The theory of organizational humanism emphasizes the use of intrinsic motivation to grow personnel qualifications, thereby increasing the economic efficiency of an organization. This theory stresses the need to formulate management goals, which incorporate humanistic values. For instance, worker's personal growth and well-being are taken into account to achieve the organization's optimal productivity. In addition, the work routines developed by organizations should provide workers with an opportunity to participate in decision making. Several human relation theorists contributed to development of the theory by laying down its values, impacts and limitations.
Organizational humanism theorists base their arguments on the outcome of the Hawthorne experiments carried out in the Western Electric Company in 1930, which emphasized the need for organizations to adopt humane management skills, encourage group and individual interactions at workplaces and build social relationships. Organizational humanism, which began in the 1960s and 1970s, called for the integration of the employees' needs with those of the organization, as opposed to exploitation of workers. Most of its concepts are drawn from research by other organizational humanism theorists, such as Abraham Maslow, McGregor, Argyris, David McClelland, Rensis Likert, Robert Golombiewski and Edgar Schein. Organizational humanists believe that by integrating employee morality and ethics with the organization's needs, it could lead to formulation of socially-conscious policies, thus preventing psychological damage in organizations.
According to Argyris, it is necessary for organizations to adhere to humanistic values, since this leads to the development of authentic relations among workers; this leads to an increase in individual competence, intergroup flexibility and cooperation, which increases the organization's effectiveness. Working environments with humanistic values may not only make workplaces exciting and challenging, but also help the workers and the organization reach full potentials. Apart from rewards and penalties, and direction and control, organizations may effectively influence human relations through internal commitment, authentic relationships and psychological success.
According to this theory, the objectives of the organization are designed by inputs from both management and workers, leading to an increase in the subordinates’ commitment towards achieving these laid-down objectives. The leadership may adopt participative democratic styles by increasing the communication flow from the subordinates to the management. Conversely, the organization control processes may be derived from the self-control of the subordinates, and not from human resource.
The humanism theory attributes the increase of employees’ productivity to alignment of work with human motivations and needs. Managers still engage in manipulation as they measure the success of employees by their productivity at work, instead of caring about employees’ satisfaction and well-being. Management also bases job rotation, promotion and rewards on the employees' productivity and economic benefits to the organization, rather than on the humanistic values developed by the employees.