Theory X Y Z of Motivation – Management Notes – For RBI Grade B & SEBI Grade A Exams

Motivation theories are an important part of the syllabus of Management in RBI Grade B and SEBI Grade A exams. Let us discuss motivation theories X, Y, and Z in this blogpost and understand how are they different from each other. 

Theory X Y Z of Motivation – Management Notes

Theory X & Y

In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting two aspects of human behaviour at work.

Two different views of individuals (employees): one of which is negative, called Theory X and the other is positive, so-called as Theory Y.

According to McGregor, the perception of managers on the nature of individuals is based on various assumptions.

Assumptions of Theory X

  • An average employee intrinsically does not like work and tries to escape it whenever possible.
  • Since the employee does not want to work, he must be persuaded, compelled, or warned with punishment so as to achieve organizational goals. Close supervision is required on part of managers. The managers adopt a more dictatorial style.
  • Many employees rank job security on top, and they have little or no aspiration/ ambition.
  • Employees generally dislike responsibilities.
  • Employees resist change.
  • An average employee needs formal direction.

Assumptions of Theory Y

  • Employees can perceive their job as relaxing and normal. They exercise their physical and mental efforts in an inherent manner in their jobs.
  • Employees may not require only threat, external control and coercion to work, but they can use self-direction and self-control if they are dedicated and sincere to achieve the organizational objectives.
  • If the job is rewarding and satisfying, then it will result in employees’ loyalty and commitment to the organization.
  • An average employee can learn to admit and recognize the responsibility. In fact, he can even learn to obtain responsibility.
  • The employees have skills and capabilities. Their logical capabilities should be fully utilized. In other words, the creativity, resourcefulness and innovative potentiality of the employees can be utilized to solve organizational problems.

Differences between Theory X & Theory Y

  • Theory X presents a pessimistic view of employees’ nature and behaviour at work, while Theory Y presents an optimistic view of the employees’ nature and behaviour at work.
  • If correlate it with Maslow’s theory, we can say that Theory X is based on the assumption that the employees emphasize on the physiological needs and the safety needs; while Theory Y is based on the assumption that the social needs, esteem needs and the self-actualization needs dominate the employees.
  • McGregor views Theory Y to be more valid and reasonable than Theory X. Thus, he encouraged cordial team relations, responsible and stimulating jobs, and participation of all in the decision-making process.
  • Theory X encourages the use of tight control and supervision. It implies that employees are reluctant to organizational changes. Thus, it does not encourage innovation.
  • Theory Y implies that the managers should create and encourage a work environment which provides opportunities to employees to take initiative and self-direction. Employees should be given opportunities to contribute to organizational well-being. Theory Y encourages decentralization of authority, teamwork and participative decision making in an organization. Theory Y searches and discovers the ways in which an employee can make significant contributions to an organization. It harmonizes and matches employees’ needs and aspirations with organizational needs and aspirations.

Theory Z

Management professor William Ouchi argued that Western organizations could learn from their Japanese counterparts. William Ouchi’s Theory Z—a development beyond Theory X and Theory Y blended the best of Eastern and Western management practices.

  • Theory Z stresses the need to help workers become generalists, rather than specialists.
  • It views job rotations and continual training as a means of increasing 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.

Assumptions of Theory Z

  • Ouchi’s Theory Z makes certain assumptions about workers. One assumption is that they seek to build cooperative and intimate working relationships with their coworkers. In other words, employees have a strong desire for affiliation.
  • Another assumption 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 working environment in which things like family, culture, and traditions are considered to be just as important as the work itself.
  • Under Theory Z management, not only do workers have a sense of cohesion with their fellow workers, but 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 for 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:

  • Strong company philosophy and culture: The company philosophy and culture need to be understood and embodied by all employees, 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.
  • The consensus in decisions: Employees are 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. However, employees are still expected to have specialized career responsibilities.
  • Concern for the happiness and well-being of workers: The organization shows sincere concern for the health and happiness of its employees and their families. It takes measures and creates programs to help foster happiness and well-being.
  • Informal control with formalized measures: Employees are empowered to perform tasks the way they see fit, and management is quite hands-off. However, there should be formalized measures in place to assess work quality and performance.
  • Individual responsibility: The organization recognizes individual contributions but always within the context of the team as a whole.

Theory Z is not the last word on management, however, as it does have its limitations. It can be difficult for organizations and employees to make life-time 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 life-time employment may not be a good fit for companies operating in cultural, social, and economic environments where those work practices are not the norm.

Limitations of Theory Z

Theory Z suffers from the following limitations:

(i) Provision of lifetime employment to employees to develop a strong bond between organization and employees may fail to motivate employees with higher-level needs. It merely provides job security and may fail to develop loyalty among employees.

An employee may leave the organization when better employments are offered to him by some other enterprise. Moreover, the complete security of jobs may create lethargy among many employees. Employers also do not like to retain inefficient employees permanently.

(ii) Participation of employees in the decision-making process is very difficult. Managers may dislike participation as it may hurt their ego and freedom. Employees may be reluctant to participate due to fear of criticism and lack of motivation. Even if they sit along with management they may contribute little unless they understand the issues and take initiative. The involvement of all employees may also slow down the decision-making process.

(iii) Theory Z suggests an organization without any structure. But without structure, there may be chaos in the organization as nobody will know who is responsible for whom.

(iv) It may not be possible to develop a common culture in the organization because people differ in their attitudes, habits, languages, religions, customs, etc.

(v) Theory Z is based on Japanese management practices. These practices have been evolved from Japan’s unique culture. Therefore, the theory may not be applicable to different cultures.

Thus, Theory Z does not provide a complete solution to the motivational problems of all organizations operating under different types of environments. However, it is not merely a theory of motivation but a philosophy of managing.



RBI Grade B 2020 Online Course by Oliveboard 

Oliveboard has come up with RBI Grade B Online Cracker Course for RBI Grade B 2020 Exam. Oliveboard’s RBI Grade B Online Course 2020 will be your one-stop destination for all your preparation needs

What all the course offers you:

1. Course Details

RBI Grade B Cracker is designed to cover the complete syllabus for the 3 most important subjects: GA for Phase 1 and ESI + F&M for Phase 2 exam. Not just that, it also includes Mock Tests & Live Strategy Sessions for English, Quant & Reasoning for Phase 1. The course aims to complete your preparation in time for the release of the official notification.

1.1. Features:

RBI Grade B 2020 Online Course

Use Coupon Code ‘MY20’ to avail 20% discount on RBI Courses!

SEBI Grade A Online Course

For your Complete Phase 1 and Phase 2 Preparations

SEBI Grade A Cracker is a course designed to cover all the subjects under Phase I and Phase II exams.

  • For Paper 1 of the Phase I exam all essential subjects like Quantitative Aptitude, Reasoning, and English will be covered through video lectures.
  • For Paper 2 of both Phase 1 and Phase 2, the complete syllabus will be covered through video lessons, and notes.
  • The course will also have strategy sessions and past year paper discussions.
  • This course has been designed in such a way that it can be covered well before the examination.

Enroll for SEBI Grade A 2020 Online Course Here

1. Course Features


Leave a comment

Download 500+ Free Ebooks (Limited Offer)👉👉