Formal and Informal Organisation: Characteristics, Advantages and Disadvantages

Learn about the formal and informal organisation: 1. Characteristics 2. Advantages 3. Disadvantages 4. Features 5. Significance 6. Differences.

Formal and Informal Organisation: Characteristics, Advantages, Disadvantages, Features, Significance and Differences

Formal and Informal Organisation – Characteristics, Advantages and Disadvantages

The organisations can be classified on the basis of the kind of relationships prevailing in them. They are either formal or informal depending on the type of organisational structure.

Formal Organisation:

An organisation or a relationship existing within the organisation will be considered to be a formal if the job and the nature thereof is well-defined as well as there is a well- grounded system of hierarchy and authority that is being followed.

The employees have been delegated tasks and objectives and they endeavour to follow and achieve the goals, each person is held accountable for his or her job performance. In such a setting, rules and regulations are in place, and employees are supposed to follow them formally and unconditionally. The authority is well-rooted here. In fact, authority and hierarchy are the cornerstones of any formal organisation.

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Characteristics of Formal Organisation:

The characteristics of the formal organisation are listed below:

1. Created by the management.

2. Specialisation or the division of labour is the basis of the formal organisation.

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3. The authority and responsibility of people in a formal organisation is very clearly defined.

4. There are formal rules and procedures.

5. There is a clear system of authority attached with each member.

6. There are clearly specified lines of communication.

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Advantages of Formal Organisation:

The advantages of a formal organisation are listed below:

1. Clear definition of roles and responsibilities of all members, helps in avoiding duplication of efforts.

2. Accountability is easy to fix.

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3. Provides stability to the organisation.

4. Unity of command is maintained.

5. Tasks can be mastered with maximum skills in minimum time and with minimum efforts.

Disadvantages of Formal Organisation:

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Listed below are the disadvantages of formal organisation:

1. Decision making can be a time consuming exercise as formal communication follows established chain of command.

2. Established rules and policies can create organisational rigidity. Thus creativity may suffer.

3. Formal organisation can create too narrow jobs that may cost dear as far as very close managerial supervision is concerned.

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4. Formal organisation focuses on formal structure and work. Thus, it can contribute to creation of human problems.

Informal Organisation:

An informal organisation exists within a formal organisation. It develops due to friendly relations that spring up when people work together and develop common interests. The common interests bring them together as a group.

It is to be kept in mind that it is not necessary that there is supposed to be just one informal group within an otherwise formal group. Any number of informal groups may spring up within a formal group. It is also not necessary that informal groupings may work against the interests of the organisation.

Characteristics of Informal Organisation:

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Given below are the features of the informal organisation:

1. It is the result of relationships developing on the basis of common characteristics, like race, religion, language, culture, etc.

2. It is marked by the absence of any written or formal rules and regulations.

3. It has no structure, nor is it shown on an organisational chart.

4. It fulfils the social and psychological needs of its members.

5. It is not bound by any departmental or functional barrier.

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Advantages of Informal Organisation:

The benefits of the informal organisation have been recognised as under:

1. Informal groupings can at times surpass the formal organisation in terms of effectiveness and the tendency to close ranks in the event of a perceived threat to the organisation.

2. The social relationships formed in informal groupings can strongly motivate the workers towards the organisational goals.

3. At times it can lead to better coordination as a result of friendly relations among the members.

4. The flexibility in an informal organisation helps in bridging the gaps in the shortcomings of the management.

5. Innovation and creativity is promoted by the informal grouping, which in turn, helps in personality development and leadership skills.

6. Work problems are solved through informal groupings and assistance of the group.

Disadvantages of Informal Organisation:

The limitations of an informal organisation are defined below:

1. There may be constant conflicts between the formal and the informal role of the member which may impact the organisation adversely. At times the interest of the formal group may go against the interest of the organisation, i.e. the formal group.

2. The informal organisation sees changes as a threat to its interests. Thus, it may put up resistance to changes within the formal organisation, thereby, acting against the overall interest of the organisation.

Formal and Informal Organisation – Features, Advantages and Disadvantages

In any organisation, there is a complex network of relationships between individuals while discharging their assigned tasks. Such relationships which are prescribed by the management are termed as – “formal organisation structure” but relationships which come into existence due to social interactions are known as – “informal organisation structure” as shown below –

Formal Organisation:

Formal organisation is a well-defined structure of authority and responsibility that defines delegation of authority and relationships between the organisational members. It is a deliberately designed structure with formal authority, responsibility rules, regulations and channels of communication. This structure is created intentionally by the managers- for the achievement of the organisational goals.

The features of a formal organisation are explained below:

(i) It is a deliberately created structure that defines official relationships between employees working at different levels of management.

(ii) The purpose of a formal organisation structure is achievement of the organisational goals.

(iii) In a formal organisational structure, each individual is assigned a specific job. Division of work results in specialisation.

(iv) Formal organisational structure results in creation of a hierarchy of superior-subordinate relationships.

(v) It is created through delegation of authority

(vi) It specifies official communication lines across the organisation

Advantages of Formal Organisation:

(i) It clearly defines the objectives of the organisation and authority- responsibility relationships between the people.

(ii) Division of work develops effective communication system in the organisation.

(iii) It provides stability in the organisation.

(iv) Formal organisational structure results in coordinating the activities of various departments.

(v) There is no chance of duplication or overlapping of work.

(vi) In a formal organisation as the rules and regulations are clear and organised, so there is discipline in the organisation.

Disadvantages of Formal Organisation:

(i) While following scalar chain (a communication chain between the top-most person and the lowest rank necessitating each person to follow the hierarchy) and chain of command actions get delayed in formal organisation.

(ii) Formal organisational structure gives importance to work only. Human relations, psychological and social needs of employees, etc., are ignored.

(iii) There is rigidity in the organisation due to stringent rules, regulations, policies, etc.

(iv) Since all tasks need to be coordinated, a small failure or glitch in the communication lines can create inefficiency in the organisation.

(v) Sometimes, the decisions of the top management are not practical and as a result, there is a lack of coordination in the organisation which, in turn, delays the achievement of the organisational goals.

Informal Organisation:

The informal organisational structure gets created automatically and the main purpose of such structure is getting psychological satisfaction. Informal organisations have always existed with formal organisations. The existence of informal structure depends upon the formal structure because people working at different levels of management interact with one another to form informal structure.

“Informal organisation is a network of personal and social relations not established or required by formal organisation but arising spontaneously as people associate with one another.” – Keith Davis.

The features of an informal organisation are as under:

(i) Informal structure is not planned. It arises spontaneously out of formal interaction amongst the people.

(ii) Informal organisation does not have any formal structure.

(iii) The system of communication is informal. It does not follow the chain of command.

(iv) It has no fixed rules and regulations that govern the functions of the organisation.

(v) The basic purpose of an informal organisation is fulfilment of social and personal needs of the employees.

(vi) Informal organisational structure does not follow any fixed path of flow of authority

Advantages of Informal Organisation:

(i) Informal structure does not follow scalar chain so there can be faster spread of communication.

(ii) Social interactions lead to cooperation and coordination amongst people of different groups.

(iii) People satisfy their social needs, recognition and acceptance in informal organisations.

(iv) Informal organisation provides protection to its members from pressure of top management.

(v) Informal organisation extends its flexibility to formal organisation.

(vi) It promotes creativity and innovations in the work of individuals.

(vii) It helps to achieve the formal goals of the organisation efficiently as there is a mutual understanding between the people working at different levels of management.

Disadvantages of Informal Organisation:

(i) It is believed that informal organisational structure spreads rumours which may mislead the employees.

(ii) Informal structure does not form a structure for smooth working of an organisation.

(iii) If the leaders want their personal interests to be satisfied at the cost of group interests, informal organisation will work against the formal organisational goals.

(iv) If group goals are different from the organisational goals, members usually pursue group goals even if they are against the interests of formal organisational goals. This harms the organisation.

(v) Informal organisation prefers status quo and a routine work pattern. Lack of desire to deviate from the existing norms or acquire new knowledge works against implementation of new and sound policies in the organisation. Management has to face resistance to new work methods.

Formal and Informal Organisation – Significance, Characteristics and Differences

Formal organisation refers to the structure of relationships consciously developed by the top management to achieve the objectives of the organisation. In this form, instructions, responsibility, authority, accountability, lines of command, and positions and authority are clearly defined and communicated. All the members of the organisation are well aware of their duties and authority.

Every subordinate is expected to follow directions of his supervisor in the formal chain of command. However, it is not capable of accomplishing organisational objectives all alone; it needs the help of informal organisation for this purpose. In other words, informal organisation which does not appear on the organisation chart supplements the formal organisation in achieving organisational goals effectively and efficiently.

Formal Organisation:

According to Chester I. Barnard, formal organisation is “a system of consciously coordinated activities or forces of two or more persons”. A formal organisation is deliberately designed to achieve the objectives of organisation. The individual working in the organisation must adapt according to the norms of formal organisation. It tells him to do certain things in a specified manner, to obey orders from designated individuals and to cooperate with others. Coordination also moves in a prescribed pattern in the formal organisation structure.

The formation of formal organisation is based on four key pillars, namely:

(i) Division of labour,

(ii) Scalar and functional processes,

(iii) Structure, and

(iv) Span of control.

The principle of division of labour and specialisation allows the formal organisation to divide the whole work into a number of small operations and each operation is performed by a different person so that benefit of specialisation can be availed.

The scalar and functional processes refers to the growth of the organisation both vertically and horizontally whereas the structure of the organisation refers to the overall arrangement in the organisation which provides proper balance between different parts of the organisation and ensure proper execution of all operations and the achievement of organisational objectives. The span of control, refers to the number of subordinates directly reporting and accountable to one superior.

Characteristics of Formal Organisation:

The salient features of formal organisation are as follows:

1. Organisation structure is designed and developed by the top management to achieve organisational goals.

2. The principle of division of labour and specialisation are used in formation of formal organisation to achieve efficiency in the operations.

3. The main focus of the organisation structure is on the jobs to be performed and not the individuals who are to perform jobs.

4. The sentiments of organisational members are not taken into consideration.

5. The, authority and responsibility relationships created by the organisation structure are to be accepted by all the members of the organisation. The position in the organisation hierarchy represents the relative status of the incumbent.

Significance of Formal Organisation:

Formal organisation is the basis of effective management of any enterprise.

It can help in achieving the following benefits:

1. Formal organisation helps in identification of the objectives of various departments and units besides facilitating the process of achieving organisational goals through the fulfilment of objectives of various departments.

2. It helps in use of resources and new technological developments in proper and optimum manner.

3. Authority and responsibility relationships are clearly defined which facilitate better communication.

4. Wastage of resources and conflicts between individuals are minimised as the division of work among the departments and individuals are clearly laid down. It also ensures proper balance of activities of different departments.

6. Employees are motivated to work for personal advancement as it creates a chain of command from top to bottom highlighting chances for promotion.

7. It helps in bringing stability in the enterprise through procedures, policies, rules and regulations. Due to presence of well-defined procedures, policy and regulations, the operations of different departments continue even if old employees are retired or leave and the new employees join the organisation.

Informal Organisation:

As the name itself suggests that these organisations are not developed or planned, rather they are formed on their own within the organisation due to routine interactions among employees of the organisation. Keith Davis has described informal organisation as a network of personal and social relations not established or required by formal organisation but arising spontaneously as people associate with one another. It is also known as – ‘shadow organisation’ as it exists along with the formal organisation. As we all know, man is a social animal and cannot live without social interaction.

People working or living together anywhere develop social relationships based on common taste, language, culture or some other factors and become members of one or more informal groups. These informal groups are known as informal organisation.

The informal groups run parallel to the formal ones. Informal relations are not displayed on organisation charts and manuals. An informal organisation provides an opportunity to workers to come close to each other, develop a feeling of cooperation and coordination among themselves.

Generally, large formal groups give rise to small informal or social groups. The membership of informal groups often comprise individuals from different parts of the organisations and/or from different levels of the organisation both vertically and diagonally as well as same horizontal level. Thus, it may break the structure of formal organisation. The member of informal group may appoint their own leader who exercises authority by the consent of the members themselves.

The informal leader may be chosen as the person who reflects the attitudes and values of the members, helps to resolve conflict, leads the groups in satisfying its goals or liaises with management or other people outside the groups.

Characteristics of Informal Organisation:

The small informal or social groups are part of large formal groups and they are based on common taste, language, culture or some other factors. These groups are not pre-planned and originates automatically within the organisation due to interaction between the members in the organisation.

The main features of informal organisation are as follows:

1. They are unplanned and arise automatically.

2. Formation of informal organisation are outcome of natural process.

3. Informal organisation are formed on account of human relationships.

4. Informal organisations may be based on common language, religion, culture, taste, problems, etc.

5. The membership of informal organisations may cut across the formal structure of organisation and it is voluntary.

6. The member of informal group may appoint their own leader who exercises authority by the consent of the members themselves.

7. A person may be a member of a number of informal groups simultaneously.

Significance of Informal Organisation:

The importance of informal organisation can be examined from the functions performed by informal groups.

The important functions of informal organisation are as under:

1. The communication process within informal group is very fast. Therefore, it can be used as a channel of communication in the organisation.

2. It assist in adoption of ideas promoted by the formal organisation through discussion, of its pros and cons. Hence, it provides support to the formal organisation.

3. The informal leader can guide the members in more effective manner as he is considered more reliable to the members of informal group and therefore, it helps in filling the gap in the manager’s abilities. They can act as a medium to resolve any issue between management and workers.

4. Informal organisation provides a platform to outlet their feelings and frustrations. Thus, it provides psychological satisfaction to the members.

5. The presence of informal organisation make necessary for the managers to plan and act carefully. Thus, informal organisation assists in the proper functioning of the formal organisation.

Difference between Formal and Informal Organisations:

The difference between formal and informal organisations can be enumerated briefly as below:

1. Origination – Formal organisation is deliberately created by management in a well-planned manner with the objective of achieving organisational goals. Whereas, informal organisation arises spontaneously and no conscious efforts are made to create it. Their formation is based on relationships, caste, culture, taste, problems, etc.

2. Basis – A formal organisation is governed by rules and procedures. On the other hand, an informal organisation is based upon attitudes and emotions of the people. It depends on informal and social contacts between people working and interacting with one another.

3. Nature – A formal organisation is stable and predictable as they are created through a planned manner but an informal organisation is neither stable nor predictable.

4. Communication – As formal organisation is a system of well-defined relationships among individual. Therefore, it follows pre-determined lines of communication. On the contrary, an informal organisation has no definite form and there are no specific lines of communication.

5. Focus – In a formal organisation, the main focus is placed on authorities and functions. In an informal organisation, the focus is on people and their relationships.

6. Authority – The authority, in case of formal organisation, flows from top to bottom. Informal authority is attached to a person and it can flow in downwards or horizontal direction.

7. Existence – A formal organisation is not an outcome of informal organisation whereas informal organisation arises from formal structure.

8. Rationality – A formal organisation operates on procedures and policies instead of sentiments or emotions. All activities are executed according to pre-determined course and actions. Whereas, in an informal organisation, the activities are influenced by emotions and sentiments of its members.

9. Presentation – Formal organisation can be shown in an organisation chart or a manual whereas informal organisations cannot be shown on chart or manual of the enterprise.

10. Delegation – In case of formal organisation, the authority and responsibility are delegated in accordance with the directions of top level management, whereas, in case of informal organisation, there is no such process.

11. Flexibility – In case of formal organisation, the structure is rigid whereas, in case of informal organisation, it is flexible.

Formal and Informal Organisation

Formal Organisation:

Formal organisation means the intentional structure of roles in a formally organised enterprise. If a manager is to organize well, the structure must furnish an environment in which individual performance, both present and future, contributes most effectively to group goals.

Formal organisation must be flexible. There should be room for discretion, for advantageous utilization of creative talents, and for recognition of individual likes and capacities in the most formal of organisations. Yet, individual effort in a group situation must be channelled toward group and organisation goals.

The formal organisation represents the classification of activities within the enterprise, indicates who reports to whom and explains the vertical journal of communication which connects the chief executive to the ordinary workers. In other words, an organisational structure clearly defines the duties, responsibilities, authority and relationships as prescribed by the top management.

In an organisation, each and every person is assigned the duties and given the required amount of authority and responsibility to carry out this job. It creates the co-ordination of activities of every person to achieve the common objectives. It indirectly induces the worker to work most efficiently. The inter-relationship of staff members can be shown in the organisation chart and manuals under formal organisation.

Characteristics of Formal Organisation:

The important characteristics of a formal organisation are given below:

1. It is properly planned.

2. It is based on delegated authority.

3. It is deliberately impersonal.

4. The responsibility and accountability at all levels of organisation should be clearly defined.

5. Organisational charts are usually drawn.

6. Unity of command is normally maintained.

7. It provides for division of labour.

Informal Organisation:

The friendship, mutual understanding and confidence are some of the reasons for existing informal organisation. For example, a salesman receives orders or instructions directly from the sales manager instead of his supervisors.

To know more about informal organisation we can study about Hawthorne experiment.

It is much easier to ask for help in an organisation problem from someone you know personally, even if he or she may be in a different department, than from someone you know only as a name on an organisation chart.

Informal organisation is a network of personal and social relations not established or required by the formal organisation but arising spontaneously as people associate with one another.

Thus informal organisations—relationships not appearing on an organisation chart—might include the machine-shop group, the sixth-floor crowd, the Saturday evening get together gang, and the morning coffee “regulars”.

Informal Group or Informal Organisation:

Informal organisation is formed spontaneously at any time at any place when men are constantly interacting with each other. Informal organisations exist within the formal group. The informal organisation consists of a group of people who relate to each other spontaneously for the purposes of mutual benefit and achievement.

These groups are neither structured not designated by an organistion’s administration. The roll behaviour of an individual in this group is not organisationally determined. These groups are formed naturally in response to the needs of social contact. For example, if some student are coming to college from same area by same bus, then they interact more and are held together.

These informal work groups have tremendous power in shaping attitudes, behaviour and consequently, production. They share a set of beliefs, values and socially acceptable behaviours. Group members come to think and act in similar ways and this encourages the feeling of closeness among them.

They are generally beyond the control of the management. They can work for the management, by encouraging co-operation and increasing production. On the other hand, they can work against the management by sabotage and slowing down the production. Hawthorne studies revealed how these groups operate.

There are so many opportunities for conflict between the needs and goals of the informal work group, and the needs and goals of the formal group. If a management wants success, it must recognise “Informal organisation” existence and try to understand them. The informal group serves many needs of the workers.

It can serve the needs of the formal organisation. Red tape is eliminated. Shortcuts evolve. Informal channels of communication are established to cut across department boundaries. Unpleasant tasks assigned to one person can be rotated or shared by group agreement.

Types of Informal Group:

The informal group is classified as follows:

1. Horizontal Clique

2. Vertical Clique

3. Mixed or Random Clique

4. Interest group

5. Friendship group.

1. Horizontal Clique – It is an informal association of workers (or) managers who are all in the same rank.

2. Vertical Clique – Here superior and subordinates will form a group. The people of different levels in a department work together informally.

3. Mixed or Random Clique – The people of different ranks, from different departments and from different locations form a group informally.

4. Interest group – The persons having same characteristics, same idea and working similar types of work form a group. This group is called as Interest group. They are formed to achieve some common objective.

People having common interest or attitude come together and form a group for the following reasons:

i. To interchange the works allotted,

ii. To increase the wage, bonus and other benefits,

iii. To support a worker whose service is terminated.

5. Friendship Group– Similar age, similar view and similar interest make the people join. Bachelor’s paradise and Teenager’s clubs are the groups formed by friends and called as friendship groups.

Characteristics of Informal Organisation:

1. Informal organisation arises without any external cause i.e., voluntarily.

2. It is a social structure formed to meet personal needs.

3. Informal organisation has no place in the organisation chart.

4. It acts as an agency of social control.

5. Informal organisation can be found on all levels of organisation within the managerial hierarchy.

6. The rules and traditions of informal organisation are not written but are commonly followed.

7. Informal organisation develops from habits, conduct, customs and behaviour of social groups.

8. Informal organisation is one of the parts of total organisation.

9. There is no structure and definiteness to the informal organisation.

Advantages of Informal Organisation:

The advantages of informal organisations are briefly explained below:

1. It fills up the gaps and deficiency of the formal organisation.

2. Informal organisation gives satisfaction to the workers and maintains the stability of the work.

3. It is a useful channel of communication.

4. The presence of informal organisation encourages the executives to plan the work correctly and act accordingly.

5. The informal organisation also fills up the gaps among the abilities of the managers.

Disadvantages of Informal Organisation:

The disadvantages of informal organisation are summarised below:

1. It has the nature of upsetting the morality of the workers

2. It acts according to mob psychology.

3. Informal organisation indirectly reduces the efforts of management to promote greater productivity.

4. It spreads rumor among the workers regarding the functioning of the organisation unnecessarily.

Formal and Informal Organisation – Characteristics, Reasons and Effects

In an organization, interaction of people among themselves is not totally governed by formally designed organization structure but by informal relationships among these people also. Thus, there is an informal organization also which interacts with formal organization. Behavior of people emerges out of this interaction.

Therefore, this behavior is called as emergent behavior. As a result, informal authority, informal leader, informal communication, etc. emerge in an organization. Since these are not prescribed by the managers but are important for organizational functioning, understanding of formal and informal organizations and how informal organization affects formal organization is necessary. In order to understand the nature of formal and informal organizations, we have to trace out their basic characteristics and how these are created.

Characteristics of Formal Organization:

Formal organization is consciously and deliberately designed system of well-defined jobs, each bearing a definite authority, responsibility, and accountability.

The characteristics of formal organization are as follows:

1. Formal organization is designed by the top management to fulfil certain requirements — performance of necessary activities thereby achieving organizational objectives.

2. It is based on the principles of division of labour and efficiency in operations.

3. It concentrates more on the performance of jobs (conglomerate of activities) and not on the individuals performing the jobs.

4. The authority and responsibility assigned to each job have to be adhered to by the job holders. Based on the degree of authority and responsibility, people are placed in hierarchy, and their status is determined accordingly.

5. Coordination among members and their control are well specified through organizational processes, procedures, rules, etc.

Characteristics of Informal Organization:

Informal organization (also known as informal group) is the pattern of social interactions of people at work which is not prescribed formally. When people work together, they evolve some sort of grouping or pattern of relationships among them which is not according to what is prescribed by the formal organization. Such relationships may be more complex than the officially prescribed ones.

Characteristics of informal organization are as follows:

1. Informal organization is a natural outcome at the workplace. It is not designed and planned.

2. It is created on the basis of some similarity among its members. The bases of similarity may be age, sex, place of origin, caste, religion, personality characteristics, liking or disliking, etc.

3. Membership in an informal organization is voluntary. A person may become member of several informal groups at the same time.

4. Behaviour of members of the informal organization is coordinated and controlled by group norms and not by the norms of the formal organization.

Reasons for Informal Organization:

The basic reason behind the emergence of informal organization is the inadequacy of formal organization to meet the needs of both members and organization. Formal organization either does not provide the most convenient way of interactions or it may produce some psychological pressure on the members of the organization.

In this situation, organizational members create informal organization because of the following reasons:

1. Desire to Socialize with others:

People, by nature, like to socialize in the organization in order to satisfy their social needs. Normally, such needs are not satisfied by the formal organization but such needs are quite important for people.

Informal organization provides opportunity to them to interact with people of their liking based on several factors like personality factors, caste, religion, place of origin, common interests, etc. This is the natural way of need satisfaction and, therefore, becomes important reason for the emergence of informal organization.

2. Psychological Fatigue of Routine Tasks:

Due to increasing level of specialization, people concentrate on a single task or a few simple tasks. Simple and routine type of tasks have undesirable influence on the people. They become bored by their tasks and may feel psychological fatigue. Therefore, they try to overcome this problem through social interactions which are provided by informal organization.

3. Hierarchical Control and Communication:

Modern large organizations are characterized by hierarchy — superior-subordinate relationships with formal control and communication. There is a tendency of exercise of control by superiors while subordinates may not like control. When a subordinate is not able to thwart such hierarchical control, he tries to find out an association where he does not face similar type of control.

Thus, he joins informal organization. Besides, formal communication may be quite lengthy and time-consuming while people may like to work through a shorter way. Thus, they develop their own way of interaction in the form of informal organization to get information quickly.

4. Positive Contributions of Informal Organization:

Reason for creating informal organization is that it contributes to the interests of its members in several ways. These may be in the areas of- (i) protecting their interest, (ii) working as regulatory device, (iii) protection of cultural values of members, (iv) validation of their beliefs, (v) outlet for overcoming frustration, and (vi) development of leadership potential.

Dysfunctional Effects of Informal Organization:

Though informal organization satisfies social needs of its members and complements formal organization in a specific way, it has some dysfunctional effects specially when it is not handled properly.

The major dysfunctional effects that may emerge because of the operation of informal organization are as follows:

1. Resistance to Change:

Informal organization produces resistance to change in the organization. Every informal group promotes certain values and norms which are considered to be desirable for it. In course of time, group members guard these values and norms resulting in a perpetration of the status quo.

Any intended change by the management affecting alteration of commonly shared values and norms is vehemently resisted. Thus, if informal organization is not handled properly, there may be problems in bringing such a change.

2. Generation of Rumour:

Informal organization leads to spread of rumour which involves communication of information about a person or organizational working not based on fact but based on personal interest of group members spreading the rumour.

Rumour may be destructive in the sense that it affects morale of people adversely as everyone goes on adding information from his own side which is most suitable to him. This may create bitter feelings between management and employees specially if rumour relates to matters dealing with employees.

3. Role Conflict:

Members of an Informal organization perform two types of roles simultaneously: role prescribed by formal organization and role expected by informal organization. Many times, there is conflict between these roles because a group member is expected to perform his role according to official norms (for example, bringing change in working) which may be different from informal role (for example, maintaining status quo). Higher is the degree of role conflict, more is the dysfunctional impact on organizational functioning.

4. Conformity:

Informal organization exerts strong pressures for conformity to behave according to the general standards of informal organization. This can make group members reluctant to act independently, creatively, or assertively due to the fear of losing group approval and membership. Pressure for conformity may result in restricted output and manipulation of informal organization by some members towards undesirable needs or their own selfish ends.

5. Social Costs:

Informal organization is costly from social point of view also. In many cases, informal interactions meant for personal satisfaction like gossiping, joke telling, etc., take place during working hours resulting in wastage of time and resources. More the time wasted in such activities, more is the operating costs for the organization.

Overcoming Dysfunctional Effects of Informal Organization:

Informal organization is a natural outcome of the operation of social factors at workplace. As such, it can neither be created nor dispensed with. The only option left to management is to overcome dysfunctional effects of informal organization in such a way that it does not create any unfavourable feeling among employees.

Therefore, what is required for overcoming dysfunctional effects of informal organization effects is to develop a situation in which informal organization does not grow beyond unmanageable proposition and it is used for positive actions.

Two approaches can be adopted by management in this context:

1. Structural Approach and

2. Behavioural Approach

1. Structural Approach:

Structural approach deals with the design of formal organization in such a way that it makes informal organization sympathetic to the formal organization.

This can be achieved in the following ways:

(i) The work should be assigned in terms of ‘meaningful end-products’. Managers can identify blocks of work that have natural unity whose result can be clearly visualized, for example, a block that includes all activities related to securing a customer’s order, producing a particular product, etc.

Authority can be delegated for doing such a clear- cut, complete block of work to a small group of people. This may enable the group members to see their contributions directly and they associate themselves, with the work.

(ii) People with all skills necessary to complete the assigned work should be placed as close as possible to the point of action. Thus, a work group will be independent and self-contained. For example, a self-contained sales team may include a salesman, a service man, a delivery man, and a record-keeping person. In such a case, people can form informal group associated with the end result rather than with their particular specialties.

(iii) An operating group should be supplied with full facts on its work. The group should be self-regulating. If any information, relevant to group working, is available elsewhere, this should be supplied quickly to the group.

For example, data on laboratory tests, material costs, etc. may be recorded somewhere else but must be communicated immediately to the group. Since the group receives the information promptly on its progress and has full authority to make changes, its members may become so engrossed with the result that they will avoid other social groups.

2. Behavioural Approach:

Besides structural approach, management can adopt behavioural approach to overcome dysfunctional effects of informal organization. It can adopt flexible and accommodating approach towards informal organization rather than a strong repressive approach to solve a problem arising out of its functioning as the latter approach may harden the attitudes of members of informal organization leading to generation of serious counteraction and destructive conflicts.

Therefore, the problems arising out of informal organization can be solved through flexible behaviour which may include the following aspects:

(а) Management should create a feeling in the minds of employees that it is not against the informal organization; on the contrary, it supports such activities so that interests of employees are integrated with those of the organization through better understanding.

(b) While making decisions, influence of informal organization should be taken into account like creating committees, changing work structure and distribution, etc.

(c) Management can refrain from taking actions or creating environment which is unnecessarily threatening to informal organization in general because this will create more adverse feelings in the minds of members which may be detrimental to the organization.

Formal and Informal Organisation – Important Characteristics

The organisation can be classified on the basis of authority and responsibility assigned to the personnel and the relationship with each other. In this way, an organisation can be either formal or informal.

1. Formal Organisation:

Characteristics of Formal Organisation:

The important characteristics of a formal organisation are given below:

a. It is properly planned.

b. It is based on delegated authority.

c. It is deliberately impersonal.

d. The responsibility and accountability at all levels of organisation should be clearly defined.

e. Organisational charts are usually drawn.

f. Unity of command is normally maintained.

g. It provides for division of labour.

2. Informal Organisation:

Informal organisation is an organisational structure which establishes the relationship on the basis of the likes and dislikes of officers without considering the rules, regulations and procedures. These types of relationships are not recognised by officers but only felt. The friendship, mutual understanding and confidence are some of the reasons for existing informal organisation. For example – a salesman receives orders or instructions directly from the sales manager instead of his supervisors.

The informal organisation relationship exists under the formal organisation also. The informal organisation relationship or informal relations give a greater job satisfaction and result in maximum production.

Characteristics of Informal Organisation:

a. Informal organisation arises without any external cause i.e., voluntarily.

b. It is a social structure formed to meet personal needs.

c. Informal organisation has no place in the organisation chart.

d. It acts as an agency of social control.

e. Informal organisation can be found on all levels of organisation within the managerial hierarchy.

f. The rules and traditions of informal organisation are not written but are commonly followed.

g. Informal organisation develops from habits, conduct, customs and behaviour of social groups.

h. Informal organisation is one of the parts of total organisation.

i. There is no structure and definiteness to the informal organisation.