Adam Smith (1723 – 1790) identified the division of labour and specialization as the two key means to achieve a larger return on production. Division of labour  is an economic concept which states that dividing the production process into different stages enables workers to focus on specific tasks. If workers concentrate on one small aspect of production, this increases overall efficiency. When employees concentrate on a specific task, with time they improve the necessary skill which is useful for a specific task and they perform better and faster which saves time and money, and enables increased production levels.

Smith found that factories in which employees specialized in only one or a few tasks had greater performance. In his famous example of a Pin Factory which he visited, each employee performed all 18 pin-making tasks. In fact, Smith found that 10 employees specializing in a particular task could, make 48 000 pins a day, whereas those employees who performed all the tasks could make only a few thousand at most. Smith reasoned that this difference in performance occurred because the employees who specialized became much more skilled at their specific tasks, and, as a group, were thus able to produce a product faster than the group of employees in which everyone had to perform many tasks. Smith concluded that increasing the level of job specialization, the process by which a division of labour occurs as different employees specialize in different tasks over time, increases efficiency and leads to higher organizational performance.

Fredrick Taylor (1856 – 1923) aimed at continuously increasing the efficiency of the production process. He divided labour into an elementary division of labour in which every worker was allocated their own tasks that had to be repeated constantly. Everyone was assigned their own program that consisted of successive actions and this was aimed at worker’s levels of knowledge and skills. This brought about considerable time savings and because of this routine, productivity increased rapidly. Taylor felt it was important to select the right person for the right job and to leave the planning and thinking to the specialists.

Division of labor allows economies of scale (ES). Economies of scale are the reduction in per unit cost of production as the volume of production increases. In other words, the cost per unit of production decreases as volume of product increases. Costs per unit can decrease as the volume of production increases for different reasons. ES helps at increasing cost advantages that a business obtains due to more units of output.

Division of labour allows specialization. Firms producing at a large scale employ a large number of workers. This allows the firms to practice specialization by splitting jobs into smaller tasks. These individual tasks are assigned to separate workers. In this way workers spend all their work time on the part they know best and it also allows them to perfect their skills. Overall result of this is that an average unit is produced at lower cost. Specialization also works at management level. For example in an organization you will find Marketing team, Human Resource Management team, Finance team, Operation team, Risk Management Team, Procuring team, Information Technology team etc, etc. On a small scale, a Civil Contractor while construction a house divides the work into civil engineer, supervisor, masons, and site labour, welder, plumber, electrician and interior designer.

Henry Fayol (1841 – 1925) recognized that division of labour leads to specialization and that specialization is considered as part of “the natural order” comparing it to the organs of the body. For example the GI tract (Gastro Intestinal which is responsible for digestion in body) are the mouth, esophagus, stomach, small intestine, large intestine, the rectum and anus. Food enters the mouth and passes to the anus through the hollow organs of the GI tract. The liver, pancreas, and gallbladder are the solid organs of the digestive system. Each of the organs listed herein is responsible for diction of food once it enters our body.

The object of division of work is to produce more and better work with the same effort, Fayol described. Fayol also said that division of labor helps in learning. As business firms grow, they learn from both experience and research. Firms gradually learn-by-doing and become more and more efficient. Firms also learn from research which results in better processes and new formulas pushing their production cost per unit even lower.

This very objective has not been altered in today’s modern business world. In a sense this principle is the fundamental feature of modern economy, allowing for the largest increases of productivity. Peter F. Drucker (1909 – 2005) said that the 20th century has seen a rate of 3% productivity increase per year, hence productivity rose 50 fold since the time of Frederick Taylor, who acted as a catalyst in the development of division of work.

An example of this fact can come from early industrialization, namely the Ford motor company, where Taylor’s system of a scientific approach was applied. Fredrick Taylor was interested in skill development by means of standardization and functional specialization. One worker would assemble the dashboard, another would assemble the wheels, and yet another would paint the exterior. The effects of the division of labour are well known and lead to Ford becoming not just the predominant car maker but also the inventor of the conveyer-belt production system- revolutionizing many industries.

However, one could argue that extremes of division of work could lead to undesired effects. Division of labour can ultimately reduce productivity and increase costs to produce units. Several reasons as causes for reduction in productivity can be thought of. For example, productivity can suffer when workers become bored with the constant repetition of a task. Additionally, productivity can be affected when workers lose pride in their work because they are not producing an entire product they can identify as their own work.

On the flipside, Douglas M. McGregor (1906 – 1964) cautioned that people would get bored doing the same job again and again. Repetition of same work bores people and kills enthusiasm. Fayol probably had recognized this fact earlier in his work. He stated that the division of work has its limits which experience and a sense of proportion teach us may not be exceeded. In more recent years management thinkers have recognized and addressed this issue more intensely.

Karl Marx (1818 -1883) warned that repetition of work leads to process of disaffection. In his view, workers would become more and more specialized, and work would become more and more repetitive, until eventually the workers would be completely estranged from the process of production. While it can have benefits on productivity, the specialization of labour can lead to workers with low overall skills and low enthusiasm.

Leo Tolstoy said that division of labor is a justification for sloth (laziness).

Theory X and Theory Y are theories of human motivation created and developed by social psychologist Douglas McGregor at the MIT Sloan School of Management in the 1960s that have been used in human resource management, organization behavior, organizational communication and organizational development. They describe two contrasting thinking of workforce motivation.

Theory X and Theory Y represent the perceptions managers hold about their employees. It is not about their general behavior outside the work place, it pertains on their job, while working in the organization.

It is contrasting because many people get great satisfaction from their work and take great pride in it while others may view it as a burden, and simply work to survive.

This question of motivation has been studied by management theorists and social psychologists for decades, in attempts to identify successful approaches to management. Every manager’s management style is strongly influenced by his/her beliefs and assumptions. Every manager accordingly treats and motivates members of his team. If the manager feels that his team members dislike work, he will be inclined towards an authoritarian style of management. On the other hand, if a manager assumes that employees take pride in doing a good job, he will tend to adopt a more participative style.

The ‘Theory X’ management assumes employees are inherently lazy and will avoid work if they can and that they inherently dislike work. As a result of this, management believes that workers need to be closely supervised and all-inclusive systems of controls be developed. It requires a hierarchical structure with narrow span of control at each and every level. According to this theory, employees will show little ambition without a tempting incentive program and will avoid responsibility whenever they can.

Theory X managers rely heavily on threat and intimidation to gain their employees’ fulfillment. Theory X managers present an authoritarian style in which emphasis is laid on productivity or output. These managers expect a fair day’s work from their subordinates. It also reflects that such managers behave as watchdogs and they constantly suspect that people want to avoid work. 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. This theory is based on mistrust in employees and it styles around highly restrictive supervision, and a disciplinary atmosphere. It gives rise to autocratic leadership. Such leaders provide clear expectations for what needs to be done, when it should be done, and how it should be done. There is also a clear division between the leader and the followers. These managers tend to micro-manage and are extremely task oriented.

In a small business environment, the owners often implement Theory X form of leadership when the operation is relatively small and he has a limited number of employees. While an authoritarian style is considered more traditional, and in some instances, outdated form of leadership, it still offers a variety of benefits. An authoritarian style of leadership can be effective in work environments where decisions need to be made quickly. The sole responsibility rests with the leader, and he/she makes the decision without the need to consult others. If a business faces constant change, the autocratic leader is able to respond in a way that prevents the business from falling behind the competition and keeps up with customer demand. In a state of emergency when a riot breaks, or major accidents take place or in a war the army and police chiefs are required to take on the spot decisions and during such times autocratic decision works.

Theory Y is a participative style of management which assumes that people will exercise self-direction and self-control in achieving the organizational goals and objectives. It assumes that employees are committed to organization’s objectives. It is management’s main task in such a system to mould the employees and maximize their commitment.

Theory Y leaders are participative leaders – also known as democratic leaders; it is believed to be the most effective leadership style in today’s business world. Democratic leaders offer guidance to group members, they give reasonable autonomy to their subordinates and allow them to participate in the group. They appreciate inputs and ideas from their group members.   Theory Y leaders encourage group members to participate, but retain the final say over the decision-making process. Group members feel engaged in the process and are more motivated and creative. This is a more dignified and enlightened management style.

Please understand that theory Y though you feel is liberated, is difficult to practice when goals and objectives are blurred in an organization. It challenges the groups and managers to innovate, to discover new ways of organizing and directing human effort. A perfect organization is like an illusion. Douglas McGregor urged companies to adopt Theory Y. He believed that motivated individuals give far more productivity. It brings the highest levels of achievements. Theory X merely satisfies worker’s basic physical needs and not their social, self esteem needs and self actualization needs. “Man is a wanting animal,” wrote McGregor, “as soon as one of his needs is satisfied another appears in its place.”

Theory X and Theory Y relates to Maslow’s hierarchy of needs in how human behavior and motivation are main priorities in the workplace in order to maximize output. In Theory Y, the organization is trying to create the most symbiotic relationship between the managers and workers, which relates to Maslow’s needs for self-actualization and Esteem. For self-actualization, the manager promotes the optimum workplace culture through ethics, morality, creativity, spontaneity, problem solving, without prejudice and by accepting facts. We must realize that prejudice exists in others, even as we try to minimize it in ourselves. A Theory Y manager tries to promote each team member’s self-esteem, confidence, achievement, happiness, respect of others, and respect by others.

Do you know Maslow was indeed greatly influenced by McGregor? So much so that he tried to introduce Theory Y into a Californian electronics business, but found that the idea in its intense form did not work well. Maslow thus concluded that however independent and mature people are; they need some form of rules and regulation for adherence around them and some direction from superiors. Maslow also criticised Theory Y for its callousness – as it hardly works well on the weak and incapable employees who are not competent enough of a high level of self-motivation.

Whereas, Robert Towsend an American business executive and author who is noted for transforming Avis into a rental car giant wrote in his comic classic “Up the Organization”, powerfully in support of Theory Y that people don’t hate work. It’s as natural as rest or play. They don’t have to be forced or threatened. If they commit themselves to mutual objectives, they’ll drive themselves more effectively than you can drive them. But they’ll commit themselves only to the extent they can see ways of satisfying their ego and development needs.

Many studies conducted on Theory X Theory Y indicate that there is no such one best organizational approach; rather, the best approach depends on the nature of the work and the organizational structure. Enterprises with highly predictable tasks perform better with by the highly formal procedures and management hierarchies of the classical approach. On the other hand, organizations with highly uncertain tasks that require more extensive problem solving, are less formalized and they emphasize on employees’ self-control and participation in decision making which works effectively. In quintessence, according to these newer studies, managers must be flexible in delegating and controlling employees.

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