Chester Barnard

His work includes The Functions of Executive. He conceived organization as a Cooperative system

He is regarded as spiritual father of social system school.

Formal Organization as a Cooperative System

An organization comes into existence when people are able to communicate with each other, willing to cooperate with each other and have a common purpose. Thus an organization has 3 elements1. Communication 2. Willingness 3. Common Purpose

Informal Organization as a Natural System

Barnard defined informal organization as the aggregate of personal contacts and interactions and the associate groupings of people. He believed that informal organizations are natural systems and give rise to formal organizations (which are artificial systems). Both the organizations necessarily exist.

 Formal organizations according to Barnard are vitalized and conditioned by informal organization which perform 3 functions-

1. The communication of intangible facts, opinions, suggestions that cannot pass through formal channels.

2. Maintaining the Cohesiveness psychological integration).

(socio-

3. Maintenance of feeling of personal integrity, self respect, and independent choice.

Theory of Contribution-Satisfaction Equilibrium

According to Barnard survival of an

organization depends on maintenance of an equilibrium between the contributions and satisfaction of its participants.
The contributions are provided by participants to the organization and satisfaction is provided by organization to its participants.

 He pointed out that the individual participant would remain in organization only when his inducements outweighed his contributions. The organization survives so long as it has the capacity to offer effective inducements in sufficient quantities to maintain the equilibrium of the system.

 Thus Barnard rejected the classical economic man concept and broadly agreed with human relationists with regard to motivation of people in organization. He traced the sources of satisfaction to four specific inducements1. Material inducements such as money. 2. Personal non material opportunities for distinction.

 Desirable physical conditions of work. Ideal benefactions such as pride of workmanship & so on. However Barnard says that material rewards are ineffective beyond subsistence level. He also pointed out 4 types of general incentives-

 Associated attractiveness based on compatibility with associates. The adaptation of working conditions to habitual methods and attitudes. The opportunity for feeling of enlarged participation in course of events. The conditions for communicating with others based on personal comfort in social relations.

Acceptance Theory of Authority

According to this theory the basis of legitimacy of authority is the acceptance of it by the subordinate. Thus the superior can exercise authority only when it is accepted by the subordinate.

 Barnard defines authority as the character of a communication in formal organization by virtue of which it is accepted by contributor or member of organization. Barnard stated that a subordinate will accept a communication as authoritative only when the four conditions are simultaneously satisfied-

1. When he understands the communication.

2. When the communication is not inconsistent with purpose of the organization.

3. When the communication is compatible with his personal interest as a whole. 4. When he is able to mentally and physically comply with communication.

 The Acceptance Theory of Authority is facilitated by Zone of Indifference of individual participant of the organization. Orders will be accepted by subordinates so long as they fall within this zone. Hence the executives should issue only those orders which fall into this zone. The extent of zone of indifference is determined by contribution-satisfaction equilibrium.

Principles of Communication
Barnard suggested 7 principles of communication which are important in establishing and maintaining objective authority in an organization The channels of communication should be definite. Everyone in the organization must have a definite formal channel of communication.

 The line of communication must be as direct and short as possible. The competence of persons serving as communication centers should be adequate. The complete formal line of communication must usually be used.

 The line of communication must not be interrupted while organization is functioning. Every communication must be authenticated.

Decision Making
Barnard made a significant contribution to theory of decision making. He emphasized organizational decision making rather than individual decision making. The former is the result of deliberation, evaluation and thought while the latter is a result of subconscious automotive and responsive factors. Thus decisions made by organization are more logical and rational than personal decisions.

 Barnard felt that a decision maker should distinguish relevant facts affecting the fulfillment of organizational purpose from those which are irrelevant. This requires search of strategic factors by analyzing situations. These factors should be controlled or modified as they influence the decision making.

Functions of the executive

1. Establishing and maintaining the system of communication in an organization. 2. Securing essential service from subordinates. 3. Formulating and defining purposes and objective.