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

Rapid growth Learning organization Idea generation

Business Approach

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.