Case Study – HR Memo due tomorrow

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Motivating Employees: Why It Matters

What motivates you to do what you do? How do you motivate others to help you or to accomplish things

on their own? You have already learned about the role both managers and employees play in helping

organizations reach their goals. As a manager, you are expected to lead and manage people. As an

employee, you are given job-specific duties and responsibilities to perform. Neither leading nor following

will happen unless people are motivated.

This video (https://youtu.be/dysp4PtHgtQ) on the motivational strategies used by Zappos is a good

place to begin our discussion of motivation in business. What motivates the employees at Zappos? Is it

high salaries? Long vacations? The chance to shave their heads at the company picnic once a year? As you

watch the video, pay attention to what really motivates Zappos workers.

Since the 1920s, researchers have studied human behavior, developing a variety of theories to explain the

driving force behind motivation. These theories range from the need to provide a safe and secure

environment to the desire not to experience negative consequences from action or inaction.

Understanding the basis for motivation and how motivational approaches work within an organization can

help you and your business be successful.

As you read on, ask yourself the following questions:

What motivates me?

How have others tried to motivate me?

Which motivational approaches have been the most and least successful?

When have I been successful in motivating others?

How can I use this information to be successful in my personal and professional life?

The Hawthorne Studies

Many of today’s ideas about the connection between human motivation and employee performance can be

traced back to discoveries from the Hawthorne studies.

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Hawthorne Works, c. 1920

During the 1920s, Elton Mayo conducted a series of studies on workers at the Hawthorne plant of the

Western Electric Company in Illinois. These studies changed the direction of motivational and managerial

theory from earlier studies, in particular Frederick Taylor’s “man as machine” view that focused on ways of

improving individual performance.

In contrast, Hawthorne set the individual in a social context. He argued that an employee’s work

surroundings and coworkers have as much influence over performance as skill and ability. The Hawthorne

studies are credited with focusing managerial strategy on the sociopsychological aspects of human

behavior in organizations.

This video (https://youtu.be/D3pDWt7GntI) from the AT&T archives contains interviews with

individuals who participated in these studies. It provides insight into the way the studies were conducted

and how they changed employers’ views on worker motivation.

The studies originally examined the effects of physical conditions on productivity and whether workers

were more responsive and efficient under certain environmental conditions, such as better lighting. The

results were surprising: Mayo found that workers were more responsive to social factors—such as their

manager and coworkers—than the other factors being investigated. When the lights were dimmed again

and the workplace was returned to pre-experimental conditions, productivity rose to its highest level and

absenteeism plummeted.

Mayo had discovered that workers responded when they received more attention from their managers:

Employees were more productive when they felt that their managers cared about and were interested in

their work. The studies also found that although financial incentives are important drivers of worker

productivity, social factors are equally important.

The Hawthorne studies also included a number of other experiments, including one in which two women

were chosen as test subjects and were asked to choose four other workers to join the test group. Each

person’s performance was measured before they were grouped in a separate room from other employees,

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and their performance continued to be measured for five years as they worked assembling telephone

relays. In the experiment room, they were assigned to a supervisor, who sometimes used the test subjects’

suggestions to make changes.

The researchers then measured how different variables affected group and individual productivity.

Changing a variable usually increased productivity, even if the variable was just a change back to the

original condition. The researchers concluded that the employees worked harder because they thought

they were being monitored individually. They hypothesized that choosing one’s coworkers, working as a

group, being treated as special (as evidenced by working in a separate room), and having a sympathetic

supervisor were the real reasons for the productivity increase.

The Hawthorne studies showed that people’s work performance is dependent on social issues and job

satisfaction. The studies concluded that tangible motivators, such as monetary incentives and good

working conditions, are generally less important in improving employee productivity than intangible

motivators, such as meeting individuals’ desire to belong to a group and be included in decision making and

work.

Licenses and Attributions

Chapter 10: Motivating Employees (https://courses.lumenlearning.com/wm-

introductiontobusiness/chapter/why-it-matters-motivating-employees/) by Linda Williams and Lumen

Learning from Introduction to Business is available under a Creative Commons Attribution 4.0 International

(http://creativecommons.org/licenses/by/4.0/) license. UMGC has modified this work and it is available

under the original license.

© 2022 University of Maryland Global Campus

All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity of information located at

external sites.

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Need-Based Theories

We will look at four main theories about how human needs are satisfied: Maslow’s hierarchy of needs,

Alderfer’s ERG theory, Herzberg’s two-factor theory, and McClelland’s acquired-needs theory.

Maslow’s Hierarchy of Needs

Human motivation can be defined as the fulfillment of various needs. These needs can encompass a range

of human desires, from basic, tangible needs of survival to complex emotional needs surrounding an

individual’s psychological well-being.

Abraham Maslow, a social psychologist, was interested in a broad spectrum of human psychological needs,

rather than individual psychological problems. He is best known for his hierarchy-of-needs theory.

Depicted in the pyramid below, the theory organizes the different levels of human psychological and

physical needs in order of importance.

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Maslow’s Hierarchy of Needs

Managers can apply Maslow’s hierarchy to better understand employees’ needs and motivation, and

address them in ways that lead to high productivity and job satisfaction.

Physiological and Safety Needs

At the bottom of the pyramid are the physiological, or basic human survival needs: food, shelter, water,

sleep, etc. Once physiological needs are satisfied, individual safety takes precedence. Safety and security

needs include personal security, financial security, and health and well-being.

After they have basic nutrition, shelter, and safety, people seek to fulfill higher-level needs.

Connection: The Third Level of Need

The third level of needs—love and belonging—are the desire to share and connect with others. Neglect,

shunning, or ostracism can impact a person’s ability to form and maintain emotionally significant

relationships. Humans need to feel a sense of belonging and acceptance, whether from a large social group

or a small network of family and friends. Without these attachments, they may be vulnerable to loneliness,

social anxiety, and depression.

Higher-Level Needs

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The fourth level is esteem—the normal human desire to be valued and validated by others—as well as self-

esteem. People with low self-esteem may find that external validation by others—through fame, glory,

accolades, etc.—only partially or temporarily fulfills their needs at this level.

Finally, at the top of the pyramid is self-actualization. At this stage, people feel that they have reached

their full potential. Self-actualization may occur after reaching an important goal or overcoming a particular

challenge, and it may be marked by a new sense of self-confidence or contentment. But it is rarely a

permanent state. Rather, self-actualization is an ongoing need for personal growth and discovery that

people have throughout their lives.

Hierarchy of Needs and Organizational Theory

Maslow’s hierarchy of needs is relevant to organizational theory because both are concerned with human

motivation. Understanding what people need—and how their needs differ—is an important part of effective

management. For example, some people work primarily for money (and fulfill their other needs elsewhere),

but others like to go to work because they enjoy their coworkers or feel respected by others and

appreciated for their good work.

In the workplace, Maslow’s hierarchy of needs suggests that if a lower need is not met, then the higher

ones will be ignored. For example, if employees lack job security, they will be far more concerned about

their financial well-being and paying their bills than about friendships and respect at work. However, if

employees receive adequate financial compensation (and have job security), meaningful group relationships

and praise for good work may be more important motivators.

Consequences of Unmet Needs

When their needs aren’t met, employees can become very frustrated. For example, if someone works hard

for a promotion and doesn’t get the recognition it represents, that employee may lose motivation and put

in less effort. Also, after a need is met, it will no longer serve as a motivator; the next level up in the needs

hierarchy will become more important. Therefore, keeping employees motivated can seem like a moving

target. People seldom fit neatly into pyramids or diagrams, though; their needs are complicated and often

change over time.

Assessing Needs Accurately

Here’s an example: Maria is a long-time employee who is punctual, does high-quality work, and is well liked

by her coworkers. However, her supervisor begins to notice that she is coming in late and seems distracted.

He concludes that Maria is bored with her job and wants to leave. But when he raises these issues in her

semiannual performance appraisal, he learns that Maria’s husband lost his job six months ago and, unable

to keep up with mortgage payments, the couple has been living in a hotel. Maria has moved down the

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needs pyramid and, if the supervisor wants to be an effective manager, he must adapt the motivational

approaches he uses. In short, a manager’s best strategy is to recognize this complexity and try to remain

attuned to what employees say they need.

Alderfer’s ERG Theory

Clayton Paul Alderfer, an American psychologist, used Maslow’s hierarchy of needs in developing the his

ERG theory, which refers to core needs in three areas:

existence

relatedness

growth

These three areas align, respectively, with Maslow’s levels of physiological, social, and self-actualization

needs.

Alderfer proposed that when needs in one category are not met, people will redouble their efforts to fulfill

needs in a lower category. For example, if their self-esteem (an area of need in the growth category) is

suffering, people will invest more effort in the relatedness category of needs.

Herzberg’s Two-Factor Theory

American psychologist Frederick Herzberg is regarded as one of the great original thinkers in management

and motivational theory. He set out to determine the effect of attitude on motivation by simply asking

people to describe the times when they felt really good and really bad about their jobs. What he found was

that people who felt good gave very different responses from people who felt bad.

The results from this inquiry form the basis of Herzberg’s Motivation-Hygiene Theory, sometimes called

Herzberg’s two-factor theory (1968), which hypothesized that two sets of factors govern job satisfaction

and job dissatisfaction: hygiene factors, or extrinsic motivators, and motivation factors, or intrinsic

motivators.

Hygiene factors, or extrinsic motivators, tend to represent tangible, basic needs like those noted in both

the existence category of ERG theory and in the lower levels of Maslow’s hierarchy of needs. Extrinsic

motivators include status, job security, salary, and fringe benefits. It’s important for managers to realize

that not providing the appropriate and expected extrinsic motivators will sow dissatisfaction and decrease

motivation among employees.

Motivation factors, or intrinsic motivators, tend to be less tangible. They are tied more to emotional needs

like those identified in the relatedness and growth categories in the ERG theory and at the higher levels of

Maslow’s hierarchy of needs. Intrinsic motivators include challenging work, recognition, relationships, and

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growth potential. Managers need to recognize that while these needs may fall outside the traditional scope

of what a workplace ought to provide, they can be critical to strong individual and team performance.

The factor that differentiates two-factor theory from the others is the role of employee expectations.

According to Herzberg, intrinsic motivators and extrinsic motivators have an inverse relationship. Intrinsic

motivators tend to increase motivation when they are present, while extrinsic motivators tend to reduce

motivation when they are absent. This is due to employees’ expectations. Extrinsic motivators (e.g., salary,

benefits) are expected, so they won’t increase motivation when they are in place, but they will cause

dissatisfaction when they are missing. Intrinsic motivators (e.g., challenging work, growth potential), on the

other hand, can be a source of additional motivation when they are available.

If managers want to increase employees’ job satisfaction, they should be concerned with the nature of the

work itself—opportunities for employees to gain status, assume responsibility, and achieve self-realization.

If, on the other hand, management wishes to reduce dissatisfaction, then the focus should be on the job

environment—policies, procedures, supervision, and working conditions. To ensure a satisfied and

productive workforce, managers must pay attention to both sets of job factors.

McClelland’s Acquired-Needs Theory

Psychologist David McClelland’s acquired-needs theory splits the needs of employees into three

categories:

achievement

affiliation

power

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Employees who are strongly achievement-motivated are driven by the desire for mastery. They prefer

working on tasks of moderate difficulty in which outcomes are the result of their effort rather than luck.

They value receiving feedback on their work.

Employees who are strongly affiliation-motivated are driven by the desire to create and maintain social

relationships. They enjoy belonging to a group and want to feel loved and accepted. They may not make

effective managers because they may worry too much about how others will feel about them.

Employees who are strongly power-motivated are driven by the desire to influence, teach, or encourage

others. They enjoy work and place a high value on discipline. However, they may take a zero-sum approach

to group work—for one person to succeed, another must fail. If channeled appropriately, their motivation

can positively support group goals and help others in the group feel competent.

The acquired-needs theory doesn’t claim that people can be neatly categorized as one of the three types.

Rather, it asserts that all people are motivated by all of these needs to varying degrees. Also, needs do not

necessarily correlate with competencies; it is possible for an employee to be strongly affiliation-motivated,

for example, but still be successful in a situation that doesn’t meet that employee’s affiliation needs.

McClelland proposes that people in top management generally have a high need for power and a low need

for affiliation. He also believes that although individuals with a need for achievement can make good

managers, they are not generally suited to being in top management positions.

Process-Based Theories

Next, we will discuss three process-based theories of motivation: equity theory, expectancy theory, and

reinforcement theory.

Equity Theory

In contrast to the need-based theories we have covered so far, process-based theories view motivation as

a rational process. Individuals analyze their environment, develop reactions and feelings, and respond in

specific, predictable ways.

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Equity theory attempts to explain relational satisfaction in terms of perceived fairness: That is, people

evaluate how fair or unfair distribution of resources is within their interpersonal relationships. Regarded as

one of many theories of justice, equity theory was first developed in 1963 by John Stacey Adams. Adams, a

workplace and behavioral psychologist, asserted that employees seek to maintain equity between their

inputs and rewards from a job, and the perceived inputs and outcomes of others.

Equity theory proposes that people value fair treatment, which motivates them to maintain a similar

standard of fairness with their coworkers and the organization. Accordingly, equity structure in the

workplace is based on the ratio of inputs to outcomes.

Inputs are the employee’s contributions to the workplace. They include time spent working and level of

effort but can also include less tangible contributions such as loyalty, commitment, and enthusiasm.

Outputs are what the employee receives from the employer. They can also be tangible or intangible.

Tangible outcomes include salary and job security. Intangible outcomes might be recognition, praise, or a

sense of achievement.

A Workplace Example

For example, let’s look at Ross and Ayla, who both perform similar jobs for a large magazine publishing

company. If Ross received a pay raise but saw that Ayla was given a larger raise for the same amount

of work, Ross would evaluate this change, perceive an inequality, and be distressed. However, if Ross

perceived that Ayla was being given more responsibility and, therefore, more work that matched the

salary increase, then he would see the change as fair and would not object to it.

An employee will perceive treatment as fair if the ratio of inputs to outcomes seems equivalent for all

of the employees who are being compared.

Primary Propositions

Equity theory includes the following primary propositions:

Individuals will try to maximize their outcomes.

Individuals can maximize collective rewards by evolving accepted systems for equitably apportioning

resources among members. As a result, groups will evolve such systems of equity and will attempt to

induce members to accept and adhere to these systems. In addition, groups will generally reward

members who treat others equitably and punish members who treat others inequitably.

When individuals find themselves in inequitable relationships, they will become distressed. The more

inequitable the relationship, the more distress they will feel. According to equity theory, the person

who gets “too much” and the person who gets “too little” both feel distressed. The person who gets

too much may feel guilt or shame. The person who gets too little may feel angry or humiliated.

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Individuals who discover they are in inequitable relationships will attempt to eliminate their distress by

restoring equity.

Compensation

When employees compares their input/outcome ratios to other workers’, they will look for others with

similar jobs or skill sets. For example, Ross would not compare his salary and responsibilities to those of the

magazine company’s CEO. However, he might look outside the organization for comparison. For example,

he might visit a job search website to check salaries for positions like his at other publishing houses.

Pay, whether hourly or salary, is a central concern for employees and is therefore the cause of equity or

inequity in most, but not all, cases. In any position, employees want to feel that their contributions and

work performance are being rewarded with fair pay. An employee who feels underpaid may experience

feelings of hostility toward the organization and perhaps coworkers. This hostility may cause the employee

to underperform and breed job dissatisfaction among others.

Subtle or intangible compensation also plays an important role in equity. Receiving recognition and being

thanked for strong job performance can help employees feel valued and satisfied with their jobs, resulting

in better outcomes for both the individual and the organization.

Equity theory has several implications for business managers:

Employees measure the total of their inputs and outcomes. This means a working

parent may accept lower monetary compensation in return for more flexible working

hours.

Different employees ascribe different personal values to inputs and outcomes. Thus,

two employees of equal experience and qualification performing the same work for the

same pay may have different perceptions of the fairness of the deal.

Employees are able to adjust for purchasing power and local market conditions. Thus, a

teacher from Vancouver, Washington, may accept lower compensation than a colleague

in Seattle if the cost of living is different, and a teacher in a different culture and

environment may accept a totally different pay structure.

Although it may be acceptable for more senior staff to receive higher compensation,

there are limits to the balance of the scales of equity, and employees can find excessive

executive pay demotivating.

Staff perceptions of inputs and outcomes of themselves and others may be incorrect, so

perceptions need to be managed effectively.

Key Points

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Expectancy Theory

Expectancy theory, initially put forward by Victor Vroom at the Yale School of Management, suggests that

behavior is motivated by anticipated results or consequences. Vroom proposed that a person decides to

behave in a certain way based on the expected result. For example, people will work harder if they think

the extra effort will be rewarded.

According to expectancy theory, this process begins in childhood and continues throughout life.

Expectancy theory has three components: expectancy, instrumentality, and valence.

Expectancy is the belief that effort will lead to the intended performance goals. It describes a person’s

belief that “I can do this.” Usually, the belief is based on an individual’s past experience, self-confidence,

and the perceived difficulty of the performance standard or goal. Factors associated with a person’s

expectancy perception are competence, goal difficulty, and control.

Instrumentality is the belief that meeting the performance expectation will result in a desired outcome.

Instrumentality reflects the person’s belief that, “If I accomplish this, I will get that.” The desired outcome

may be a pay increase, promotion, recognition, or sense of accomplishment. Having clear policies in place—

preferably spelled out in a contract—guarantees that the reward will be delivered if the agreed-upon

performance is met. Instrumentality is low when the outcome is vague or uncertain, or if the outcome is

the same for all possible levels of performance.

Valence is the unique value an individual places on a particular outcome. Valence captures the fact that “I

find this particular outcome desirable because I’m me.” Factors associated with a person’s valence are

needs, goals, preferences, values, sources of motivation, and the strength of their preference for a

particular outcome. An outcome that one employee finds motivating and desirable—such as a bonus or pay

raise—may not be motivating and desirable to another (who may, for example, prefer greater recognition or

more flexible working hours).

Expectancy theory, when properly followed, can help managers understand how individuals are motivated

to choose among various behavioral alternatives. To enhance the connection between performance and

outcomes, managers should use systems that tie rewards closely to performance. They can also use

training to help employees improve their abilities and their belief that added effort will lead to better

performance.

A Note of Caution

It’s important to understand that expectancy theory can run aground if managers interpret it too

simplistically. Vroom’s theory entails more than just the assumption that people will work harder if they

think their effort will be rewarded. The reward needs to be meaningful and take valence into account.

Valence has a significant cultural as well as personal dimension, as illustrated here:

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When Japanese motor company ASMO opened a plant in the United States, it brought in many Japanese

workers but hired American managers to oversee operations. The managers, seeking to motivate the

workers with a reward system, initiated a costly employee-of-the-month program that included free

parking and other perks. The program was a huge flop, and participation was disappointingly low. Why?

The program required employees to nominate their coworkers to be considered for the award. Traditional

Japanese culture values modesty, teamwork, and conformity, and to be put forward or singled out for

being special is considered inappropriate and even shameful. To be named Employee of the Month would

be an embarrassment—not at all the reward that management assumed. Especially as companies become

more culturally diverse, the lesson is that managers need to get to know employees and their needs—their

unique valences—if they want to understand what makes the workers feel motivated, happy, and valued.

Reinforcement Theory

The basic premise of the theory of reinforcement is both simple and intuitive: An individual’s behavior

depends on the consequences. It’s cause and effect: If I work hard today, I’ll make more money. If I make

more money, I’m more likely to want to work hard.

Operant Conditioning

Reinforcement theory is based on the work of B. F. Skinner in the field of operant conditioning. The theory

relies on four primary inputs, or aspects of operant conditioning, from the external environment: positive

reinforcement, negative reinforcement, positive punishment, and negative punishment.

The chart Operant Conditioning shows the reinforcement and punishment pathways. Each one may include

positive and negative stimuli.

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Operant Conditioning

Types of Reinforcement

Positive reinforcement attempts to increase the frequency of a behavior through rewards. For example, if

an employee identifies a new market opportunity that creates profit, that employee may receive a bonus.

Negative reinforcement, on the other hand, attempts to increase the frequency of a behavior by removing

something the individual doesn’t like. For example, an employee demonstrates a strong work ethic and

wraps up a few projects faster than expected. This employee happens to have a long commute. The

manager rewards the employee’s progress by allowing work-from-home days.

Reinforcement can be affected by various factors:

satiation—the degree of need. If an employee is already wealthy, a bonus may not be motivating or

reinforcing.

immediacy—the time elapsed between the desired behavior and the reinforcement. The shorter the

time between the two, the more likely that the employee will correlate the reinforcement with the

behavior. If an employee does something great but isn’t rewarded until two months later, the

connection to the behavior may be unclear. The reinforcement loses meaning and power.

size—The magnitude of a reward or punishment can have a big effect on the degree of response. For

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example, where satiation is not a factor, a bigger bonus often has a bigger impact.

In managing employees, reinforcers include salary increases, bonuses, promotions, variable incomes,

flexible work hours, and paid sabbaticals. Managers are responsible for identifying the behaviors to

promote and those to discourage, and for carefully considering how the behaviors relate to organizational

objectives. Implementing rewards and punishments that are aligned with the organization’s goals helps to

create a more consistent, efficient work culture.

Incentive Programs

One particularly common positive-reinforcement technique is creating incentive programs to encourage

specific actions, behaviors, or results during a defined time period. Incentive programs can reduce

turnover, boost morale and loyalty, improve wellness, increase retention, and drive daily performance. By

motivating staff, businesses can increase productivity and meet goals.

Let’s look at an IT sales team, for example. Its goal is to sell a company’s new software to larger businesses,

so the manager offers a 5 percent commission reward to team members who gain clients of 5,000 or more

employees. This reward reinforces the behavior of closing big contracts, motivates team members to work

toward the goal, and likely will increase the number of big contracts closed.

To maximize the impact of reinforcement, every feature of an incentive program must be tailored to

participants’ interests. A successful incentive program contains clearly defined rules, suitable rewards,

efficient communication strategies, and metrics for measuring success. By adapting each element to fit the

target audience, companies are better able to engage employees and enhance the program’s efficacy.

Punishment

Positive punishment is a straightforward form of conditioning: identifying a negative behavior and

providing an adverse stimulus to discourage future occurrences. A simple example would be suspending an

employee for inappropriate behavior.

Negative punishment entails removing or withholding something. For example, an employee in the IT

department prefers to work unconventional hours, from 10:30 a.m. to 7 p.m. However, this employee has

been performing poorly. A negative punishment would be to revoke the right to keep the preferred

schedule until performance improves.

The purpose of punishment is to prevent future occurrences of an unacceptable or undesirable behavior.

According to deterrence theory, awareness of a punishment can prevent people from engaging in a

behavior, whether by punishing them immediately after the behavior, or by educating them about

consequences to discourage them before they even engage in the behavior. Punishment tools can include

demotions, salary cuts, and terminations.

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In business organizations, both punishment and deterrence play vital roles in shaping workplace culture

and in avoiding conflicts and negative outcomes—both internally and externally. If employees know exactly

what they are not supposed to do, and they understand the possible repercussions of violating

expectations, they will generally try to avoid crossing the line. Prevention is a much cheaper and easier

approach than waiting for something bad to happen. Therefore, preemptive education about rules—and the

penalties for violations—is common in business.

Theory X, Theory Y, and Theory Z

Next, you’ll learn more about three different managerial styles and their impact on employee motivation.

As you read, see if the descriptions fit anyone you have worked for.

Perspectives on Motivation

The idea that a manager’s attitude has an impact on employee motivation was originally proposed by

Douglas McGregor, a management professor at the Massachusetts Institute of Technology during the

1950s and 1960s. McGregor (1960) proposed two theories of how managers perceive and address

employee motivation. He referred to these opposing motivational methods as theory X and theory Y

management. Each theory assumes that the manager’s role is to organize resources, including people, to

benefit the company. However, beyond this, the attitudes and assumptions they embody are quite

different.

Theory X

According to McGregor, theory X management makes the following assumptions:

Work is inherently distasteful to most people, and they will attempt to avoid work whenever possible.

Most people are not ambitious, have little desire for responsibility, and prefer to be directed.

Most people have little aptitude for creativity in solving organizational problems.

Motivation occurs only at the physiological and security levels of Maslow’s hierarchy of needs.

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Most people are self-centered, so they must be closely controlled and often coerced to achieve

organizational objectives.

Most people resist change.

Most people are gullible and unintelligent.

Essentially, theory X assumes the primary source of employee motivation is monetary, with security being a

strong secondary motivator. Under theory X, one can take a hard or soft approach to getting results.

The hard approach relies on coercion, implicit threats, micromanagement, and tight controls—essentially an

environment of command and control. The soft approach is to be permissive and seek harmony, hoping

that employees will cooperate when asked. However, neither of these extremes is optimal. The hard

approach results in hostility, purposely low output, and extreme union demands. The soft approach results

in a growing desire for greater reward in exchange for diminished work output.

It might seem that the optimal approach to human resource management would lie somewhere between

these extremes. However, McGregor asserts that neither approach is appropriate, since the basic

assumptions of theory X are incorrect.

Drawing on Maslow’s hierarchy of needs, McGregor argues that a need, once satisfied, no longer

motivates. The company uses monetary rewards and benefits to satisfy employees’ lower-level needs.

Once those needs have been satisfied, the motivation disappears. Theory X management hinders the

satisfaction of higher-level needs because it doesn’t acknowledge that those needs are relevant in the

workplace. As a result, the only way that employees can attempt to meet higher-level needs at work is to

seek more compensation, so, predictably, they focus on monetary rewards. While money may not be the

most effective way to self-fulfillment, it may be the only way available. People will use work to satisfy their

lower needs and seek to satisfy their higher needs during their leisure time. However, employees can be

most productive when their work goals align with their higher-level needs.

McGregor makes the point that a command-and-control environment is not effective because it relies on

lower-level needs for motivation. In modern society, those needs are mostly satisfied for most employees,

so they are no longer motivating. In this situation, one would expect employees to dislike their work, avoid

responsibility, have no interest in organizational goals, resist change, and this easily creates a self-fulfilling

prophecy. To McGregor, a steady supply of motivation seemed more likely to occur under theory Y

management.

Theory Y

The higher-level needs—esteem and self-actualization—are ongoing and, for most people, never completely

satisfied. Employees can best be motivated through these higher-level needs.

In strong contrast to theory X, theory Y management makes the following assumptions:

Work can be as natural as play if the conditions are favorable.

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People will be self-directed and creative to meet work and organizational objectives if they are

committed to them.

People will be committed to quality and productivity objectives if rewards address higher needs, such

as self-fulfillment.

The capacity for creativity spreads throughout organizations.

Most people can handle responsibility because creativity and ingenuity are common traits.

Under the right conditions, people will seek responsibility.

These assumptions suggest that personal and organizational goals can be aligned by using the employee’s

own need for fulfillment as the motivator.

McGregor stressed that theory Y management does not imply a soft approach. He recognized that some

people may not have reached the level of maturity assumed by theory Y and may initially need tighter

controls. These can be relaxed as the employee develops.

If theory Y holds true, an organization can apply the following principles of scientific management to

improve employee motivation:

Decentralization and delegation. With decentralized control and few levels of management, managers

will have more subordinates and, consequently, will need to delegate some responsibility and decision

making.

Job enlargement. Broadening the scope of an employee’s job adds variety and opportunities to satisfy

ego needs.

Participative management. Consulting employees in decision making taps their creative capacity and

provides them with some control over their work environment.

Performance appraisals. Having the employee set objectives and participate in the process of self-

evaluation increases engagement and dedication.

This type of environment can increase and continually fuel motivation as employees work to satisfy their

higher-level personal needs through their jobs.

Ouchi’s Theory Z

In the 1980s, the United States experienced a surge of demand for Japanese products, particularly in the

automotive industry. US consumers clambered for cars, televisions, stereos, and electronics from Japan

because of their high quality and low prices. The Japanese competitive edge came from how workers were

managed. Japanese employees were engaged, empowered, and highly productive.

Management professor William Ouchi (1981) argued that Western organizations could learn from their

Japanese counterparts. Born to a Japanese American family and educated in the US, Ouchi spent a lot of

time in Japan studying the approaches to workplace teamwork and participative management used in

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Japanese organizations. The result was theory Z: a development beyond theory X and theory Y that

blended the best attributes of the management practices Ouchi studied and observed. Ouchi claimed

theory Z would reduce employee turnover, increase commitment, improve morale and job satisfaction, and

drastically increase productivity.

Theory Z stresses the need to help workers become generalists, rather than specialists. It views job

rotations and continual training to increase employees’ knowledge of the company and its processes, while

building a variety of skills and abilities. Since workers are given much more time to receive training, rotate

through jobs, and master the intricacies of the company’s operations, promotions tend to be slower. The

rationale for the drawn-out time frame is that it helps develop a more dedicated, loyal, and permanent

workforce, which benefits the company. The employees, meanwhile, have the opportunity to fully develop

their careers at one company. When employees rise to a higher level of management, it is expected that

they will use Theory Z to “bring up,” train, and develop other employees in a similar fashion.

Ouchi’s theory Z makes certain assumptions about workers. One is that they seek to build cooperative and

intimate working relationships with their coworkers (i.e., a strong desire for affiliation). Another is that

workers expect reciprocity and support from the company. According to theory Z, people want to maintain

a work-life balance, and they value a work environment in which family, culture, and traditions are

considered just as important as the work. Under theory Z management, not only do workers have a sense

of cohesion with their fellow workers, they also develop a sense of order, discipline, and a moral obligation

to work hard. Finally, theory Z assumes that given the right management support, workers can be trusted

to do their jobs to their utmost ability and look after their own and others’ well-being.

Theory Z also makes assumptions about company culture. If a company wants to realize the benefits

described above, it needs to have the following:

A strong company philosophy and culture. All employees need to understand the company philosophy

and culture, and employees need to believe in the work they’re doing.

Long-term staff development and employment. The organization and management team need to have

measures and programs in place to develop employees. Employment is usually long term, and

promotion is steady and measured. This leads to loyalty from team members.

Consensus in decisions. Employees should be encouraged and expected to take part in organizational

decisions.

Generalist employees. Because employees have a greater responsibility in making decisions and

understand all aspects of the organization, they ought to be generalists, even though they have

specialized responsibilities.

Concern for the happiness and well-being of workers. The organization needs to demonstrate sincere

concern for the health and happiness of its employees and their families, in part through programs to

foster happiness and well-being.

Informal control with formalized measures. Employees should be empowered to perform tasks without

being micromanaged, but with formalized measures in place to assess work quality and performance.

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Individual responsibility. Within the context of the team, the organization should recognize individual

contributions.

Theory Z is not the last word on management, and it has limitations. It can be difficult for organizations

and employees to make lifetime employment commitments. Also, participative decision making may not

always be feasible or successful due to the nature of the work or the willingness of the workers. Slow

promotions, group decision making, and lifetime employment may not be a good fit for companies

operating in cultural, social, and economic environments where these practices are not the norm.

References

Herzberg, F. (1968). One more time: How do you motivate employees? Harvard Business Review, 46(1),

53–62.

McGregor, D. (1960). The human side of enterprise. McGraw-Hill.

Ouchi, W. G. (1981). Theory z: How American management can meet the Japanese challenge. Addison-

Wesley.

Licenses and Attributions

Chapter 10: Motivating Employees (https://courses.lumenlearning.com/wm-

introductiontobusiness/chapter/introduction-to-need-based-theories/) by Linda Williams and Lumen

Learning from Introduction to Business is available under a Creative Commons Attribution 4.0 International

(http://creativecommons.org/licenses/by/4.0/) license. UMGC has modified this work and it is available

under the original license.

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