Radical Management Tips From The 60s: McGregor & Townsend

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.

Theory X

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."

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:

Budgets

"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."

Employment contracts

"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."

Expense accounts

"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."

Job descriptions

"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."

Management consultants

"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."

Personnel department

"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)."

Purchasing 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."

Training department

"Fire the training department. These baby sitters in the corporate kindergartens can turn any job into busy seatwork."

P.R. department

"Yes, fire the whole department, too. If you have an outside P.R. firm, fire them too."

Marketing department

"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."

Recruiters

"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."

Meetings

"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

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."

Company plane

"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."

Monthly reports

"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."

Office hours

"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."

Vacation policy

"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."

Organization charts

"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."

Policy manuals

"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

"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)."

Theory Y

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."

Theory Y medicines

These are a few of the Theory Y things that companies should do, according to Townsend, to put people first:

Objectives

"One of the important functions of a leader is to make the organization concentrate on its objectives. In the case of Avis, it took us six months to define one objective - which turned out to be: 'We want to become the fastest-growing company with the highest profit margins in the business of renting and leasing vehicles without drivers.'

Most of all, work on simplifying and distilling your statement of objectives. Our objective was simple enough so that we didn't have to write it down. We could put it in every speech and talk about it wherever we went.

Once these objectives are agreed on, the leader must be merciless on himself and on his people. If an idea that pops into his head or out of their mouths is outside the objective of the company, he kills it without a trial."

Conflicts

"Conflicts within the organization are a sign of a healthy organization - up to a point. A good manager doesn't try to eliminate conflict; he tries to keep it from wasting the energies of his people."

Delegate decisions

"All decisions should be made as low as possible in the organization. There are two kinds of decisions: those that are expensive to change and those that are not.

A decision to build the Edsel or Mustang (or locate your new factory in Orlando or Yakima) shouldn't be made hastily; nor without plenty of inputs from operating people and specialists.

But the common or garden-variety decision - like when to have the cafeteria open for lunch or what brand of pencil to buy - should be made fast."

Delegate authority

"Many give lip service, but few delegate authority in important matters. And that means all they delegate is dog-work. A real leader does as much dog-work for his people as he can: he can do it, or see a way to do without it, ten times as fast. And he delegates as many important matters as he can because that creates a climate in which people grow."

Fairness

"Fairness, justice, or whatever you call it - it's essential and most companies don't have it. Everybody must be judged on his performance, not on his looks or his manners or his personality or who he knows or is related to.

Rewarding outstanding performance is important. Much more neglected is the equally important need to make sure that underachievers don't get rewarded. This is more painful, so doesn't get done very often."

Rapid firing

"Firing people is unpleasant but it really has to be done occasionally. It's a neglected art in most organizations. If a guy isn't producing after a year (two at most), admit that you were wrong about him. Keeping him is unfair to other people who must make up for his failure and untangle his mess. And it's unfair to him. He might do well in another company or industry."

True leadership

"True leadership must be for the benefit of the followers, not the enrichment of the leaders. In combat, officers eat last.

Most people in big companies today are administered, not led. They are treated as personnel, not people.

A good leader sees the best in his people, not the worst; he is not a scapegoat hunter. He makes things seem simple. He is persistent. He's fair and has a sense of humor, and he has humility.

I suppose the best way to tell a leader is, if you find a place where people are coming to work enthusiastically and they are excited to come to work and would rather work there than anywhere else, you can bet you have got a leader."

Admit mistakes

"Admit your own mistakes openly, maybe even joyfully.

Encourage your associates to do likewise by commiserating with them. Never castigate. Babies learn to walk by falling down. If you beat a baby every time he falls down, he'll never care much for walking."

Promises

"Keep them. If asked when you can deliver something, ask for time to think. Build in a margin of safety. Name a date. Then deliver it earlier than you promised.

The world is divided into two classes of people: the few people who make good on their promises (even if they don't promise as much), and the many who don't. Get in column A and stay there."

Stockholders

"Turn the management and as many employees as possible into stockholders - and with enough stock so they think of themselves as owners.

More of your people must be owners. Your lawyers and investment bankers will try to talk you out of this sensible impulse, but the deeper you can spread ownership the better."

Anti-Theory X vaccine

McGregor's philosophies of Theory X & Theory Y are as evident today as they were in the 60s. McGregor thought the management world would have an anti-Theory X vaccine by 1980. Obviously, that isn't really the case.

The struggle to make the world of work more fun is still going on. We need modern day McGregors and Townsends. We need more people advocating that we run companies as if people were human.

Are you inspired? Do you now want to get to the other side as well? Then Townsend has one simple piece of advice for you:

"Get to know your people. What they do well, what they enjoy doing, what their weaknesses and strengths are, and what they want and need to get from their jobs. And then try to create an organization around your people, not jam your people into those organization-chart rectangles.

You can't motivate people. That door is locked from the inside. You can create a climate in which most of your people will motivate themselves to help the company reach its objectives.

Like it or not, the only practical act is to adopt Theory Y assumptions and get going."