What is the difference between Mcgregor's "Theory X and Theory Y" and Maslow's hierarchy of needs? How does this particularly apply to management?

McGregor's "Theory X and Theory Y" is a simplistic, but useful account of two "theories" or visions of human behavior. On theory X, we are self-interested individuals who seek wealth and pleasure and care little for others; this is essentially the same as the assumptions of neoclassical rational agent models. On theory Y, we are creative individuals who seek to challenge and express ourselves, and care less for material rewards than we do for the thrill of achievement and the joy of a job well done. One can also see these as ends of a continuum, where people combine the two motivations to different degrees.

Some styles of management appeal to theory X, while others appeal to theory Y. McGregor argues that management will be more successful if it applies less theory X and more theory Y.

Maslow's hierarchy of needs is a much more empirically-validated account of human behavior which comes from cognitive psychology. It says that human beings have several different types of needs, and we must fulfill more basic needs before we can move on to more complex needs.

The most basic needs are physiological survival: We must eat, we must drink, we must breathe. Without these needs, we rapidly die.

The second level is safety: We need to be secure from danger, and we want our possessions and our relationships to be similarly secure.

The third level is belonging: We need to feel connected with other human beings, and form intimate relationships with others.

The fourth level is esteem: We want to feel valued and respected, we want to be recognized for our achievements.

The fifth and final level is self-actualization: We want to do something with our lives, create things, accomplish things, make a difference in the world.

The major limitation of Maslow's hierarchy lies in making it a strict hierarchy; in some cases human beings will sacrifice a more basic need for a higher-level need---the extreme example being a suicide bomber who sacrifices his survival for belonging and self-actualization. An improved model might account for this by giving each need a finite marginal utility, such that more basic needs are usually stronger and more important, but can be overriden in extreme cases by higher-level needs.

As far as applications to management, Maslow's hierarchy can effectively subsume McGregor's "Theory X and Theory Y": Workers at a very low standard of living are likely to mostly obey Theory X, because their very basic needs are not being met and they need money simply to survive. But workers at a higher standard of living are likely to mostly obey Theory Y, because with all their basic needs met they are interested in esteem and self-actualization. Thus, switching from monetary bonuses to public recognition for your achievements works well on university professors, but not on assembly-line workers.