Management theorist Chester Barnard believed

Management theorist Chester Barnard believed organizations need to be
both effective and efficient. Effective means meeting organizational goals
in a timely way. Efficient, in his opinion, means the degree to which the
organization can satisfy the motives of its employees.

Barnard viewed organizations as systems of cooperation of human activity,
and noted that they are typically short-lived. According to Barnard,
organizations are generally not long-lived because they do not meet the
two criteria necessary for survival: effectiveness and efficiency.

Effectiveness, is defined the usual way: as being able to accomplish stated
goals. In contrast, Barnard’s meaning of organizational efficiency differed
substantially from the conventional use of the word. He defined 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 members while attaining its explicit goals, cooperation
among its members will last.


Efficient – Performing or functioning in the best possible manner with the
least waste of time and effort.
• The difference between effectiveness and efficiency can be summed up
shortly, sweetly and succinctly – Being effective is about doing the right
things, while being efficient is about doing things right.
• While efficiency refers to how well something is done, effectiveness refers to
how useful something is.
• 1. If an organization is effective but not efficient, customers will be happy but
costs will be higher.
• 2. If an organization is efficient but not effective, customers will be unhappy
but costs will be lower.
• 3. If an organization is neither effective nor efficient, customers will go
elsewhere and costs won’t matter.
• 4. If an organization is both effective and efficient, customers will flock to the
organization and profits will be high.

Barnard summarized the functions of the executive as follows

• Establishing and maintaining a system of communication
• Securing essential services from other members
• Formulating organizational purposes and objectives
• To manage people and make sure they do their jobs

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His principles of communication

• The channels of communication should be definite
• Everyone should know of the channels of communication
• Everyone should have access to the formal channels of communication
• Lines of communication should be as short and as direct as possible
• Competence of persons serving as communication centers should be
• The line of communication should not be interrupted when the organization is
• Every communication should be authenticated.

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