Unit2.

2 Informal organization

An informal organization is a group of people who share a common identity and

are committed to achieving a common purpose. Informal organizations are created
by the will and shared identity of their members. The operation of an organization,
in reality, is known as an informal organization as opposed to a formal
organization, which is based on roles and responsibilities. Informal organizations
emerge from the interaction or communication between employees irrespective of
their designations and hierarchies. It runs parallel to a formal organization.

Definition

According to Chester Barnard, "an informal organization is an aggregate of

interpersonal relationships without any conscious purpose but which may
contribute to joint results."

According to Schein, an informal organization exists in the sense that it has no

legal existence, no legal boundaries, no membership roster, no tangible assets, no
formal structure, and no official leadership. The distinguishing feature of an
informal organization is the social fabric that binds its members together with a
common identity.

Concept and Types

Informal organizations have no fixed rules or hierarchies defined between people.

It is fluid and dynamic in its form. Both formal and informal groups coexist in an
organization and are essential for efficient functioning. We can classify informal
organizations into three groups that are defined by the similarities and
dissimilarities of the work performed by the members of each group. These are
listed below:

Horizontal Group- People who work at the same level in an organization belong
to a horizontal group. Such groups promote mutual support and information
sharing among the members. It is often found that people share the same problems,
concerns, and interests. They solve problems without depending on their bosses or
higher or lower hierarchical members. For example, people working for different
departments like sales, operations, production, etc. but who are at the same level in
the organizational hierarchy form a horizontal group.
Vertical Group- People working at different levels in an organization belong to
the vertical group. Such groups are formed through skip-level relationships. For
example, a top-level employee may be associated with a first-level employee, or a
group of first-level employees may establish a group with their bosses. Such
groups promote better communication and quick access to the issues arising in the
organization. Mixed Group- People from different levels and different departments
create a Mixed Group. The groups are created based on common interests like club
memberships, common interests or their backgrounds. For example, the president
of the sales department may bond with the director of technology.

Example of Informal Organization

Members of the sales team join every day for lunch with the human resource team.
Another example of such informal groups is that sales team personnel help tech
development employees to figure out the requirements of the product.

Features of Informal Organization

Informal organizations exist in every organization. They are built spontaneously,

over time, and not deliberately.

Policies, procedures, or norms are not required to create such groups; they are
formed merely based on personal interactions and common interests. There is no
specific direction in the flow of information. It does not possess any definite
structure or hierarchy. Another feature of informal organizations is that they are
found in every business. It is because social interactions are essential. Employees
who do not get along well with one another may not be able to work cooperatively.
This affects the organization's financial profitability.

Finally, managers can only regulate rather than prohibit informal organizations.
This regulation is significant because it has the potential to influence the
productivity and morale of everyone involved.

Difference between a Formal and Informal Organization

A formal organization is created by the management deliberately, whereas an

informal organization is created spontaneously by members. Formal organizations
are stable and run long, but informal groups are unstable. The purpose of a formal
organization is to accomplish its organizational goal, as opposed to an informal
organization, which fulfills the psychological and social needs of its members. In a
formal organization, the job of a member is clearly defined by the management and
is held accountable to the organization. This is in contrast to an informal
organization, which is formed based on interpersonal relationships and has no
defined responsibilities or roles. Formal organizations are bound by hierarchies,
but informal group members are equal. In formal organizations, the focus is on
work performance, whereas in informal ones, it's interpersonal relationships.

Rules and regulations are well-defined in a formal organization, while informal

organizations have their norms, beliefs, and values. The size of formal
organizations is large when compared to informal organizations, which are small.

Functions of Informal Organization

Informal organizations have several important functions. They are: It provides a

source of friendship and social connections for members of the
organization. Interpersonal relationships and informal groups can help employees
better understand what is going on in the company and establish contact with it so
that they have a certain sense of control over the work environment. Informal
organizations can provide status and recognition that formal organizations cannot
or will not provide employees. The interpersonal network can help the
socialization of new employees by informally communicating rules,
responsibilities, basic goals, and job expectations. Organizational grapevine helps
employees better understand what is happening in their workplace by quickly
transmitting information and conveying it to places that cannot be reached by the
formal system. Importance of Informal Organization Information is exchanged
between groups and people quickly because the lines of communication are not
defined. Quick feedback is received. Job satisfaction is attained because the social
needs of the members are fulfilled, thus leading to stability in the organization.
People in an organization are diverse, and so are their needs, which cannot be
fulfilled by the formal design of the organization. They provide the members with
an opportunity to build status and social interaction and enable them to overcome
identity crises. It also provides an audience to listen to and reach out to.

Advantages
The informal organization has several advantages. They are: First, they instill a
sense of unity and solidarity among members. It happens because they are
obsessed with each other's social interactions. Therefore, this leads to job
satisfaction and stability in the organization. In addition, a strong informal
organization can be an effective means of rapid communication. Managers and
employees can use this. The informal organization can compensate for the
limitations imposed by formal structure, enabling it to successfully achieve
organizational goals. The managers also benefit from the informal organizations by
using them to understand the grievances of employees. Workers benefit from the
emotional security provided by the informal organization. A sense of being present
and belonging in a positive atmosphere boosts job satisfaction. A positive
influence from an informal organization leads to increased productivity. Managers
know that members of the informal organization will keep an eye on its activities,
which is why they plan carefully after going through the benefits and drawbacks.

Disadvantages

Conflicts

Informal grouping gives rise to conflicts because multiple people tend to boss each
other. To achieve social satisfaction sometimes, the members slip away from
formal organizational timelines, thereby decreasing productivity. Rumors With
communication between different members across departments, there are chances
of rumors getting spread quickly. Spreading of wrong information disrupts the
work environment hampering the work balance. Conformity People share common
interests in clubs to form groups. However, when a non-conforming member joins
this group they may be pressured to conform to the group which can be against the
organizational interests. This can be a cause of harassment or physical abuse.
Change Resistance Informal groups can create resistance to the rules or strategies
set by the management and cause difficulty in implementation. An informal group
may restrict modifications in the work environment.