Douglas McGregor, through his well-known “Theory X and Theory Y,” drew a distinction between the assumptions about human motivation which underlie these two approaches,

Philosophy 01 : Labor is viewed as a technical factor of production . They are treated as a commodity and they can be bought and sold. They are considered as cogs in the machine. They can be hired and fired at will.

Assumption: Employee must be controlled and supervised by management to attain company goals. Employees have limited potentiality.

Philosophy 02 : Labor has been viewed as a human factor with a lot of positive potentialities. People are assets – not cost. Investment in people is very rewarding. Management must develop and utilize the talent of people to achieve common goals.

Assumption: Employee must be treated with respect and dignity because they are the sources of competitive advantages.

For McGregor, Theory X and Theory Y are not opposite ends of the same continuum, but rather two different continua in themselves. In order to achieve the most efficient production, a combination of both theories may be appropriate. This approach is derived from Fred Fiedler's research over various leadership styles known as the contingency theory. This theory states that managers evaluate the workplace and choose their leadership style based upon both internal and external conditions presented. Managers who choose the Theory X approach have an authoritarian style of management. An organization with this style of management is made up of several levels of supervisors and managers who actively intervene and micromanage the employees. On the contrary, managers who choose the Theory Y approach have a hands-off style of management. An organization with this style of management encourages participation and values individuals' thoughts and goals. However, because there is no optimal way for a manager to choose between adopting either Theory X or Theory Y, it is likely that a manager will need to adopt both approaches depending on the evolving circumstances and levels of internal and external locus of control throughout the workplace.