Chester Barnard: Organizations as Systems of Exchange

1. Reading Presentation of Brian R. Fry. Mastering Public Administration: From Max Weber to Dwight Waldo. Chapter 6. (1989) Chester Barnard: Organizations as Systems of Exchange Princess Grace Kamila Noer (1B1032) Ruly Fitrah Nasrullah (1B1051) Public Management and Policy Analysis Program (PMPP) International University of Japan 2011

2. Outline • Background: Origins and Development of Organization • Three Basic Organizational Activities and Organizational Dynamics: 1. The willingness to cooperate 2. Establishing and defining organizationalpurpose 3. Communication • Conclusion

3. Origins and Development of Organization Human Nature Physical and biological limitation, social, active, purposeful,posses irreducible of free will Cooperative Activity Cooperative system must satisfying individual motives and cooperative purpose. Informal organization and Formal organization Complex Formal Organization Systemic nature, depersonalized activity, specialization, Existence of informal organization

4. Three Basic Organizational Activities and Organizational Dynamics Three Basics Organizational Activities: 1.) the willingness to cooperate 2.) Establishing and defining organizational purpose 3.) Communication • Organizational Dynamics: • The Incentive System • Authority • Decision Making • Executive Functions (Leadership & Responsibility)

5. 1. Induce willingness to cooperate The Incentive System: • Organization as a system of exchange • Willingness to subordinate immediate personal interest for both ultimate personal interest and general good • Organizational Efficiency : when motives of individuals in the org. are fulfilled and is a function of the capacity of an org. to offer incentive in sufficient quantity to maintain the system

6. Organizational Effectiveness : degree to which purposes of org. have been fulfilled, no direct relevance to motives • Incentive : Objective (method of incentive) and Subjective (method of persuasion • Objective : material, personal, nonmaterial opportunities, physical working conditions, personal ideals satisfaction (pride etc), general objectives include condition of community, etc • Org. are never able to offer all objectives incentives, or provide sufficient amount of available • Persuasion : makes member want what it is in organization • Status system : can be disruptive but important

7. Authority • “The existence of a net inducement is the only reason for accepting any order as having authority” • Zone of indifference : acceptance without consideration of merits and thus automatically obey the directive • Reasons why organizational authority effective: • 1) increase the zone of indifference and acceptance, reduce zone of rejection • 2) contractual obligation • 3) orders are not given unless conform with four conditions • 4) informal group support organizational authority

8. 2. Establishing and defining organizational purpose Decision making (objective aspect): • Two types of purposes: • subjective aspect(individual motives)  personal decision. • cooperative aspect (organization interest as a whole)  organizational decision making. • Three main factors of decision making: the purpose of the decision, the speed required, and the quality of data or information available

9. 3. Communication Authority: • The importance of effective communication  the directive understandable, consistent and meet with capability of the subordinate. Executive function: • Providing a system of communication, securing individual effort and formulating and defining organizational purpose. • Executive function shaped by its the leadership and responsibility.

10. Conclusion • Mutual understanding and relationship between organization and subordinates. • The needs of subordinates  effective in accomplishing organization objectives. • Seeking the balance between the needs of the individual and the needs of organization.

11. Thank you