barnard review ling

7/22/2019 Barnard Review Ling

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Book Review on: The Functions of the Executive

(Chester I. Barnard, 19!"

By: Ling Zhou

This book is one of the first to provide a comprehensive theory of cooperative behavior in

formal organizations. Before its publication, most of the work on management and

organization was fragmentary: to administer is to plan, organize, integrate and measure

etc. But some more basic uestions like why we need organizations, what are essential

for organizations, are left untouched. Barnard realizes that without first answering these

uestions and finding the nature of organizations, we are lack of a solid base on which to

discuss the more specific uestions.

!ne of the greatest contributions of Barnard is to point out the cooperation nature of

organizations. Barnard was the first to insist that organizations by their very nature are

cooperative systems and cannot fail to be so. "ooperation is the essence of organizations.

#n organization can survive only because of cooperation. #ctually, he emphasized

cooperation almost to the e$clusion of such things as conflict, imperative coordination

and financial inducements. This e$treme position is, of course, not so favorable in today%s

view and & will discuss these defects later. 'e should give Barnard the credit, however,

for seeing that an organization is a cooperative system, interpreted with the language of

contract theory, this is saying that in order for an organization to e$ist, there should be a

set of contracts that every member agrees.


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The problem is that Barnard seems to minimize the importance of individuals in order to

emphasize on the cooperation in organizations. (e defined the organizations as

)nonpersonal*. #nd he is forced to distinguish between the organizational aspects of

people and the personal aspects: an employee has dual personality+an organization

personality and an individual personality. But looking from the contract theory%s view,

we do not need )nonpersonality* to ensure cooperation. #ctually, every individual can

decide whether to cooperate enter the contract- after considering her own preferences.

"ooperation can e$ist as long as the contract is designed in such a way that it is to every

member%s best interest to cooperate.

Barnard also believes that organizations are superior to individuals. !rganizations are

rational, while individuals are not. This is an interesting point. &n modern economic

theory, it is often assumed that individuals are rational, while if we aggregate individuals

to a group, the group may not be rational. !f course, this is from the )aggregation* view

that there may not e$ist a representative rational individual for the group even when each

member of the group is rational. & think Barnard%s point is valid in that )bounded

rationality* may be a better description of individual behaviors than )rationality*. But

)organizations are rational* seems to be too simple a claim to be accepted. &f we regard

organizations as a set of contracts, it is very hard to define rational behaviors for the

organization.

#s necessary for cooperation, Barnard stresses on the e$istence of the organization

purpose and each member%s commitment to it. 'e have discussed e$tensively in the class


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that there do not e$ist an organization purpose in the strict sense. irst of all, it is hard, if

at all possible, to draw the border of an organization. /econd, even if we can, every

member in the organization has her own purposes even for each individual, it%s possible

that she has multiple purposes-: the employee wants to get a wage and build up working

e$periences0 the supplier wants to sell her product0 the customer wants good products1

&t%s not very meaningful to say which should be the organization purpose. &n fact, for an

organization to e$ist, every member%s purposes must be satisfied, otherwise she can

refuse to participate. &n the literature and business, when people talk about )organization

purpose*, they usually mean the shareholders% purpose which is to increase the stock

price. 2ote that to accomplish that, we need to satisfy other stakeholders% purposes as

well though those are not identified as )organization purpose*. #lso, every member needs

not to commit to that purpose in order to accomplish it.

Barnard redefines authority from his cooperation view of organization: authority comes

from the bottom. Before him, people usually took it for granted that the persons at the top

of an organization have a lot more authority than those at the bottom. Barnard is very

insightful to note that the subordinate makes a decision to grant authority to the person

above her. &f a subordinate does not accept the legitimacy of an order, the person giving it

has no authority. This point of view is essentially a contract theory view. Barnard also

speaks of the )fiction of the superior authority*. To e$plain the fact that organizations do

fire people, Barnard says that )firing* is essentially a decision of the employees. &f the

employee knows what behaviors would lead to being fired while she still chooses that

behavior, then she is actually choosing to be fired.


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Based on his organizational theory essentially cooperation-, Barnard discusses the

functions of the e$ecutive. (e believes that the e$ecutive functions serve to maintain a

system of cooperative effort. &t is not uite correct to say that the e$ecutive functions are

to manage the system of cooperative efforts because as a whole, it is managed by itself,

not by the e$ecutive, which is part of it. (e argues that control relates directly to the work

of the organization as a whole rather than to the work of e$ecutives as such. The fact that

practically the control is over e$ecutives for the most part is only due to the heavy

dependence of the cooperation success upon the functioning of the e$ecutive.

Barnard proposes three e$ecutive functions:

3- 4evelop and maintain a system of communication. This involves 5ointly a scheme

of organization organization charts, specifications of duties etc.- and e$ecutive

personnel the selection of personnel and the offering of incentives etc.-.

6- 7romote the securing of the personal services that constitute the materials of

organizations. The work divides into two main divisions: 3- the bringing of

persons into cooperative relationship with the organization0 6- the eliciting of the

services after such persons have been brought into that relationship.

8- ormulate and define the purposes, ob5ectives, ends, of the organizations.

& will address some interesting points for each of the three functions seuentially.


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irst, in the communication function, Barnard has mentioned both formal and informal

communication channels. But he does not address communication from the information

point of view. /ince he has put too much weight on cooperation, he does not give enough

attention to the decision right and information e$traction problem. Because everyone is

working for the same common organization purpose, there is no incentive to hide

information. Thus the e$ecutive can collect all information and make decision

accordingly. This is certainly not true given the agency theory.

/econd, in the securing of personal services function, Barnard plays down the importance

of economic incentives. #gain, the reason might be the e$istence of common

organization purpose+the workers do not need incentives to get to work. (e does

mention the balance between )inducements and contributions*, but this is against his

cooperative view+why would the employees have to make elaborate calculations of

inducements and contributions if the cru$ of the matter were cooperation in a common

purpose9 This contradiction can be easily solved by turning to the contract theory.

(ere, Barnard raises a very interesting uestion: how should the e$ecutives be

compensated9 (e argues that material incentives play an )incidental and superficial role*

in the case of the e$ecutive. Their salaries are usually high because they need the money

to meet the burdens of prestige. #lthough & do not agree with that, & do agree that it%s hard

to design a compensation scheme for e$ecutives. #s Barnard says, the most important

single contribution reuired of the e$ecutive is loyalty. &nterpreted in the agency theory

language, the essential problem of compensation scheme design is to align the interests of


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the e$ecutives and the organization. 'hen and probably only when their interests are

aligned, will the e$ecutives be )loyal* to the organization.

Third, in the organization purpose formation function, Barnard deliberates on the

importance of moral purpose and indoctrination. /ince the organization purpose has to be

common, it must be moral. #nd for people to work toward this common goal, the

e$ecutive must use propaganda and indoctrination to solve the possible conflicts. Barnard

admits that sometimes the ends of the person and the ends of the organization are not the

same. (e could have proceeded from here and arrived at conclusions much more similar

to those of contract theory. &nstead, he indicates that such opposition is most likely to

occur among the lowerranking participants in an organization and can be removed by

educating the workers. #ctually, he is so obsessed with the idea of common purposes that

he claims that when they do not e$ist, the e$ecutive need to manufacture them in order to

maintain the cooperative system. #s we have said before, this is not true: an organization

can e$ist when the members have different purposes.

Barnard%s book is enormously influential and remarkable. &t contains the seeds of three

distinct trends of organizational theory. !ne is the institutional school as represented by

7hilip /elznick0 another is the decisionmaking school as represented by (erbert /imon0

the third is the human relations school. These schools will be covered in my book review

on "harles 7errow%s Complex Organizations. & believe Barnard%s book will remain a

classic for organization theory.


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barnard review ling

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