Final answer:
The theory proposed by Douglas McGregor is called Theory Y. It states that employees view work as being as natural as rest or play, and they seek inner satisfaction and fulfillment from their work. In Theory Y workplaces, employees are able to participate in setting their personal and work goals.
Step-by-step explanation:
The theory proposed by Douglas McGregor, where managers assume that employees view work as being as natural as rest or play, is called Theory Y.
In Theory Y, managers believe that most people seek inner satisfaction and fulfillment from their work. Employees function better under leadership that allows them to participate in setting their personal and work goals. In such a workplace, employees are able to provide input on matters of efficiency and safety.
For example, Toyota production lines have a Theory Y approach, allowing any employee to stop the entire line if a defect or issue appears, so that it can be fixed and its cause remedied.