There are few ideas about management and business that both ‘cut through’ to wider audiences and hang around for decades. One such is probably contained in Douglas McGregor’s 1960 book ‘The Human Side of Enterprise’.
You might not know McGregor’s name, or the title of the book, or when it was published. But if I say Theory X and Theory Y, I’m guessing a lot more of you will have come across McGregor’s central idea?
Very simply McGregor argued that the theory of human nature used in most business and management theory and practice was what we’d now call ‘rational utility maximisation’. People go to work to earn money and for no other reason.
The best way to motivate them to work productively is a combination of carrots (monetary rewards) and sticks (deprivation of those rewards, of even of their employment). This involves the rigid application of hierarchical authority. This he called “Theory X”.
His alternative was “Theory Y”. This is a very different theory of human nature - that working comes as naturally to humans as play or rest. That we enjoy working with others and get satisfaction from productive activity.
Humans can exercise self-control and self-direction. Commitment to collective goals, taking responsibility, exercising knowledge, skill and craft are pleasurable things to do.
There’s a lot more to McGregors thought than that brief summary, but you get the drift?
Standing on the Shoulders – Scanlon and Mond
Like any new theory McGregor’s ideas did not spring out of thin air in 1960. The roots of what is sometimes called the ‘human relations’ school of organisation and management stretch back into at least the 1920s and 30s and beyond.
Just to illustrate, here are a couple of examples.
Joseph Scanlon, a steelworker and local union president, pioneered an approach to active management-labour co-operation in the USA in the 1930s. The involved actively involving workers in decision-making and improving production processes. Although initially this was just to help save firms and jobs, it later evolved to include profit sharing and group-based rewards systems.
These innovations later became famous as ‘Scanlon Plans’ and Scanlon himself went to work with McGregor at MIT as a lecturer. He played a significant role in helping to improve war production during WWII.
In the aftermath of the General Strike in Britain in 1926, Alfred Mond, a Liberal politician and industrialist, led an attempt to create better worker-management relations based on co-operative principles not dissimilar to Scanlon’s. It was a short-lived attempt at a top-down reform involving the big employers and the Trades Union Congress.
But ‘Mondism’, as it became known, survived in a few businesses. One of them was where I first started work in 1969 – ICI Pharmaceuticals Research at Alderley Park in Cheshire.
As a lowly trainee lab tech I was amazed to find we’d be called together every three months or so – literally everyone who worked in or supported a specific research project. The project leaders would explain what it was about, how far they’d got and ask for questions and suggestions.
These practical innovations by Scanlon and Mond before, during and after WWII were paralleled by developments in social-psychology – most famously Maslow’s “hierarchy of needs” developed in the post-WWII period, along with many other ideas from humanistic social psychology.
These ideas and practical experiences went on to inform the huge growth in ‘organisational development’ studies and techniques from the 1950s onwards.
The dominant paradigm still neglects the human side of productivity. For example, Jeremy Hunt, the current Chancellor, said in May 2024 that the "reason our productivity is lower in the UK, is not because British people don't work as hard, it's because we haven't been investing in as much machinery as other countries".
But what the whole human relations movement demonstrates is that it is not just ‘investment in machinery’ that determines levels of productivity, but how we humans are organised and equipped to deliver. The ‘human side of productivity’ matters too. Using the same technology, different ways of organising can make a big difference to the quality and quantity of outputs.
Buurtzorg
Jump forward to the present and we find many examples in the private, public and third sectors of where different ways of equipping and organising people can make a huge difference in productivity levels.
The most well-known example of a very different approach to providing public services is the Dutch neighbourhood nursing system known as ‘Buurtzorg’. It involves small self-managed teams of nurses – usually 10-12 – but there are around 750 such teams.
And it really does mean self-managed – there is no hierarchy above them – just some mentors available to help if necessary and a very small HQ (about 30 people) who help with finance, contracts, IT, etc.
Buurtzorg is much than just self-managed teams however. It also involves a lot of co-production with clients and social production of support from family, friends and neighbourhoods.
And Buurtzorg works. It’s been estimated to save the Dutch social care system hundreds of millions of Euros, provided better care, reduced hospital admissions, and so on.
This is just one example of where attending to the human side of productivity really works – and does not necessarily involve large capital investment (although in other areas that may be needed).
There are many other examples and issues that will be explored in future articles in this series.
We’ll look at:
- ‘Human-scale’ organisations (using the famous ‘Dunbar’s Number')
- Why it’s better to have human-driven technology rather than technology-driven humans
- Why ‘bottom-up’, small-scale, innovation is often a better and quicker way to productivity improvements than grand top-down schemes
- Why we need to break out of organisational silos and think more radically about coproduction and social production to improve public services productivity
In short, we need to think beyond the sterile idea that investment and IT – especially AI – will save us all. It won’t, but unleashing the dynamism of humans just might.
Think back only a couple of years to what was achieved during the pandemic by ingenious teams, volunteers, and organic bottom-up organisation. A new government needs to learn the lesson that the human side of organisation and productivity matters too.