Informal Organizations

by Muhammad Iqbal Malik

About Chester Irving Barnard (1886 1961)

American business executive, public administrator, and sociological theorist who specialized in the nature of corporate organization
His book, Functions of the Executive (1938), was widely influential in sociology and business theory

About Chester Irving Barnard (1886 1961)

An employee of the AT&T (1909)
Became president of an AT&T subsidiary in 1927

During the Great Depression, directed the New Jersey state relief system
Served as president of the United Service Organizations (1942 to 1945) Also served as chairman of the National Science Foundation (195254).

Preface
A society is structured by formal organizations, formal organizations are vitalized and conditioned by informal organizations. If one fails the other disintegrates
(Chester I. Barnard)

Informal Organizations
The aggregate of the personal contacts and interactions and the associated groupings of people
(Chester I. Barnard)

Informal Organizations
The system of relationships and lines of authority that develops spontaneously as employees meet and form power centers; that is, the human side of the organization that does not appear on any organization chart
Understanding Business, 6/e, (William G. Nickels )

Basic Characteristics
Involves two or more people
Informal relationships, groupings & interactions

Repeated contacts but without any conscious joint purpose

Involves the human need to socialize Includes both friendly and hostile relationships and interactions

Basic Characteristics
Informal association precedes formal organization, as it requires preliminary (informal) contact and interaction before establishment

Scope of Informal Organizations

Informal organizations exist within:
Organization Community State or Everywhere

Effects and Consequences

Affects knowledge, beliefs, attitudes and behaviour, which may spread across the entire organization with a chain reaction
Forms habits, norms, customs institutions

Creates conditions that may lead to the establishment of a formal organization (e.g. families, societies, clubs, company etc.)

Effects and Consequences

Formal and informal practices often diverge (e.g. failure of a policy or procedure due to nonacceptance by the people)
Informal groups also act as window to formal organizations (all organizational contacts are based on few individual interactions)

Effects and Consequences

Informal organization persists and expands with formal organization through continuity of interactions Repeated interactions imply common (unconscious) purposes such as social, professional (unofficial), material Lasting interactions are fundamentally based on human need for action.

Effects and Consequences

Such personal relationships are often more intense and significant than institutional (individual vs. org. loyalty) Purposive cooperation a means of individual (or social) development
All these purposes are indirectly fulfilled through formal organizations Thus formal organizations serve societal cohesiveness and social integration

Creation of Informal by Formal Organizations

Formal systems of cooperation are inherently informal in nature
Formal activities involve people and result in informal association through continuous interactions Formal organizations provide individuals the means to fulfill social and individual needs through social interaction

Creation of Informal by Formal Organizations

All organizations host informal organizations

Functions of Informal in Formal Organizations

Communication (which is largely informal)
Creates cohesiveness and integration

Facilitates in creating social conditions that encourage willingness to work, by adding social motives Creates a feeling of independence as informal interactions are not governed by formal rules and authority

Functions of Informal in Formal Organizations

Protects individual personality and character against negative (or corrupt) organizational influences Informal organizations play a significant role in the development of an organizational culture, that is the aggregate of the values, norms and attitudes of its people

Conceptual Application and Related Themes

A public administrator should understand and harness the social forces in the organization to the advantage of the system
To shape and guide values in the system, utilizing informal organizational concepts Can fight against corrupt practices by encouraging developing positive informal organizations

Conceptual Application and Related Themes

Human Relations Movement focus on human and group dynamics
Trend towards organic vs. bureaucratic systems Organizing around values that drive people, rather than purely economic objectives Maslows hierarchy of needs - Social

Conceptual Application and Related Themes

Systems theory recognizing the influence of components on each other, on the system and vice versa Reinforced by research in socialpsychology and sociology
Recognition in modern organizational theory, of the relatively informal roles of champions and agents for change for significant organizational purposes

Examples
Six senior most supreme court judges refused to take oath under LFO. All were sacked. The informal organization protected their individual morality from the corrupt influences of the formal system

Examples
Organizational workers in Australia as a protest vowed to strictly go by the book, paralysing business activity signifies the role of informal behaviour for organizational well being, even in routine formal matters.
Informal cooperation in govt. institutions among corrupt public servants, protecting both individual and group interests

Examples
The institution of prophethood, initially emerges as an informal organization within a social structure. After substantial growth, the institution becomes complex, and thus becomes formalized, thereby creating several other formal organizations and institutions - e.g. mosque, madrissa, shariah, fiqha, salat, zakat etc.

References
Informal Organizations and Their Relation to Formal Organizations, Chester I. Barnard In Search of Excellence, Tom J. Peters
Understanding Business, 6/e, (William G. Nickels ) Encyclopdia Britannica