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Unit 10: Informal Organization

10.1 Informal Organization Notes

Informal organization refers to the relationship between people in an organization based
on personal attitudes, emotion, prejudices, likes and dislikes, etc. These relations are not
developed according to procedures and regulations laid down in the formal organization.
Informal organization is an important concept in the study of organization. People in the
formal organization have a tendency to cut across formal channels and communicate
informally with other parts of the organization. Formation of groups, cliques or sub-cliques
is all pervasive. People tend to be motivated by group norms, social conventions and leaders
enjoying no formal authority. Thus, there exists a more complex and complicated system of
informal relationship along with the formal relations in the organization. Such informal
relations are not portrayed in the organization charts and manuals.
Barnard viewed informal organization as joint personal activity without conscious joint
purpose, even though possibly contributing to joint results. Keith Davis regards informal
organization as the network of personal and social relationships which is not established or
required by formal organization. Thus informal organization comprises the whole set of
customs, social norms and ideas by which people are influenced.
Informal organization refers to the relationship between people based not on procedures but
on personal attitudes, prejudices, likes and dislikes. There always exists informal organization
in a formal organization and every management has to recognize this fact.
Informal organization is characterized by the following features:

• It develops spontaneously and is not established by formal managers.
• It is based on informal authority attached to the person, and not the position. Informal
authority is earned and not delegated. This authority under informal organization
largely flows upward or horizontally.
• Informal organization represents human tendency to cut across formal channels and
communication informally with other parts of the enterprise.
• People in the informal organization are influenced by leaders without any formal
authority.

• It is all-pervasive and exists in every enterprise.
• Informal organization is not always destructive though at times it can make the job
of management more difficult. Because of its powerful influence on productivity and
job satisfaction, formal management will do well to derive benefit from the study of
informal organization.
• Informal organization cannot altogether be abolished. Informal organization is not
created at the will of the formal managers, nor the latter do away without the social
conventions and group norms.
10.1.1 Functions of Informal Groups
The informal groups have the following functions:

• These groups maintain and continue the cultural values and lifestyle of the group.
• They provide social satisfaction.
• The group develops system of communication in order to meet wants and to keep its
members informed about what affects them.
• They exercise social controls by which the behaviour of others is influenced and
regulated.

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