Barnard's Principles

Alongwith scientific management and the  manager's tasks, many scholars and practitioners were thinking about experimenting with, and writing on, industrial psychology and on social theory both of which, in many instances, were stimulated by the scientific management movement. We can get the flavor of these developments by looking briefly at the  emergence of industrial psychology, the growth of personnel management, and the development of a sociological approach to human relations and management.  

In determining that the task of executives (by which he meant all kinds of managers) was one of maintaining a system of cooperative effort in a formal organization, Barnard addressed himself first to the reasons for, and the nature of, cooperative systems. The logic of his analysis can be seen in the following steps. 

1. Physical and biological limitations of individuals lead them to cooperate, to work in groups; while the basic limitations are physical and biological, once people cooperate, psychological and social limitations of individuals also play a part in inducing cooperation.
2. The act of cooperation leads to the establishment of a cooperative system in which physical, biological, personal, and social factors or elements are present. He also makes the point that the continuation of cooperation depends on effectiveness (does it accomplish the cooperative purpose?) and efficiency (does it accomplish the purpose with a minimum of dissatisfaction and costs to cooperating members?). 
3. Any cooperative system may be divided into two parts: "organization" which includes only the interactions of people in the system, and other elements. 
4. Organizations can in turn be divided into two kinds: the "formal" organisation which is that set of consciously coordinated social interactions that have a deliberate and joint purpose, and the "informal" organization which refers to those social interactions without a common or consciously coordinated joint purpose. 
5. The formal organization cannot -exist unless there are persons who (a) are able to communicate with one another, (b) are willing to contribute to group action, and (c). have 'a conscious common purpose: 
6. Every formal organisation must include the following elements:(a) a system of functionalization so that  people can specialize (that is, various forms of departmentalisation), (b) a system of effective and efficient incentives that will induce people to contribute to group action, (c) a system of power (authority) which will lead group members to accept the decisions of executives, and (d) a system of logical decision making. 
7. The executive functions enter the process through the work of the executive in integrating the whole and in finding the best balance between conflicting forces and events. 
8. To make the executive effective requires a high order of responsible leadership; as Barnard so well emphasizes, "Cooperation", not  leadership, is the creative process; but leadership is the indispensable fulminator of its forces. 

Bernard's thesis is a social systems approach, concentrating on major elements of the managerial job, containing extraordinary insights on decision making and leadership.