The Functions of the Executive

The Functions of the Executive is a book by Chester I. Barnard (1886–1961) that presents a “theory of cooperation and organization” and “a study of the functions and of the methods of operation of executives in formal organizations.”^[1]:xi-xii It was originally published in 1938; a Thirtieth Anniversary edition, published in 1968, is still in print.^[2][3]

The book is notable for its focus on how organizations actually operate, instead of previous approaches to organizations that emphasized “prescriptive principles.”^[4]:277 It has been praised for being one of the first books to consider leadership from a social and psychological viewpoint.^[5]:67 An article in Public Administration Review reported that an informal advisory panel voted it one of the most influential books in public administration published between 1940 and 1990.^[6] It was voted the second most influential managementbook of the 20th century in a poll of the Fellows of the Academy of Management, behind The Principles of Scientific Management by Frederick Winslow Taylor.^[7]

Background

Barnard attended Harvard University between 1906 and 1909 where he majored in economics; however, he did not obtain a degree.^[8]:7–8 After rising through the ranks at AT&T Corporation, Barnard became president of New Jersey Bell between 1927 and 1948.^[9]:56 At New Jersey Bell, Barnard enjoyed “long hours of self-absorbed reflection and study.”^[10]:171

In 1936, Barnard gave a lecture at Princeton University entitled “Mind in Everyday Affairs.”^[8]:19,92 In the lecture, Barnard described the differences between “logical” and “non-logical” (i.e., “intuitional”) mental processes.^[1]:302 He encouraged the use of non-logical processes “for many conditions and purposes.”^[1]:321

Barnard had many contacts with Harvard officials, for example in relation to fundraising activities.^[11]:165 He and Lawrence Joseph Henderson were friends, and Henderson was a friend of Abbott Lawrence Lowell, who had been president of Harvard and founder of the Lowell Institute.^[8]:16–18 Henderson suggested that Lowell invite Barnard to lecture at the Institute, and having read “Mind in Everyday Affairs” and another lecture by Barnard, Lowell did so.^[8]:18–21 Barnard gave eight extemporaneous talks at the Lowell Institute in 1937 on the topic of “functions of the executive,” and on the invitation of Dumas Malone (the director of Harvard University Press who met Barnard through Arthur W. Page), he revised the material from the talks to create the book.^{[1]:vii[9]:14–15}

Barnard’s philosophy and thought processes in writing the book were characterized by humanism, empiricism, speculative philosophy (the interpretation of experience in a coherent framework), and analysis of the dichotomy of individualism and collectivism.^[8]:46–59 As cited in the book, his intellectual influences included Arthur F. Bentley, Vilfredo Pareto, Lawrence Joseph Henderson, Talcott Parsons, W. H. R. Rivers, Frederic Bartlett, Elton Mayo, Fritz Roethlisberger, Mary Parker Follett, James Harbord, Alfred North Whitehead, and John R. Commons.^{[1]:47,51,68,90,121,122,164,195,202} His approach diverged from the “mechanistic conceptions” of Frederick Winslow Taylor and Henri Fayol.^[5]:77

Introduction to the Thirtieth Anniversary Edition

In the 1968 edition, the Introduction by Kenneth R. Andrews evaluates the book and summarizes its place in the management literature. Andrews concludes that it is “the most thought-provoking book on organization and management ever written by a practicing executive.”^[2]:xxi He contrasts Functions of the Executive with the “classical” approaches to organizations found in books such as Principles of Management by Harold Koontz and Cyril J. O’Donnell.^[2]:xiv,xxii

Preface

Barnard gives an overview of his arguments in his Preface:^[1]:xi-xii

Formally this work is divided into four parts, but in a sense it consists of two short treatises. One is an exposition of a theory of cooperation and organization and constitutes the first half of the book. The second is a study of the functions and of the methods of operation of executives in formal organizations.

Part I

Part I is “Preliminary Considerations Concerning Cooperative Systems.”

In Chapter I, “Introduction” (pages 3–7), Barnard notes that “formal organization is that kind of cooperation among men that is conscious, deliberate, purposeful,” and that “successful cooperation in or by formal organizations is the abnormal, not the normal, condition.”^{[1]:4–5[12]:457[13]:3} An individual may belong to many formal organizations, some of which may be short-lived.

Chapter II, “The Individual and Organization” (pages 8–15), states that individuals can be characterized in many ways (e.g., physical, social, psychological), but that for the purposes of discussion the book is concerned with the functional relationships among individuals in organizations. Barnard distinguishes between “effective” and “efficient” actions:

When a specific desired end is attained we shall say that the action is “effective.” When the unsought consequences of the action are more important than the attainment of the desired end and are dissatisfactory, effective action, we shall say, is “inefficient.” When the unsought consequences are unimportant or trivial, the action is “efficient.”^{[1]:19[14]:13}

The remaining chapters in Part I elaborate on the relationships among people in a “cooperative system”:

• Chapter III: “Physical and Biological Limitations in Cooperative Systems” (pages 22–37)
• Chapter IV: “Psychological and Social Factors in Systems of Cooperation” (pages 38–45)
• Chapter V: “The Principles of Cooperative Action” (pages 46–61)

Part II

The book’s second part concerns “The Theory and Structure of Formal Organizations.”

Pages 65–81 contain Chapter VI, “The Definition of Formal Organization.” In the chapter, Barnard defines “formal organization” twice as “a system of consciously coordinated activities or forces of two or more persons.”^{[1]:73,81[15]:149} The chapter outlines how Barnard developed the definition and explains that the concept of organization is abstract. It specifies that a formal organization is part of a “cooperative system,” a “complex of physical, biological, personal, and social components which are in a specific systematic relationship by reason of the cooperation of two or more persons for at least one definite end.”^{[1]:65[15]:149}

Chapter VII, “The Theory of Formal Organization” on pages 82–95, sets forth the three elements necessary for organizations: “(1) communication; (2) willingness to serve; and (3) common purpose.”^{[1]:82[16]:40} Barnard suggests both: (1) that an organization that cannot accomplish its purpose cannot survive, and (2) that an organization that accomplishes its purpose has no reason for existence. Therefore, organizations are constantly adopting new purposes.^[1]:91

Chapter VIII, “The Structure of Complex Formal Organizations” (pages 96–113), concerns the relationship of “superior” to “subordinate” organizations, the growth of organizations, and the relationship of small working “unit organizations” to “executive organizations” within complex formal organizations.

In Chapter IX, “Informal Organizations and Their Relation to Formal Organizations” (pages 114-123), Barnard states that formal organizations coexist with informal organizations (groups of people who interact with each other outside a formal organizational structure).^[15]:151 Benefits of informal organizations include the promotion of communication, cohesiveness, and self-respect.^[1]:122

Part III

Part III is titled “The Elements of Formal Organizations” and begins with Chapter X (pages 127-138) about “The Bases and Kinds of Specializations.”

“The Economy of Incentives” is Chapter XI (pages 139-160). According to Barnard, “in all sorts of organizations the affording of adequate incentives becomes the most definitely emphasized task in their existence”^{[1]:139[15]:151} Specific inducements range from “material inducements” to “ideal benefactions” (e.g., “pride of workmanship”), while “general incentives” include “personal comfort in social relations.”^{[1]:142–149[13]:4} Barnard’s conclusions on incentives were drawn “almost entirely from observations… not from any reading.”^[9]:28–29

Chapter XII, “The Theory of Authority” (pages 161-184) is notable for its summary of the conditions for authoritative communications, its explanation of “zone of indifference,” and its distinction between “authority of position” and “authority of leadership.”

• Concerning authoritative communications, Barnard wrote:

A person can and will accept a communication as authoritative only when four conditions simultaneously obtain: (a) he can and does understand the communication; (b) at the time of his decision he believes that it is not inconsistent with the purpose of the organization; (c) at the time of his decision, he believes it to be compatible with his personal interest as a whole; and (d) he is able mentally and physically to comply with it.^{[1]:165[11]:167–168[13]:4–5}

• Barnard discusses the concept of “zone of indifference,” which is “perhaps the most well-known idea in the book,” as follows:^[13]:5

…there exists a “zone of indifference” in each individual within which orders are acceptable without conscious questioning of their authority… The zone of indifference will be wider or narrower depending upon the degree to which the inducements exceed the burdens and sacrifices which determine the individual’s adhesion to the organization. It follows that the range of orders that will be accepted will be very limited among those who are barely induced to contribute to the system.^{[1]:167–169}

• “Authority of position” is explained as occurring when people “impute authority to communications from superior positions… to a considerable extent independent of the personal ability of the incumbent of the position.” In contrast, people with superior ability have “authority of leadership.” When a person has both types of authority, the subordinate will “accept[] orders far outside the zone of indifference.”^{[1]:173–174[11]:168}

In Chapter XIII, “The Environment of Decision” (pages 185-199), Barnard contemplates how personal decision-making and organizational decision-making differ. He states “The fine art of executive decision consists in not deciding questions that are not now pertinent, in not deciding prematurely, in not making decision that cannot be made effective, and in not making decisions that others should make.”^{[1]:194[15]:152[17]:165}

Part III concludes with Chapter XIV, “The Theory of Opportunism” (pages 200-211).

Part IV

“The Functions of Organizations in Cooperative Systems” constitutes the final part of the book. It begins with Chapter XV (“The Executive Functions,” pages 215-234) and Chapter XVI (“The Executive Process,” pages 235-257).

Chapter XVII on “The Nature of Executive Responsibility” (pages 258-284) discusses morality. Barnard observes that “cooperation, not leadership, is the creative process; but leadership is the indispensable fulminator of its forces.”^{[1]:259[17]:166} In turn, morality is critical to leadership: “organizations endure… in proportion to the breadth of the morality by which they are governed.”^{[1]:282[5]:82}

The “Conclusion” (Chapter XVIII, pages 285-296) highlights 16 major observations of the book and contemplates the relationship of science and art in management:

I believe that the expansion of cooperation and the development of the individual are mutually dependent realities, and that a due proportion or balance between them is a necessary condition of human welfare. Because it is subjective with respect both to a society as a whole and to the individual, what this proportion is I believe science cannot say. It is a question for philosophy and religion.^{[1]:296[17]:169}