Chester Irving Barnard (1886–1961) was a telecommunications executive and author of Functions of the Executive, an influential 20th century management book, in which Barnard presented a theory of organization and the functions of executives in organizations.

He looked at organizations as systems of cooperation of human activity, and was worried about the fact that they are typically rather short-lived. Firms that last more than a century are rather few, and the only organization that can claim a substantial age is the Catholic Church.

Criteria For Organization Survival

According to Barnard, this happens because organizations do not meet the two criteria necessary for survival: effectiveness and efficiency. Effectiveness, is defined the usual way: as being able to accomplish the explicit goals. In contrast, his notion of organizational efficiency is substantially different from the conventional use of the word. He defines efficiency of an organization as the degree to which that organization is able to satisfy the motives of the individuals. If an organization satisfies the motives of its participants, and attains its explicit goals, cooperation among them will last.

Theory of Authority & Theory of Incentives

Two of his theories are particularly interesting: the theory of authority and the theory of incentives. Both are seen in the context of a communication system that should be based in some essential rules:

Essentials Rules

1. Everyone should know of the channels of communication
2. Everyone should have access to the formal channels of communication
3. Lines of communication should be as short and as direct as possible

Thus, what makes a communication authoritative rests on the subordinate rather than in the boss. Thus, he takes a perspective that was very unusual at that time, close to that of Mary Parker Follett, and is not that usual even today. One might say that managers should treat workers respectfully and competently to obtain authority.

In the theory of incentives, he sees two ways of convincing subordinates to cooperate:

1. Tangible incentives and
2. Persuasion.

He gives great importance to persuasion, much more than to economic incentives.

The book is complex, not light reading. His main objective, as indicated by the title, is to discuss the functions of the executive, but not from a merely intuitive point of view, but deriving them from a conception of cooperative systems based on previous concepts.

Barnard ends by summarizing the functions of the executive (the title of the book) as being:

1. The establishment and maintenance of the system of communication
2. The securing of the essential services from individuals
3. The formulation of the organizational purpose and objectives