Building Efficient Management and leadership practices.The Contemporary Relevance of Chester I. Barnard's thought in the context of the Knowledge-Based Economy

This research highlights the pillars on which the function of leadership rests and the relationships between leadership, the quality of the management process and business results through analysis of Barnard’s thought. Why is the thought of Chester Barnard at the center of our research? Anticipating the times, Barnard was the first to conceive management in the modern sense, shifting the focus from management methods and tools to the executive and manager. The executive is the key to building an effective and efficient productive system. Leadership becomes an expression of the centrality of the executive’s role, it becomes the essence and substance that nourishes all the other managerial functions: planning, control and organization. However, the greatness of his thought is best expressed in the greatly innovative and modern element: the creation and maintenance of a cooperative system. This management function consists in the acquisition and maintenance of services provided by organization participants, making use of incentives and persuasion. The maintenance of an effective and efficient organization involves the capacity to adapt management of the numerous, different, external environment variables, the vital dynamic elements of the current Knowledge Economy. It also requires the establishment of a system of internal organs that operate in a coordinated manner, with high levels of productivity, in order to satisfy the company’s interests and those of individual participants simultaneously. According to our interpretation of Barnard’s thought, creating and maintaining a coordinated, cooperative business system capable of achieving the objectives of survival and development depends on the existence of an effective management process. In addition to shaping the basic managerial functions, the leadership styles adopted directly influence the “power of attraction and motivation” of the leader. The extent of this phenomenon depends on the extent to which leaders can: inspire feelings of community and cooperation in organization members; arouse admiration, emulation and confidence in participants; be perceived by the various members as a “growth instrument” that is, as an active source of operational support and potential satisfaction of their motivations. Finally, the power of attraction and motivation of the function of leadership, combining and working as a system with the conditions of organizational structure and operation determined by the management functions affects the “outcome variables” (qualitative and quantitative). The influences on “outcome variables” depend on the level to which a cooperative socio-economic system characterized by shared goals and a sustainable balance between effectiveness and efficiency is developed and maintained. This is linked to the achievement of a satisfactory quality of life within the organization; and it is also related to the degree to which it is possible to realize, effectiveness (economic and financial results; indices of physical and technical productivity; lasting economic equilibrium; survival; growth; etc.) and efficiency, in terms of adequate satisfaction of the motivations and objectives of the various participants. This enlightened and anticipatory Barnardian approach highlights the importance of “shared objectives” and “consent”, which results in reachable qualitative, quantitative and high-performance company benefits. It leads, in substance, to the modern idea of the productive system. Creating and maintaining a cooperative system and leadership become the supporting pillars for the development of the implicit and explicit participation required to spread a true participatory culture, in line with the evolution of the Knowledge Economy. Barnard’s doctrine focuses attention not primarily on techniques and method, but on man: the executive becomes a real agent of change in his choices, his values and his capacity to share knowledge. This approach appears absolutely modern, stimulating reflection on the still current need for profound change in the style of management and in the choice of the reference values of company leaders. For us, Barnard’s studies are the prelude to the process taking place in the Third Industrial Revolution. Borrowing part of an expression of Jeremy Rifkin, it is the sunset of those who are inspired by closed and proprietary hierarchical thinking and the rise of a new transparent and open generation that manifests lateral thinking that welcomes cooperativism, the sharing of objectives, and participatory leadership as basic values. –” people and institutions that use top-down, enclosed, and proprietary thinking, and those that use lateral, transparent, and open thinking.” - Jeremy Rifkin (2011). The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy, and the World, New York, Palgrave Macmillan. Chap. 1: Objectives and research methodology 1.1 Structure of the present work – 1.2 The fundamental questions of the research Our main aim is to analyze the thought of Chester Barnard on the creation and maintenance of a cooperative system, the executive process and the function of leadership, and to examine its relevance for modern studies in economics and business administration. Chap. 2: Outlines of an effective management model in the light of the economic, social and moral requirements of the knowledge-based economy 2.1 Quality of leadership and the decision-making, control, organization and execution processes – 2.2 Characteristics of traditional management models – 2.3 New management models for the needs of the knowledge-based economy – 2.3.1 The main factors that have stimulated change in the economy and society – 2.3.2 Knowledge becomes a strategic factor of productive activity and develops “intellectual managerial capitalism” – 2.3.3 Characteristics of new management models – 2.3.4 Presentation of an effective management model that permits evaluation of the originality, relevance and utility of Barnard’s model of the executive process. Chapter 2 outlines an effective executive model, analyzing modern doctrine on the subject, to be used also as a benchmark for the evaluation of Barnard’s contribution to management theory. For our objective, the reference model should permit evaluation of Barnard’s theoretical system in relation to the economic, social and moral requirements of the current knowledge-based economy. Now knowledge has become a strategic production factor and “intellectual managerial capitalism” has developed to influence significantly the organizational structure, management models and results of modern enterprises. Chap. 3: The cultural background and socio-economic context in which Barnard developed his theory of executive functions to create an efficient and effective cooperative system 3.1 Barnard: scholar of organizational behavior and precursor of management theory– 3.2 Market imperatives and enterprise behavior – 3.3 The philosophy of individualism versus the philosophy of social ethics – 3.4 The managerial revolution, the affirmation of managerial capitalism and its influence on Barnard’s thought – 3.5 The operation and results of the capitalist system: intellectual stimulus for the development of management models in a context of socio-economic dynamism – 3.6 Barnard’s contribution to the sustainability of the capitalist system. In chapter 3, we outline the economic, social and cultural environment in which the conceptions of Barnard matured: the reference is to the 1930s; we analyze the contribution of the management model proposed by the author to make the capitalist system sustainable; Chap. 4: The executive process and its organic functions. The fundamental role of leadership 4.1 Barnard, pioneer in the application of general systems theory to organizations – 4.2 Towards the construction of a general theory of for-profit and non-profit organizations – 4.3 The organic functions of the executive process according to Barnard – 4.4 Barnard’s theory of the executive process – 4.5 The modernity of Barnard’s thought – 4.6 The conceptual system of management: its current configuration – 4.7 Coordination is not an autonomous management function In chapter 4, the analysis interprets the thought of Barnard on the management process. The author’s approach is systemic: he uses the concept of system as the basis of development for his management theory. Apart from some differences in terminology, the management functions adopted by Barnard are very similar in substance to those recurrent in the modern theory of management; on this issue, the author seems a precursor of subsequent theoretical developments. What is really original in his theoretical construction is the relationship between the set of management functions (management process) and the function of leadership. Chap. 5: The formulation and control of the general purposes of a company and its sub-system objectives. The creation of the organizational structure and the information system .1 Introduction – 5.2 Motives and objectives of organization members – 5.3 In every organization there is a purpose, which is the unifying and coordinating principle for the activities of the members – 5.4 Cooperative and subjective aspects of organizational purposes – 5.5 Organizational and individual ends – 5.6 General purposes of the organization and its sub-system objectives: the means-ends chain – 5.7 Definition of organizational structure: organizational roles, communication lines and information system – 5.8 The formulation of general purposes according to Barnard – 5.9 The determination of general purposes is not the product of equal participation of the various members of the organization in the decision-making process – 5.10 The theoretical approaches of Cyert, March and Galbraith and the formulation of the general purposes of companies – 5.11 Concluding remarks on equal participation of the various stakeholders in the formulation of the general purposes of companies In chapter 5, two management functions are analyzed: one that leads to the formulation of general objectives and the system of corporate objectives and one to create the organizational structure and the communications system. The approach followed by the author is “holistic”: the corporate system is considered as an integrated whole and both the elements that make up the system and the relationships between them are analyzed simultaneously. Chap. 6: Barnard and the theory of authority 6.1 Introduction – 6.2 The subjective aspect of formal authority: the assent of the individual who receives an order determines its “authoritative character” – 6.3 The objective aspect of formal authority: pillar of organizational structure – 6.4 The characteristics of an effective system of communication – 6.5 The importance of the distinction between subjective and objective aspects In Chapter 6, we explain the theory of authority developed by Barnard. This theory is a milestone in the development of studies on the organization and the management of for-profit and non-profit companies. The phenomenon of authority cannot be fully understood unless it favors the so-called “subjective aspect” and “the objective aspect”, Barnard affirms that “the objective aspect” of authority is of great importance for executives and for scholars because this profile concerns the organizational structure and, in particular, the control lines (defined as lines of communication), which have the task of “holding together/keeping united” the structure, to create order, stability and coordination of management activity. Chap. 7: The role of executives in making the organization’s goals compatible with members’ goals. The search for equilibrium between the organization’s incentives and members’ contributions Summary: 7.1 “Socializing” and “personalizing” dimensions in organizations – 7.2 Brief summary of executive process deployment– 7.3 The creation and maintenance of a cooperative system and the function of leadership that inspires this process – 7.4 The elements that form the basis of a cooperative system: the will to collaborate, the incentives to be provided to organization members and the strategy of persuasion – 7.5 Objective incentives – 7.5.1 Specific inducements – 7.5.2 General inducements – 7.5.3 The need to use persuasion – 7.6 The method of persuasion 7.6.1 The creation of coercive conditions – 7.6.2 The rationalization of opportunity – 7.6.3 The inculcation of motives – 7.7 The economy of incentives according to Barnard – 7.8 General purpose and economic equilibrium in for-profit and non-profit organizations – 7.8.1 Analysis of for-profit organizations – 7.8.2 Analysis of non-profit organizations In chapter 7, we focused on the problem of creating and maintaining a sustainable “cooperative system”. This led to the problem of making company goals and objectives compatible with those of individuals and of the various groups involved in operational activities. The author also provides the solution to this problem through the introduction of a system of incentives provided by the company, and through careful and cautious persuasion aimed to induce people to collaborate and supply satisfactory performance. Chap. 8: The compatibility of effectiveness and efficiency: the pillars of Barnard’s theory of cooperation 8.1 The conventional concepts of effectiveness and efficiency – 8.2 Efficiency and effectiveness in Barnard’s thought – 8.3 The concepts of effectiveness and efficiency are not spontaneously convergent 8.4 The equilibrium and sustainability of a cooperative system depend on the ability of executives to make effectiveness and efficiency compatible – 8.4.1 Introduction – 8.4.2 Requirements to develop compatibility between effectiveness and efficiency – 8.4.3 A review of the general organization goals: the production and distribution of goods and services – 8.4.4 Leadership based on responsibility is fundamental to make effectiveness and efficiency converge – 8.4.4.1 The role of management in adapting organization conduct to the external environment and to the requests of organization members – 8.4.4.2 The function of leadership: its contribution to make effectiveness and efficiency compatible – 8.4.4.3 The moral factor of the organization according to Barnard: ethical codes and sense of responsibility – 8.4.4.4 First considerations on the relationship between systems of ethical codes and responsibility – 8.4.4.5 Further considerations on the topic In chapter 8, the research focuses on certain concepts often cited earlier: effectiveness and efficiency. It must be emphasized that the two phenomena that underpin cooperation are not spontaneously convergent and that effectiveness and efficiency and, above all, their equilibrium are the effect of the systematic management process, inspired and shaped by the quality of leadership. Chap. 9: The executive process, leadership and the realization of a cooperative system: the theoretical model of C.I. Barnard 9.1 Introduction – 9.2 Brief review of the executive process and the integrating function of leadership – 9.3 The higher-order leadership function that shapes the other management functions – 9.4 Systematization of Barnard’s thought on the nature of leadership and its elements – 9.4.1 Introduction – 9.4.2 The system of moral codes – 9.4.3 Personal qualities of the leader – 9.4.4 Summary of Barnard’s thought on the relations between the executive process, leadership and a valid cooperative system – 9.5 Some critical remarks on Barnard’s theory of leadership. In chapter 9 the nature, characteristics and elements of leadership are specified as well as its influence on the overall management process. The relationships between leadership, the process of management and qualitative and quantitative business results are also represented in a schematic way. Chap. 10: Summary of the present work Chap. 11: The relevance of Barnard’s theoretical system to the economic, social and moral requirements of the current knowledge-based economy Summary: 11.1 Introduction - 11.2 Brief reference to the characteristics and needs of the knowledge-based economy - 11.3 Barnard’s lessons for scholars and executives of the modern age - 11.3.1 Premise – 11.3.2 The systemic view of management and leadership: an attempt to develop a unifying conceptual framework for the structure and behavior of for-profit and non-profit organizations based on the general theory of systems - 11.3.3 The nature of the management process and its division into functions - 11.3.4 Organizational and individual objectives. The role of management in their harmonization and integration – 11.3.5 Rational organizational behavior and the creation of a hierarchy of objectives, decisions and organs: the chain of means and ends - 11.3.6 The conduct of complex organizations is the product of a “pluralistic and organically integrated” decision-making system - 11.3.7 The average person in an organization operates according to a “limited rationality model” - 11.3.8 The theory of authority: originality and influence on scholars and managers - 11.3.9 The mission of for-profit and non-profit organizations - 11.3.10 The economic equilibrium necessary for the survival of organizations - 11.3.11 Effectiveness and efficiency: the basis of the cooperative system and lasting company success - 11.4 Final assessment of the contemporary relevance and originality of Barnard’s management and leadership theories: answers to the research questions formulated in chapter 1 Chap.11, analyzes the relevance and originality of Barnard’s thought in relation to the economic, social and moral requirements of the current knowledge-based economy. Chap. 12: Limitations of Barnard’s model Summary: 7.1 “Socializing” and “personalizing” dimensions in organizations – 7.2 Brief summary of executive process deployment– 7.3 The creation and maintenance of a cooperative system and the function of leadership that inspires this process – 7.4 The elements that form the basis of a cooperative system: the will to collaborate, the incentives to be provided to organization members and the strategy of persuasion – 7.5 Objective incentives – 7.5.1 Specific inducements – 7.5.2 General inducements – 7.5.3 The need to use persuasion – 7.6 The method of persuasion – 7.6.1 The creation of coercive conditions – 7.6.2 The rationalization of opportunity – 7.6.3 The inculcation of motives – 7.7 The economy of incentives according to Barnard – 7.8 General purpose and economic equilibrium in for-profit and non-profit organizations – 7.8.1 Analysis of for-profit organizations – 7.8.2 Analysis of non-profit organizations In chapter 12, we give our personal view on important elements of organization structure and operation able to strengthen the cooperative business system, which were neglected or little emphasized by Barnard, in the light of the most recent scholarship on the quality of leadership.