Informal Organizations
Lourvina E. Landagan
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)
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 (1952–54).
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
Basic Characteristics
evolving constantly
grass roots
dynamic and responsive
excellent at motivation
requires insider knowledge to be seen
treats people as individuals
flat and fluid
cohered by trust and reciprocity
difficult to pin down
essential for situations that change quickly
or are not yet fully understood
Formal Organization
Characteristics
enduring, unless deliberately altered
top-down
Missionary
Static
excellent at alignment
plain to see
equates “person” with “role”
Hierarchical
bound together by codified rules and order
easily understood and explained
critical for dealing with situations that are
known and consistent
Scope of Informal Organizations
Informal organizations exist within:
Organization
Community
State or
Everywhere
Functions of Informal in
Formal Organizations
They perpetuate the cultural and social
values that the group holds dear.
They provide social status and
satisfaction that may not be obtained
from the formal organization.
They promote communication among
members.
They provide social control by
influencing and regulating behavior
inside and outside the group.
Functions of Informal in
Formal Organizations
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
Benefits of Informal
Organizations
Blend with formal system
Lighten management workload
Fill gaps in management abilities
Encourage improved management
practice
Understanding and Dealing with the
Environmental Crisis
Benefits of Informal
Organizations
Business Approach
Rapid growth
Learning organization
Idea generation
Disadvantage of Informal
Organizations
Resistance to change. Perpetuation of
values and lifestyle causes informal
groups to become overly protective of
their "culture" and therefore resist
change.
Role conflict. The quest for informal
group satisfaction may lead members
away from formal organizational
objectives.
Cont..
Rumor. The grapevine dispenses truth
and rumor with equal vengeance. Ill-
informed employees communicate
unverified and untrue information that
can create a devastating effect on
employees.
Conformity. Social control promotes
and encourages conformity among
informal group members, thereby
making them reluctant to act too
aggressively or perform at too high a
level.
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
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
Maslow’s 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 social-
psychology 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.