After reading this article you will learn about:- 1. Meaning of Informal Organisation 2. Features of Informal Organisation 3. Merits 4. Limitations.

Meaning of Informal Organisation:

As formal organisation grows in size, parallel existence of informal relationships along with formal relationships becomes unavoidable. Informal organisations have always existed with formal organisations. They arise because of inevitable social and personal needs of individuals which cannot be satisfied by the principles of formal organisation. They represent non-planned, unofficial, social interactions amongst people working in formal structures. They arise out of common interests of people.

These organisations are not governed by formal set of principles but they are an important and integral part of formal organisations. E. Wight Bakke calls the creation of informal organisations along with formal organisations a fusion process.

According to him, “When an individual and an organisation come together in such a way that the individual is a participant in, and a member of, the organisation and the two are mutually dependent on each other, both are reconstructed in the process. The organisation to some degree remakes the individual and the individual to some degree remakes the organisations.”


Importance of informal organisation was recognised by Chester Barnard. He viewed informal organisation as “any joint personal activity without conscious joint purpose, even though contributing to joint results.” Keith Davis defines 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.”

While working in a formal organisation, people of different departments at different levels interact with each other, discuss their common interests (cultural, social etc.) and form groups to promote their goals. These goals are known as group goals and informal organisation is an important means to satisfy these goals.

Features of Informal Organisation:

Informal organisation has the following features:

1. Unplanned structure:


This structure is not planned. It arises spontaneously out of formal interaction amongst people. When people formally interact with each other, they tend to discuss their interests, attitudes, hobbies, beliefs etc. and in the course of doing so, form groups whose goals are different from formal organisational goals. Their informal relationships gradually develop informal organisation that co-exists with the formal organisation.

2. Social needs:

The basic purpose of informal organisation is fulfillment of social and personal needs of people. People share common thoughts, feelings and interests different from formal organisational goals. Their social needs of friendship, love and support are strengthened by informal organisations.

3. No formal structure:


A formal organisation has a definite structure. It is depicted by lines and boxes on the organisation chart (organisation chart is a visual representation of organisation structure). Informal organisation does not have any formal structure. It cannot be precisely shown on the organisation chart. Relationships amongst people change according to changes in their interests and liking for each other.

Workers of production department may consult sales managers to solve their personal problems rather than production manager and vice versa. There are no superiors and subordinates in informal organisation. People communicate with each other in all forms; vertical, horizontal and diagonal.

4. Informal leaders:

Leaders are informally elected by group members. They strongly influence group activities and contribute to formal goals positively or negatively.


5. Informal communication system:

The system of communication is informal. It does not follow the chain of command. It operates along with formal channel of communication and works faster than the formal channel. It transmits the messages much faster though rumours may also spread along with formal messages. Communication flows in every direction; vertical, horizontal, diagonal and connects people throughout the organisation.

6. No rules and regulations:

It has no fixed rules and regulations that govern functions of the organisation. Rules are framed and changed by people according to their convenience.


7. No fixed tenure:

It is formed at the will of people and dissolves at their will. It does not operate for a fixed time period. Dissolution of informal organisation also does not follow any legal procedure.

Merits of Informal Organisation:

Informal organisation has the following merits:

1. Promotes social and cultural values:


Members of informal organisation share common thoughts, social and cultural beliefs. Their interests are promoted which strengthens the organisation and promotes commitment to accomplish its formal goals.

2. Relief to top managers:

Social interactions lead to cooperation and coordination amongst people of different groups. It helps top managers achieve the formal goals efficiently. They do not have to officially inspire the workers to work.

3. Supplement to managers’ capacities:


Sometimes managers are unable to take official decisions without the support of members. People of informal organisation help managers by providing them the help and support that cuts across official chain of command.

4. Social satisfaction and security:

Members satisfy their social needs of interaction, recognition and acceptance in informal organisations. Their need for friendship, love and support are satisfied in these organisations.

5. Communication:

Communication travels much faster in informal organisations than formal organisations. People discuss their work and non-work related problems and find solutions without the support of superiors.

6. Better relationships:


If managers of formal organisation maintain cordial relations with managers of informal organisation, it promotes an environment of understanding. This helps to achieve formal goals of the organisation efficiently.

7. Promotes creativity:

People exploit their creativity and work according to their judgment and skills without waiting for superiors’ instructions. They think of new ideas and practice them without the fear of rejection by the superiors.

8. Self-control:

Employees frame their own targets and self-control their activities. Control need not be exercised from the top.

9. Restraint on discretion:


Informal organisation checks wrong acts of managers. Managers cannot frame goals, policies and plans not acceptable to members of informal organisations. They cannot use discretion to frame goals that suit their interests at the cost of others’ interests.

10. Social satisfaction:

When members get tired while working, informal organisations provide them relief against official boredom and tiredness. They provide them an outlet to satisfy their needs of interaction, love and friendship.

11. Quick feedback:

Managers can get quick feedback on their official decisions through informal channels of communication. This helps in knowing how well their policies are being implemented by organisational members.

Limitations of Informal Organisation:

Though informal organisation helps to achieve formal goals of the organisation, it also suffers from the following limitations:


1. Conformity:

Being part of informal organisation, members form informal groups. These groups make their own norms and standards of performance followed by all group members, whether or not they like them. If these norms are against the interests of formal organisation, members still accept them, otherwise they lose group acceptance. For example, if the group decides not to work overtime, all members agree to it even if they want to work overtime. Informal organisations, therefore, result in excessive conformity to group norms which is bad.

2. Attitude of leaders:

If leaders have negative attitude, that is, want their personal interests to be satisfied at the cost of group interests, informal organisation will work against the formal organisational goals. This is harmful for the organisation.

3. Role conflict:

As members of formal and informal organisation, people face role conflict. If group goals are different from formal goals, members conform to group goals. If the organisation allows lunch break of 30 minutes but group extends it to 45 minutes to socialize, members face conflict in their formal and informal roles.


4. Rumour:

“Rumour is grapevine information that is communicated without secure standards of evidence being present.” It means spreading false information. Information flows virtually in all directions, to every individual at every level of the organisation. False information (rumor) spreads in informal organisation at a very fast speed.

If, for example, managers decide to declare Monday a holiday and a worker overhears them, the message that Monday is a holiday will pass throughout the organisation in no time even if it has not been officially announced by managers.

5. Resistance to change:

Informal groups become over-protective about the group goals and values. They oppose change in their way of working. Lack of desire to deviate from existing norms or acquire new knowledge works against implementation of new and sound policies in the organisation. An organisation where workers work five days a week will not easily accept a six-day week even if working hours each day are reduced.

6. Conflicting goals:


If group goals are different from organisational goals, members generally pursue group goals even if they are against the interests of formal organisational goals. This is against the interests of the company and its members.