Informal Organization

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The operation of an organization, in reality, is known as an Informal organization as opposed to the formal organization which is based on the roles and responsibilities.

Informal organizations emerge from the interaction or communication between employees irrespective of their designations and hierarchies. It runs parallel to a formal organization.


According to Chester Barnard, “An informal organization is an aggregate of interpersonal relationships without any conscious purpose but which may contribute to joint results”.

Concept and Types

Informal organizations have no fixed rules or hierarchies defined between people. It is fluid and dynamic in its form. Both formal and informal groups coexist in an organization and are essential for efficient functioning. Informal organizations can be classified into three groups which are defined by the similarities and dissimilarities of work performed by the members of the group.

These are listed below:

  • Horizontal Group- People who work at the same level in an organization belong to a horizontal group. Such groups promote mutual support and information sharing among the members. It is often found that people share the same problems, concerns and interests. They solve problems without depending on their bosses or higher or lower hierarchical members. For example, people working for different departments like sales, operations, production, etc. but are at the same level in organisational hierarchy form a horizontal group.

  • Vertical Group- People working at different levels in an organization belong to the Vertical Group. Such groups are formed through skip-level relationships. For example, a top-level employee may associate with a first-level employee or a group of first-level employees form a group with their bosses.

Such groups promote better communication and quick access to the problems arising in the organization. 

  • Mixed Group- People from different levels and different departments form Mixed Groups. Such groups are formed based on common interests like club memberships, common interests or their backgrounds. For example, the president of the sales department may bond with the director of technology.

Example of Informal Organization

Members of the sales team join every day for lunch with the human resource team. Another example of such informal groups is that sales team personnel help tech development employees to figure out the requirements of the product.

Features of Informal Organization

  • Informal organizations exist in every organisation. They are built spontaneously over time and not deliberately.

  • Policies, procedures or norms are not required to form such groups, they are formed merely based on the personal interactions and common interests.

  • There is no specific direction of the flow of information

  • It does not possess any definite structure or hierarchy.

Difference Between A Formal and Informal Organization

  • Formal Organisation is created by the management deliberately whereas Informal Organisations is created spontaneously by members.

  • Formal Organisations are stable and run long but informal groups tend to be unstable.

  • The purpose of formal organisation is to accomplish its organisational goal as opposed to the informal organisation which is intended to fulfil the psychological and social needs of the members.

  • In the formal organisation, the job of a member is clearly defined by the management and is held accountable to the organisation in contrast to the informal organization which is formed based on interpersonal relationships and no defined responsibilities and roles.

  • Formal organizations are bound by hierarchies but informal group members are equal.

  • In formal organisations, the focus is on work performances whereas informal ones focus on interpersonal relationships.

  • Rules and regulations are well defined in Formal organizations while informal Groups have their own norms, beliefs and values.

  • The size of formal organisations is large when compared to informal organisations which are small in size.

Importance of Informal Organization

  • Information is exchanged between groups and people quickly because lines of communication are not defined.

  • Quick feedback is received.

  • Job satisfaction is attained because the social needs of the members are fulfilled and thus leading to stability in the organization.

  • People in an organization are diverse and so are their needs which cannot be fulfilled by the formal design of the organization.

  • They provide the members with an opportunity to build status and social interaction and enables one to overcome identity crisis. It also provides an audience to listen and reach out.



Informal grouping gives rise to conflicts because multiple people tend to boss each other.

To achieve social satisfactions sometimes, the members slip away from formal organizational timelines thereby decreasing productivity.


With communication between different members across departments, there are chances of rumours getting spread quickly.

Spreading of wrong information disrupts the work environment hampering the work balance.


People sharing common interests club together to form groups. However, when a non-conforming member joins this group they may be pressured to conform to the group which can be against the organizational interests. This can be a cause of harassment or physical abuse.

Change Resistance

Informal groups can create resistance to the rules or strategies set by the management and cause difficulty in implementations.

An informal group may restrict modifications in the work environment.

FAQ (Frequently Asked Questions)

1. Why is an Informal Organization Needed?

Ans: Informal organizations serve some basic functions. They help in maintaining the cultural values of people and also provide social contentment to the members.

2. What is the role of management for an Informal Organization?

Ans: Informal groups prove helpful to the managers because of the functions they can serve. These functions include:

  • They restore lively and effective communication.

  • Informal organizations control the people to work together in practice.

  • They can maintain values that are necessary for the group members.