Theory X and Theory Y are theories of human motivation created and developed by Douglas McGregor at the MIT Sloan School of Management in the 1960s. The theories describe two very different attitudes toward workforce motivation. McGregor felt that companies followed either one or the other approach.

In Theory X, management assumes employees are inherently lazy, dislike work and will avoid it if they can. Management believes that workers need to be closely supervised and comprehensive systems of controls developed. A hierarchical structure is needed with narrow span of control at each and every level. According to this theory, employees will show little ambition without enticing incentive programs and will avoid responsibility whenever they can. These ideas have been proven counter-effective in most modern practice.

In Theory Y, management assumes employees may be ambitious and self-motivated and exercise self-control. It is believed that employees enjoy their mental and physical work duties. They possess the ability for creative problem solving, but their talents are underused in most organizations. Given the proper conditions, theory Y managers believe that employees will learn to seek out and accept responsibility and to exercise self-control and self-direction in accomplishing objectives to which they are committed.

For McGregor, Theory X and Y are not different sides of the same coin. Rather they are two different coins all together. If managers felt the need to apply Theory X principles, that does not preclude them from being a part of Theory Y. McGregor incorporated Maslow’s hierarchy of needs into his theories. He grouped Maslow’s hierarchy into “lower order” (Theory X) needs and “higher order” (Theory Y) needs. As the influence of McGregor and Maslow’s writings spread, management theorists soon realized the possibility of connecting higher level needs to worker motivation.