Achieving a clear understanding of human nature is an important aspect of management in the work place. In order for managers and workers to work together as an effective and productive unit, the workers must know how they fit into the overall scheme of things, and the managers must have a clear understanding of how they can maximise productivity by supporting their employees through the appropriate leadership style. It is also extremely important for managers to realistically evaluate the working environment, as well as the characteristics of the task, in order to decide how he or she deals with and directs employees.
Aside from knowing how human nature dictates a worker's actions, the manager must also be aware of the specific working environment, personalities, and motivational forces, which drive employees. This can then be used to decide which actions are necessary to motivate the work force, and to obtain maximum productivity
Theory X basically holds the belief that people do not like work and that some kind of direct pressure and control must be exerted to get them to work effectively. These people require a rigidly managed environment, usually requiring threats of disciplinary action as a primary source of motivation. It is also held that employees will only respond to monetary rewards as an incentive to perform above the level of that which is expected.
From a management point of view, autocratic (Theory X) managers like to retain most of their authority. They make decisions on their own and inform the workers, assuming that they will carry out the instructions. Autocratic managers are often called "authoritative" for this reason; they act as "authorities". This type of manager is highly task oriented, placing a great deal of concern towards getting the job done, with little concern for the worker's attitudes towards the manager's decision. This shows that autocratic managers lose ground in the work place, making way for leaders who share more authority and decision making with other members of the group (DuBrin).
A more popular view of the relationship found in the work place between managers and workers, is explained in the concepts of Theory Y. This theory assumes that people are creative and eager to work. Workers tend to desire more responsibility than Theory X workers, and have strong desires to participate in the decision making process. Theory Y workers are comfortable in a working environment which allows creativity and the opportunity to become personally involved in organisational planning.
Some assumptions about Theory Y workers are emphasised in one of the texts, namely that this type of worker is far more prevalent in the work place than are Theory X workers. For instance, it is pointed out that ingenuity, creativity, and imagination are increasingly present throughout the ranks of the working population. These people not only accept responsibility, but actively seek increased authority.
According to another of the authors studied for this project, in which the "participative" (Theory Y) leadership style is discussed, a participative leader shares decisions with the group. Also mentioned, are subtypes to this type of leader, namely the "Democratic" leader who allows the members of the working group to vote on decisions, and the "Consensual" leader who encourages group discussions and decisions which reflect the "consensus" of the group (DuBrin).
Another theory which has emerged, and deals with the way in which workers are perceived by managers, as well as how managers are perceived by workers, is William Ouchi's "Theory Z". Often referred to as the "Japanese" management style, Theory Z offers the notion of a hybrid management style which is a combination of a strict American management style (Theory A) and a strict Japanese management style (Theory J). This theory speaks of an organisational culture which mirrors the Japanese culture in which workers are more participative, and capable of performing many and varied tasks. Theory Z emphasises things such as job rotation, broadening of skills, generalisation versus specialisation, and the need for continuous training of workers.
Much like McGregor's theories, Ouchi's Theory Z makes certain assumptions about workers. Some of the assumptions about workers under this theory include the notion that workers tend to want to build co-operative and intimate working relationships with those that they work for and with, as well as the people that work for them. Also, Theory Z workers have a high need to be supported by the company, and highly value a working environment in which such things as family, cultures and traditions, and social institutions are regarded as equally important as the work itself. These types of workers have a very well developed sense of order, discipline, moral obligation to work hard, and a sense of cohesion with their fellow workers. Finally, Theory Z workers, it is assumed, can be trusted to do their jobs to their utmost ability, so long as management can be trusted to support them and look out for their wellbeing.
One of the most important tenets of this theory is that management must have a high degree of confidence in its workers in order for this type of participative management to work. While this theory assumes that workers will be participating in the decisions of the company to a great degree, one author is careful to point out that the employees must be very knowledgeable about the various issues of the company, as well as possessing the competence to make those decisions. This author is also careful to point out, however, that management sometimes has a tendency to underestimate the ability of the workers to effectively contribute to the decision making process (Bittel). But for this reason, Theory Z stresses the need for enabling the workers to become generalists, rather than specialists, and to increase their knowledge of the company and its processes through job rotations and continual training. In fact, promotions tend to be slower in this type of setting, as workers are given a much longer opportunity to receive training and more time to learn the intricacies of the company's operations. The desire, under this theory, is to develop a work force, which has more of a loyalty towards staying with the company for an entire career, and be more permanent than in other types of settings. It is expected that once an employee does rise to a position of high level management, they will know a great deal more about the company and how it operates, and will be able to use Theory Z management theories effectively on the newer employees (Luthans).
A mechanistic structure, also known as a bureaucratic structure, describes an organizational structure that is based on a formal, centralized network. The mechanistic structure is best suited for companies that operate in a stable and certain environment. In general, a mechanistic structure is easy to maintain and rarely needs to be changed when an organization operates in a stable environment.
In mechanistic organizations, authority reflects a well-defined hierarchy where top-level managers make the majority of the decisions. Because the environment is relatively stable, complex decision-making processes that involve multiple parties are not required. Subordinates are expected to follow the directions of management and not question their rationale. Communication, much like decisions, also flows through hierarchical routes, or from the top down.
Individualized job specialization is used to place employees into designated tasks. In mechanistic organizations, it is typical for each person to be assigned one task that is relatively stable and easy to control. As a result of the stability of tasks, there tends to be low integration between functional areas or departments in organizations that use a mechanistic structure. Likewise, this creates a situation where, for the most part, functional areas are not dependent on each other.
Think of a mechanistic structure as a well-oiled machine that, once functioning properly, continues to work efficiently with little need for maintenance. Simply envision an organization where management makes most of the decisions, information is communicated based on chain of command, tasks are highly specialized, departments stand alone and operate as their own entity, and change is, for the most part, uncommon. Examples of mechanistic structures include healthcare, universities, and governmental organizations.
Organic structures are used in organizations that face unstable and dynamic environments and need to quickly adapt to change. When an environment changes, an organization must be able to gather, process, and disseminate information very quickly. Failure to do so can directly affect an organization's ability to maintain its competitive advantage. Communication is lateral and rapid in these complex environments. To achieve this, organizations that use an organic structure will integrate functional areas and departments together so that information can flow seamlessly between them. This fast distribution of knowledge results in an increased ability to respond to changes in the internal and external environments.
Needs can change quickly in an organic organization, making it necessary to continually redefine tasks that allow each person to be responsible for multiple tasks at a time. Organic organizations also practice joint specialization, whereby employees work together and coordinate tasks of a larger project often in the form of teams. Having a broad understanding of how multiple tasks work together allows each individual to respond quickly to change.
Decision-making in organic structures is decentralized, allowing for more complex decision-making processes involving multiple parties at all levels of the organization. The uncertainty of organic organizations makes it virtually impossible and almost counterproductive to institute standardized processes and procedures.
Why Management Accountants are of the Opinion that Theory X can easily be applied in a Mechanistic Structure
Theory X is the style that predominated in business after the mechanistic system of scientific management had swept everything before it in the first few decades of the 20th century. Theory X is an authoritarian style where the emphasis is on “productivity, on the concept of a fair day's work, on the evils of feather-bedding and restriction of output, on rewards for performance … [it] reflects an underlying belief that management must counteract an inherent human tendency to avoid work”. Theory X assumes that individuals are base, work-shy and constantly in need of a good prod. It always has a ready-made excuse for failure—the innate limitations of all human resources. Theory Y, however, assumes that individuals go to work of their own accord, because work is the only way in which they have a chance of satisfying their (high-level) need for achievement and self-respect. People will work without prodding; it has been their fate since Adam and Eve were banished from the Garden of Eden.
There is a view that, as espoused by Joanne Woodward (Sorensen and Mininhan, 2011, p. 179), “mechanistic organizations (Theory X) were more appropriate for mass technology, while organic organizations (Theory Y) were more consistent with advanced technologies;“ in essence, organisational environments which require “increased task complexity and increased technological sophistication“ require organisational forms that are characterised or suitable for Theory Y.
Why Management Accountants are of the Opinion that Theory Y and Z can easily be applied in an Organic Structure
Some management accountants believe that employees are there because they are not lazy and they want to be fulfilled based off of their decisions and their contributions to the firm and themselves. However, they have recently mixed in a miniscule amount of Theory X, as they have created a more centralized organizational system in the past few years. They now mix both mechanistic and organic structure within the organization. At this point, it is highly recommended that managers does not switch totally to Theory X and rely on mechanistic structure, as retention of performance employees would decrease. Furthermore, development and malleability of the organization would also decrease, in the end, creating an environment that would decrease their competitive edge in the market-place.
Also, as Kochan et al. (2002) argued, leadership should be distributed at all levels in a transformational sense so as to understand the assumptions and values of employees and delicately align them with shared values and assumptions creating an organic organisation and hence utilising different theory y and Theory z styles.
Furthermore, organic organizations (Theory Y) were more consistent with advanced technologies;“ in essence, organisational environments which require “increased task complexity and increased technological sophistication“ require organisational forms that are characterised or suitable for Theory Y and Z. Yet this can be seen as a misnomer, there is evidence of Theory Y and Z being applied in different contexts. As The Economist (2008) explains, Proctor and Gamble set up production facilities for detergent along Theory Y and Z lines, run in a “non-hierarchical way with self-motivating teams“ and by the mid-1960s was more productive than any other plant. Yet, this does depend on organisational wide understanding and implementation of the principles of management. As Sorenen and Minihan (2011, p. 187) point out that it is “now clear that the success or failure of Theory Y and Z programs is highly dependent on the organizational culture within which they are implemented“. In effect, policies such as performance evaluation and management by objective can only thrive if the overall conditions are there to nurture them. Ideas have to permeate all levels of an organisation, not simply elements of it.
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