This chapter of the book "The Functions of the Executive," by Chester I. Barnard (1938), discusses informal organizations, mainly to show their relationship to formal organizations. Barnard considers the following: the nature of informal organizations; certain important effects and consequences of informal organizations; the creation of informal by formal organizations; and the functions of informal in formal organizations. Informal organization has two important classes of effects: (1) it establishes certain attitudes, understandings, customs, habits, institutions; and (2) it creates the condition under which formal organization may arise. Formal organizations arise out of and are necessary to informal organization. Once established, formal organizations create and require informal organizations. The necessary functions of informal organizations in formal organizations are that of communication, the maintenance of cohesiveness, and the maintenance of integrity of the individual.