The concept of Theory X and Theory Y was developed by social psychologist Douglas McGregor. It describes two contrasting sets of assumptions that managers make about their people:

Theory X – people dislike work, have little ambition, and are unwilling to take responsibility. Managers with this assumption motivate their people using a rigid "carrot and stick" approach, which rewards good performance and punishes poor performance.

Theory Y – people are self-motivated and enjoy the challenge of work. Managers with this assumption have a more collaborative relationship with their people, and motivate them by allowing them to work on their own initiative, giving them responsibility, and empowering them to make decisions.

Though your assumptions about what motivates your people will likely have the biggest impact on which of these two approaches you take, your choice can also be shaped by several other factors. These include your organizational structure (tiered or flat), the type of work that your people do (repetitive or challenging), and their skill level (amateur or experienced).