This is Part 1 of a single original article looking back at the work of Robert Townsend and Douglas McGregor from the 1960’s. Part 2 can be found here.
This summer I read ‘Up the Organization: How to Stop the Corporation from Stifling People and Strangling Profits’, by Robert Townsend. It’s a classic about putting people first. Published in 1970, the book is a handbook against bureaucracy. Many of its lessons still ring true—maybe even more so than sixty years ago.
Townsend & McGregor
Townsend is not your average management writer. He was a progressive manager, known as the rebellious CEO who revived the almost-dead car rental business of Avis in the 60s. Some think of him as the management guru of that time.
Townsend was inspired by Douglas McGregor, professor at MIT, and author of the highly influential ‘The Human Side of Enterprise’ (1960).
Townsend was captivated by McGregor´s categorization of human nature and working environments. He said employees were motivated by either (1) authoritative direction and control, or (2) self-motivation and control. For these, he coined the terms Theory X and Theory Y.
Theory X & Theory Y
Townsend used McGregor’s Theory X to formulate 3 assumptions on which most organizations still operate:
People hate to work.
People have to be driven and threatened with punishment to get them to work toward organization objectives.
People like security, aren’t ambitious, want to be told what to do, and dislike responsibility.
He then characterized McGregor’s Theory Y with 3 opposing assumptions:
People don’t hate work. It’s as natural as rest or play.
People don’t have to be forced or threatened. If they commit themselves to mutual objectives, they’ll drive themselves more effectively than you.
But people will commit themselves only to the extent they can see ways of satisfying their ego and development needs.
Townsend challenged the ossified conventions of corporate management based on Theory X assumptions.
He writes: “There’s nothing fundamentally wrong with our country except that the leaders of all our major organizations are operating on the wrong assumptions. We’re in this mess because for the last two hundred years we’ve been using the Catholic Church and Caesar’s legions as our pattern for creating organizations.
There’s the whole problem. The result of our outmoded organizations is that we’re still acting as if people were uneducated peasants. Much of the work done today would be more suitable for young children or mental defectives.”
The result of our outmoded organizations is that we’re still acting as if people were uneducated peasants. Much of the work done today would be more suitable for young children or mental defectives.
Theory X diseases
This problem manifests itself through so-called Theory X diseases in most traditional organizations. Here’s some of the diseases Townsend said should be eliminated:
“Must not be prepared on high and cast as pearls before swine. They must be prepared by the operating divisions. Since a division must believe in the budget as its own plan for operations, management cannot juggle figures just because it likes to.”
Centralized strategic planning
“To hell with centralized strategic planning. If you don’t have a good leader, it’s all nothing; it’s just a bunch of papers flying around.”
“Without employment contracts, the company must keep the climate challenging and invigorating and the rewards commensurate with the performance. Contracts in my opinion usually lose the men they are designed to hold. And keep those who have no bases for staying.”
Excuses for failure
“One of the most important tasks of a manager is to eliminate his people’s excuses for failure. But if you’re a paper manager, hiding in your office, they may not tell you about the problems only you can solve. So get out and ask them if there’s anything you can do to help. Pretty soon they’re standing right out there in the open with nobody but themselves to blame.”
“Keep your expense accounts honest. Even if others are cheating openly… The typical response of a Theory X company to this game is to hire more people to write regulations and check the resulting paperwork. This costs more than the cheating, which, of cours, doesn’t stop – it just gets more inventive.
The real solutions: repeal the regulations, fire the checkers, and start to build a Theory Y company.”
Becoming an institution
“If you ever get a good Theory Y organization going, the problem becomes how to keep it that way.
One good plan is for the chief executive to insist that he must personally use every form in the company before it’s installed. Like: requisition forms (for pencils, pads, or air tickets), long-distance-telephone-call forms, or personnel department forms. And his secretary can’t fill in the form for him.”
“Insane for jobs that pay $150 a week or more. Judgment jobs are constantly changing in nature and the good people should be allowed to use their jobs and see how good they are.
At best, a job description freezes the job as the writer understood it at a particular instant in the past. At worst, they’re prepared by personnel people who can’t write and don’t understand the jobs. Then they’re not only expensive to prepare and regularly revise, but they’re important morale-sappers.”
“The effective ones are the one-man shows. The institutional ones are disastrous. They waste time, cost money, demoralize and distract your best people, and don’t solve problems. They are people who borrow your watch to tell you what time it is and then walk off with it.
Don’t use them under any circumstances. Not even to keep your stockholders and directors quiet. It isn’t worth it.”
“Fire the whole personnel department.
Unless your company is too large (in which case break it up into autonomous parts), have a one-person department (not a personnel department).”
“Yes, fire the whole purchasing department.
They cost ten dollars in zeal for every dollar they save through purchasing acumen. The company will benefit from having each department dealing in the free market outside instead of being victimized by internal socialism.”
“Fire the training department. These baby sitters in the corporate kindergartens can turn any job into busy seatwork.”
“Yes, fire the whole department, too. If you have an outside P.R. firm, fire them too.”
“Marketing departments – like planning departments, personnel departments, management development departments, advertising departments, and public relations departments – are usually camouflage designed to cover up for lazy or worn-out chief executives.”
“To convert a corporate liability into an asset overnight, fire the recruiters and put together a group of the most active, enthusiastic and successful people at work in your company, at all levels. Make them the campus recruiters. Their job: to be honest, not to sell or persuade.
The young prospects will spot the difference. Your man, who is on top of a job that he believes in, will be worth 40 personnel-department zombies who improvise answers and deal in images.
When their recruiting starts to pay off, make them into an ad hoc committee on how to turn the graduates loose on real jobs – to find out which ones weren’t turned into sullen slaves by 20 years of classroom dictatorship.”
“Generally speaking, the fewer the better. Both as to the number of meetings and the number of participants.
Some meetings should be long and leisurely. Some should be mercifully brief. A good way to handle the latter is to hold the meeting with everybody standing up. The meetees won’t believe you at first. They get very uncomfortable and can hardly wait to get the meeting over with.”
Reserved parking spaces
“If you’re so bloody important, you better be first one in the office. Besides, you’ll meet a nice class of people in the employees’ parking lot.”
Outside directorship and trusteeships for the chief executive is a no-no. “Give up all those non-jobs. You can’t even run your own company dummy.”
“It”s just a variation of the company-paid golf club, and the big office with three secretaries. Another line drawn through the company between the Brahmins and the untouchables.”
“Or any other time-consuming report imposed on the troops by ‘top’ management. It’s a joke because it consumes ten pounds of energy to produce each ounce of misunderstanding.”
“Anyone who makes over $150 a week should be allowed to set his own office hours. Many will conform to the traditional nine to five but it should be their choice. A few will set hours that reduce their effectiveness and cost them their jobs. Overall it’s worth it.
People have different metabolisms. If you work better from noon to midnight and your job makes those hours appropriate, you should be able to do it.”
“Just like office hours, vacations for people who make more than $150 a week should be left up to each individual. No responsible people will abuse the freedom. Your worst job will be running your best people out of town when they need some play time.”
“Draw them in pencil. Never formalize, print, and circulate them. Good organizations are living bodies that grow new muscles to meet challenges. A chart demoralizes people. Nobody thinks of himself as below other people.
They mislead you and everybody else into wasting time conning one another. It wouldn’t hurt to assume, in short, that every man – and woman – is a human being, not a rectangle.”
“Don’t bother. If they’re general, they’re useless. If they’re specific, they’re how-to manuals – expensive to prepare and revise.”
“Secrecy is totally bad. It defeats the crusade for justice, which doesn’t flourish in the dark.
Secrecy implies either: (1) What I’m doing is so horrible I don’t dare to tell you, or (2) I don’t trust you (any more).”
Radical Management Tips From The 60s: McGregor & Townsend
Unsurprisingly, Townsend was an avid advocate of Theory Y as how to win the competitive race. He not only talked about it, he was one of the first to put these ideas about putting people first into practice – at scale – when he was the head of Avis from 1962 to 1965.
In fact, when Townsend became CEO of Avis the company had not made a profit for 13 years. Three years later the company had grown internally (not by acquisitions) from $30 million sales to $75 million sales. And the company made successive annual profits of $1 million, $3 million, and $5 million.
Townsend writes: “If I had anything to do with this, I ascribe it all to my application of Theory Y.”