perceived simply as a technique of personnel administration, but where it is used for administrative purposes it becomes part of a managerial strategy, the implicit logic of which is that in order to get people to direct their efforts toward organizational objectives, management must tell them what to do, judge how well they have done, and reward or punish them accordingly."
  • "First, formal position descriptions provide management with an orderly picture of the organization and the comfortable conviction that people know what they are supposed to do. They establish formal chains of command and they delimit authority so that people will not interfere with each other. Position descriptions are a basis for an equitable salary classification scheme, provided it is recognized that at best they yield only a rough picture of reality. However, they are not a particularly realistic device for telling people what to do. Within the managerial hierarchy it is doubtful that any job is performed the same by two successive incumbents, or by the same incumbent over any long period of time."
  • "Many research studies show up substantial differences in the perceptions of subordinates and superiors concerning the requirements and priorities of the positions of the former. Position descriptions do not often produce the clarity of understanding they are designed to provide."
  • "Apart from providing guides for salary administration and some help in hiring and placement, the chief values of position descriptions are (1) to satisfy the needs of organization planners for order and systematization, and (2) to provide reassurance to top management that everyone has a piece of paper which tells him what to do. The danger is that both these groups will make the mistake of assuming that the descriptions represent reality."
  • "If we then take these somewhat questionable data and attempt to use them to make fine discriminations between people for purposes of salary administration and promotion, we can create a pretty picture, but one which has little relation to reality. Using fairly simple procedures, and some safeguards against extreme bias and prejudice, it is probably fair to say that we can discriminate between the outstandingly good, the satisfactory, and the unsatisfactory performers. When, however, we attempt to use the results of appraisal to make discriminations much finer than this, we are quite probably deluding ourselves."
  • "In attempting to communicate criticisms to a subordinate the superior usually finds that the effectiveness of the communication is inversely related to the subordinate’s need to hear it. The more serious the criticism, the less likely is the subordinate to accept it. If the superior is insistent enough, he may be able to convey his negative judgments to a subordinate, but when this happens he often finds that he has done serious damage to the relationship between them."
  • "The manager, in making judgments about a subordinate, is implying that he needs to change his behavior in certain ways, and clearly in the minds of both is the recognition that the superior is in a position to punish him if he does not change. Surely this is not a situation for effective counseling, even if the superior is skilled in psychotherapy. The role of judge and the role of counselor are incompatible."
  • "The semiannual or annual appraisal is not a particularly efficient stimulus to learning for another reason: It provides “feedback” about behavior at a time remote from the behavior itself. People do learn and change as a result of feedback. In fact, it is the only way they learn. However, the most effective feedback occurs immediately after the behavior. The subordinate can learn a great deal from a mistake, or a particular failure in performance, provided it is analyzed while all the evidence is immediately at hand. Three or four months later, the likelihood of effective learning from that experience is small."
  • "Within the framework of Theory X, the ability to provide or withhold economic rewards is the prime means by which management exercises authority in industry."
  • "Two major considerations determine the nature of managerial policy and practice with respect to wage and salary administration. The first is the consideration of equity: whether the amount of money provided is perceived to be fair relative to the market, economic conditions, the importance of the job, and the individual’s contribution."
  • "The second consideration is that of incentive (in the broad sense, including all types of economic rewards): the use of differential increments of money to yield differential increments of effort. In general it is assumed that more money will result in more effort."
  • "Equity hinges on acceptance, and relatively simple classification plans appear to be more readily accepted than some of the more elaborately “scientific” ones."
  • "It has been impossible so far to prove conclusively which approach is better, but it is clear that the gains for the organization from individual incentive plans are modest even under the best conditions."
  • "The problems of equity with respect to economic rewards can be reasonably solved by systematic market survey, attention to the cost of living, policies such as paying salaries “equal to or better than” average, well-conceived position classification plans, and the processes of collective and individual bargaining. In this fashion the individual can be assured of a general level of economic reward which he will accept as fair."
  • "Four categories of increments of economic reward above base salaries are realistic: a. Those that can be directly tied to objective criteria of accomplishment such as profit and loss. These will necessarily be limited to a few people in the total population if they are administered on an individual basis. Moreover, they will, potentially, be large enough to have genuine motivational value. b. Those that are administered as “time-service” increments, received automatically at intervals so long as performance is not unsatisfactory. Such increments will be small, and will have as their chief value the maintenance of equity (on the assumption that time on a job brings some increase in competence and in contribution). c. Merit increases to the small proportion of individuals in a given salary classification whose performance is clearly outstanding. These will require only gross differentiations of performance in which the probable error of measurement will be small, and they will also involve large enough salary increments to have genuine motivational value. d. Group rewards for departmental, or divisional, or company-wide achievement of objectively measurable economic results. These would be shared within the group in terms of an equal percentage of base salary. (The Scanlon Plan, to be considered in Chapter 8, utilizes this method of motivating performance.)"
  • "by eliminating differentiations between individuals when the error of measurement is large and the motivational value of the differentiations is small,"
  • "Tests of capacity—intelligence tests, for example—seems somehow to be different in nature, and the implications with respect to their use don’t present the same difficulties. A measure of intelligence is less personal and private than a diagnosis of emotional adjustment."
  • "Those managements who are most worried about their prerogatives seem, in general, to have the greatest difficulty in protecting them. It is at least possible that this suspicious, almost paranoid, attitude of management actually tends to promote interference with management prerogatives, to create targets which employees promptly shoot at. The chain of events in some companies amounts to a self-fulfilling prophecy: Management expects certain things to happen, and it behaves in such a fashion that they do happen. Then management reverses cause and effect in its interpretation of what has taken place."
  • "Perhaps it is now clear that the all-important climate of the superior-subordinate relationship is determined not by policy and procedure, nor by the personal style of the superior, but by the subtle and frequently quite unconscious manifestations of his underlying conception of management and his assumptions about people in general. The most careful and well-conceived policies and procedures of personnel administration, the most elaborate training in the techniques of supervision, knowledge of all the tricks of winning friends and influencing people, will be interpreted by subordinates as manipulative and exploitative devices unless the climate is right."
  • "The industrial organization is an elaborate complex of interdependent relationships, and interdependence means that each party can affect the ability of the other to achieve his goals and satisfy his needs."
  • "Indirectly perhaps, but definitely and increasingly, the industrial organization of today is being run by the staff. Their knowledge and techniques have a profound influence on major decisions, they design and administer procedures, and their control functions provide much of the direction and control of the human resources of the enterprise."
  • "One of management’s major tasks, therefore, is to provide a heterogeneous supply of human resources from which individuals can be selected to fill a variety of specific but unpredictable needs.†"
  • "There is little reason for assuming that high motivation and hard work in school are the best predictors of motivation and effort in later life. There are a good many examples to the contrary."
  • "A second implication from research findings about leadership is that a management development program should involve many people within the organization rather than a select few."
  • "Many companies have followed one of these which might be characterized as the “manufacturing” approach. Management has not phrased its philosophy this way, but it has looked on the problem essentially as a production problem. People have been assigned the engineering task of designing a program and building the necessary machinery, toward the end of producing the needed supply of managerial talent."
  • "Is the salary structure one which offers comparable rewards for staff and line at any given level? Does it, for example, put a ceiling on the salary of the researcher unless he becomes a manager?"
  • "In an organization where promotion is the sole measure of success, most people are oriented to the job to which they hope to move next."
  • "The “offering” then becomes a scheduled assignment for whole categories of people (sometimes all of management, but more often lower levels only). The need for the new knowledge is now not the individual’s “felt” need, but a need which others think he ought to have. The integrative principle is abandoned in favor of a form of control which can be used only where dependence is high (for example, in the elementary public school), and which is not very effective even then."
  • "Above all, it is necessary to recognize that knowledge cannot be pumped into human beings the way grease is forced into a fitting on a machine. The individual may learn; he is not taught. Effective education is always a process of influence by integration and self-control."
  • "It may be said of most of us that in organizational situations involving our superiors or subordinates we react (unconsciously, of course) to internal needs and fears and hopes to a greater extent than we act with respect to the situation itself. We attempt to exercise power or to gain acceptance, to lead or to take a minor role, to fight or to withdraw, to demonstrate our talents or hide our foibles—not so much because the situation requires it as because our own internal adjustment does."
  • "But what is even more important, we normally get little feedback of real value concerning the impact of our behavior on others. If they don’t behave as we desire, it is easy to blame their stupidity, their adjustment, their peculiarities. Only under rather extreme conditions do our subordinates even attempt to tell us how our behavior affects them. When our superiors sometimes make the attempt, we find it difficult to understand what they are driving at, and mostly we disagree with their perceptions of us. Above all, it isn’t considered good taste to give this kind of feedback in most social settings. Instead, it is discussed by our colleagues when we are not present to learn from it."
  • "The motivations of the individual—his “felt needs” for new knowledge or increased skill—are absolutely critical factors in any learning. The principle of integration is, therefore, important in the administration of all activities relating to managerial education."
  • "the research evidence indicates quite clearly that skillful and sensitive membership behavior is the real clue to effective group operation."
  • "I couldn’t have been more wrong. it took a couple of years, but 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. In fact, it is the major function of the top executive to take on his own shoulders the responsibility for resolving the uncertainties that are always involved in important decisions. Moreover, since no important decision ever pleases everyone in the organization, he must also absorb the displeasure, and sometimes severe hostility, of those who would have taken a different course."
  • "A colleague recently summed up what my experience has taught me in these words: “A good leader must be tough enough to win a fight, but not tough enough to kick a man when he is down.” This notion is not in the least inconsistent with humane, democratic leadership. Good human relations develop out of strength, not of weakness."
  • "The conventional conception of management’s task in harnessing human energy to organizational requirements can be stated broadly in terms of three propositions. In order to avoid the complications introduced by a label, I shall call this set of propositions “Theory X”: 1. Management is responsible for organizing the elements of productive enterprise—money, materials, equipment, people—in the interest of economic ends. 2. With respect to people, this is a process of directing their efforts, motivating them, controlling their actions, modifying their behavior to fit the needs of the organization. 3. Without this active intervention by management, people would be passive—even resistant—to organizational needs. They must therefore be persuaded, rewarded, punished, controlled—their activities must be directed. This is management’s task—in managing subordinate managers or workers. We often sum it up by saying that management consists of getting things done through other people. Behind this conventional theory there are several additional beliefs—less explicit, but widespread: 4. The average man is by nature indolent—he works as little as possible. 5. He lacks ambition, dislikes responsibility, prefers to be led. 6. He is inherently self-centered, indifferent to organizational needs. 7. He is by nature resistant to change. 8. He is gullible, not very bright, the ready dupe of the charlatan and the demagogue."
  • "Man is a wanting animal—as soon as one of his needs is satisfied, another appears in its place. This process is unending. It continues from birth to death."
  • "A satisfied need is not a motivator of behavior!"
  • "When the physiological needs are reasonably satisfied, needs at the next higher level begin to dominate man’s behavior—to motivate him. These are called safety needs."

sebastiankade

Sebastian Kade, Founder of Sumry and Author of Living Happiness, is a software designer and full-stack engineer. He writes thought-provoking articles every now and then on sebastiankade.com

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