cHAPTER

nterface between
formal andInformal Organisations
Learning Outcomes
this chapter, the
learners will be able to:
Ater studying
Funlainthe concepts and nature of formal and informal organisations
nifferentiate between formal organisation and informal organisation
Explain the concepts of group and group dynamics
Appreciate the functions of informal groups
Analyse the problems created by informal groups
Suggest guidelines for making better use of groups dynamics

Formal organisation which refers to the structure of well-defined jobs,

a definite measure of authority, responsibility and each bearing
accountability, is not capabie of
accomplishing organisational objectives all alone. It needs the help of informal organisation
Tor this purpose. In other words, informal organisation which does not
organisation chart, supplements the formal organisation in achieving appear on the
ghals effectively and efficiently. The working of informal groups and organisational
Simple as it may appear to be. Therefore, it is obligatory for every manager leaders is not as
Thoroughly the working pattern of informal relationships in the organisation andto tostudy use
them for achieving organisational objectives. In this chapter, an attempt has been made
sudy the behaviour of informal groups which develop automatically alongwith the
formal organisation.
13.1 FORMAL ORGANISATION
Ij 4uthorS4tton refers to the structure of well-defined jobs, each bearing a definite measure
aThus,upeople
thority, responsi
of the bility
and accountability. The structure is consciously designed to enable
Organisation to work together in accomplishing the common objectives.
formal
certain things,organisationa
is a structure to which an individual must adjust. It tells him to
in specified manner, to obey orders from designated individuals, and to
Co-Organioperastativeiolyn structure.
with others. Coodination also proceeds aceording to a prescribed pattern

13.1
 MANAGEMENT
13.2 PRINCIPLES AND
The formal
the degree of
organisation
success of these
facilitates the determination of objectives
objectives will be determined by the and AP LIC ATI
capacities polcheies.
of
within the organisation.
Characteristics of Formal Organisation
peug
salient features of formal organisation are as follows:
The
down bv the top management to achieve
()) Organisation structure is laid
goals.
(1) Organisation structure is
based on division of labour
efficiency in the operations.
and organisatioacnhiaeVe
specialisation to
jobs to be
(i) Organisation structure concentrates on the performed and
individuals who are to perform jobs. not the
consideration the sentiments
(ir) The organisation does not take into of
members. organisationa
(r) The authoritv and responsibility relationships created by the organisation
to be honoured by everyone. The position in the organisation hierarchy structure
are
the relative status of the incumbent. determines
Significance of FormalOrganisation
Formal organisation is the basis of effective management of any enterprise. It can heh
in achieving the following benefits :
() Formal organisation helps in determining the objectives of various departments and
units. It facilitates the attainment of organisational goals through the fulfillment of
objectives of various departments.
(ii) It facilitates optimum use of resources and new technological developments.
(ii) It clarifies authority and responsibility relationships which lead to better
communication.
(ir) There is clear-cut division of work among the departments and individuals. As a
result, there is no overlapping of efforts. This will avoid wastage of resources and
conflicts between individuals.
(r) Formal organisation creates a proper balance of activities of different department.
(vi) The creation of a chain of command from top to bottom indicates avenues to
promotion and the qualifications needed to hold a higher level job. Emplovees are
motivated to work for personal advancement.
(vii) Formal organisation brings about stability in the enterprise through procedures
Continues
policies. rules and regulations. The working of different departments
despite the leaving of old emplovees and joining of new hands.
Limitations of Formal Organisation
Forrmal organisation may suffer frorm the following limitations : working
() It emphasizes formal rules and regulations which might introduce rigidity in in
delavs
(ü) It ermphasizes communication as per official channels. This might cause
addversel
sending and receiving inforrnation. Decision-making would be afected
because of slow cornmunication.
 FORMA AND INFORMAL ORGANISATIONS 13.3
NTERFACE
BETWEEN

emphasizes the jobs and ignores the human relationships. An organisation 1s

(ii) It
incomplete without considering the interpersonal relationships between the members.
It curbs
(iv) regulations.
creativity by the employees as they are supposed to adhere to rules and

13.2INNFORMAL ORGANISATION
laformalorganisation refers to the relationship between people in the organisation based on
personalattitudes, emotions, prejudices, likes, dislikes, etc. These relations are not developed
according to procedures and regulations laid down in the formal organisation structure:
formal groups give rise to small informal or social groups. These groups may
generally,large
generayon common taste, language, culture or some other factor. They are not pre-planned,
develop automatically through continuous interaction between people.
they
but Man is a social animal and cannot live without social interaction. Wherever people
work or live together, they develop social relationships by becoming members of one or more
informal groups. These informal groups are known as informal organisation. Keith Davis has
eihed informal organisation as at ntwork of personal and social relations not established or
another. It is
required by formal organisation but arising spontaneously as people associate with one
B knon as 'shadow organisation' as it exists alongwith the formal organisation.
Informal organisation means natural groupings of people in the work situation.
Whenever people work together, they evolve informal groups bound together by common
socal, technological work or goal interests. Such groups constitute an informal organisation.
To quote Keith Davis, "Beneath the cloak of formal relationships in every institution, there crists a
more complex system of social relationships called the informal organisation". The social relations are
complex because there are many causes of their origin and they can't be planned. Moreover,.
informal groups may not be stable. It is because of these reasons that it is very difficuit to
depict informal relations on the organisation chart.
Characteristics of Informal Organisation
Generally, large formal groups give rise to small informal or social groups. These groups may
be based on common taste, language, culture or some other factor. They develop automaticaly
within the organisation according to the nature of interaction between the members in the
Organisation. The salient features of informal organisation are as follows:
(0) Informal relations are unplanned; they arise spontaneously.
(") Formation of informal organisation is a natural process.
() Informal organisation reflects human relationships.
P) Informal organisations are based on common taste, problems, language., religion.
culture, etc.
) The membership of informal organisations is voluntary Aperson may be a member
of a number of informal groups simultaneously Thus. there can be overlapping in
the informal groups.
(vi) Informal organisation is unstabie in nature; its life is generally short.
 MANAGEMENT
13.4 PRINCIPLES AND
Significance of Informal Organisation
The importance of informal organisation arises from thefunctions
functions of informal organisation are as
under performed by AP LICAIOE
gr0ups. The important
() lt serves as a verv useful channel of communication in the organisation. The intormA
communication is verv fast.
(ii) It blends with the formal organisation
to make it more effective It gives inorma
to the formal organisation.
(iii) The informal leader lightens the
burden of the formal manager and Sup un
tries to fill in
the gap in the manager's abilities.
satisfaction to the
(ir) Informal organisation gives psvchological members.
platform to express their feelings. They get a
(1) The presence of informal organisation encourages the managers to plan
act carefullv. Thus, informal organisation supports and supplements the formanda
organisation.
TABLE 13.1 : FORMAL ORGANISATION Vs. INFORMAL ORGANISATION

Basis Fornal Organisation Informal Organisation

1. Purpose It is created to achieve pre-determined It has no pre-determined
objectives. objectives.
2. Structure It is an official hierarchv of relations. Its structure is based on human
I refers to the structure of well-defined emotions and sentiments. It refers
authority and responsibility relationships.to the personal relationships which|
develop automatically when people
work together.
3. Formation Formal relations are well-planned and| Informal relations are unplanned and
created deliberatelv. they originate automatically.
4. Chain of Fromal organisation follows the official Informal organisation does not have
Command and chain of command which can't bea fixed chain of command. It is
Communication changed. Communication has to follow based on the sentiments of the
formal channels. members. There are no fixed patterms
of communication.
not last
5. Stability Formal organisation is usually stable. Informal organisation may
so long.
human
6. Human Relations Formal organisation reflects technological Informal organisation reflectsattitudes.
aspect of the organisation. It does not aspect. It is based on the
languag
take care of human sentiments. likes and dislikes, tastes,
etc. of people.
highl
It is
7. Flexibility It follows a rigid structure. It is loosely structured.
flexible.
by the
8. Leadership Managers provide leadership to the Informal leaders are chosen
workers. group members.
 FORMAL AND INFORMAL ORGANISATIONS 13.5
BETWEEN
INTERFACE
Informal Organisation
Limitationsof
limitations of innformal organisation are as follows :
The
Informal organisation may pressurise the members to restrict their output. This 1s
(i) against theinterests of the organisation.
Informal leaders may play politics in the organisation and create hurdles in the
(i) smooth working of the enterprise.
Informal communication often carries inaccurate, incomplete and distorted
(iii) information. Informal groups might spread
rumours in the enterprise.
Informal organisation may resist changes in the enterprise. This would affect its
(iv)
survival and growth adversely.
groups develop their norms of behaviour which every member has to follow.
(") Informal
Such norms may gO against the interests of the enterprise.

13.3 GROUP DYNAMICS

Meaning of Group
According to Edgar Schein, A grop S any number of people who interact with one another.
of one another, and perceive themselves to be a group. Asimilar
are psychologically aware
afinition of group is given by Marrin E. Shaw in the folowing words : A group consists of
or more persons who interact with each other consciously for the achievement of certain common
biectives. The members of the group are mutually interdependent and they are aware that they are
part of a group.
Thus, a group is a collection of two or more people who have a common goal and
interact with each other to accomplish their goal, are aware of one another and perceive
themselves to be a part of the group. Each person influences and is influenced by each other.
Thus, casual gathering of people does not qualify as a group because the people are not aware
of one another and do not interact between themselves in a meaningful way. People sitting
in a cinema hall watching a movie or waiting at a platform for a train do not necessarily
constitute a group.
In any organisation, two types of groups co-exist, namely. formal and informal groups.
n rormal group is a work unit that is deliberately created by the management as a part of the
Organisation structure, to perform tasks that enhance the accomplishment of organisational
0ojectives. It is an ´official' group whose members are selected by management according to
their talents in order to assume certain defined roles and to undertake specific tasks. The
functioning of such a group is governed by organisational rules, procedures and policies.
and dealOrmal
develop
group, members cut across formal relationships of superior and subordinate
personal and social relationships on the basis of common interests, needs and
values. The
among the informal groups emerge spontaneously out of personal, social and natural instincts
are not
stablemembers. They co-exist alongwith the formal groups. Generally, informal groups
as their existence
forming them. depends upon the needs, values and goals of the members
 MANAGEMENT PRINCIPLES AND
13.6

Meaning of Group Dynamics

Group dynamics are concerned with the formation of groups, their
and the way they affect individual members, other groups
and the structure and
are formed for a variety of reasons such as need tor
socialisation, goalorganisation, The procegsoue
etc. Their structure is defined in terms of
leader-follower relations.
pattern of communication and use of power by the group. Every group
conduct to regulate the behaviour of its members and evolves its
achieprvement
Group
evolves ocesses, reSeloauiret
strategies
to
groups in the organisation. The studv of dynamics of group behaviour is an
deal
with ohe,
human behaviour in modern organisations as it provides insights into the
and suggests wavs of making better use of groups for the accomplishments of workiintengrgal goup
of part o
objectives.
Causes of Emergence of Informal Groups (Why do People Join Groups?)
organisationa
There is no single reason which can explain whv groups are formed. The
which are responsible for the formation of informal groups are discussed beloW important
factor
1. Desire for Socialisation. Man is asocial being. He wants to socialise
Being a member of a number of informal groups allows him to satisfywithhis others
needs on the job. He can interact with others rather than Socia
loneliness.
working in isolated
2. Sense of Identification. Many people have an urge to be identified as menh
of a distinct group. So, they form special groups as cricket club, literary socie
etc. This might also help in increasing their status.
3. Goal Achievement. People form groups to pool talents, knowledge and resoutes
to achieve common goals or interests. People doing a common task confront
similar types of problems. To remove such problems, they can constitute i
separate group.
4. Monotonous Jobs. Workers performing standardised routine jobs often feel bored.
This causes mental fatigue and reduces their efficiency. In order to overcome ther
mental fatigue at work, they may form informal groups and have frequent interactions
with each other at the workplace.
5. Security. There is strength in numbers. By joining a group, a person can reduce tt
effectivelk
insecurity of standing alone. Groups help the members to meet pressures
Further, they feel secured against the management's arbitrariness.
members.
6. Source of Information. Informal group is a source of information to its
member
Informal communication is very fast. A piece of information available to a
will reach nearly all the members of the group in a short span of time. The group
Psychologial
may develop a special (code) language for speedy communication.
barriers to communication are also overcome by the group. environment
7. Innovation and Creativity. An informal group provides a supportive waysof
in which members can experiment with their ideas and explore alternative
approval offellow
doing things. It is a breeding ground for new ideas because the
workers is necessary for supporting new ideas and innovations.
 FORMAL ANDINFORMAL ORGANISATIONS 13.7
ETWEEN
BE
INTERFACE
INTERFACE BETWEEN FORMAL AND INFORMAL ORGANISATIONS
13.4 organisation is created deliberately to achieve certain pre-determined objectives. It is
supported
Formal by a structure of authority-responsibility relationships, signifying chain of command
of communication. But infomal organisation develops simultaneously as
official pattern
and organisation interact with each other. It neither follows the formal chain of
members of the
nor the formal pattern of communication. Informal organisation consists of several
command
overlappinggroups which can either assist or impede the working of the organisation. There
interaction
continuous between the formal and informal organisations. Informal relations
is a necessary tofacilitate the performance of the organisation efficiently and effectively. In
are Keith Davis, "Both formal and informal organisations are necessary for any
words of two blades are essential to make a pair of scissors
the action just as workable.
group
The
should not look down upon the informal organisation as it arises
management
spontaneously alongwiththe formal organisation. It may be noted that formal organisation
all the needs (e.g., affiliation, affection, esteem, etc.) of its members.
unable to meet
is
Management can fulfill these needs of the workers by encouraging healthy interactions
among informal
groups and their members. Also, informal organisation provides a buffer
to absorb the shock of tension and frustration among the members as a result of formal
organisational pinpricks.
Informal organisation may act to fill in gaps in manager's abilities. For instance, if a
nnager is weak in planning, one of his subordinates may informally help him in such a
dation. Management may also make use of informal group leaders by taking them into
confdence to mediate as bridges of understanding between the management and the employees.
Shartle has rightly said, "Informal structure is one index of the dynamics of getting work
done and it appears that, for efficiency, it will necessarily deviate from the formal structure".
Therefore, management should adopt a positive attitude towards informal organisations.
It should use it alongwith formal structure to make a workable system for achieving the
organisational objectives.
13.4.1 Functions of Informal Groups
Intormal groups are important from the point of view of the management as they perform
the following functions :
() Support to Formal Structure. Informal groups provide support to formal organisation
Structure. Formal structure is mechanistic and hierarchical. Informal groups provide
a human dimension to it. They fill the gaps in the formal structure.
) Flling Gaps in Management's Abilities. An enlightened group can also fill in
gaps in management's abilities. At times, a manager does not have adequate grasp
Over the problem. A subordinate has knowledge in the area and is willing to help
nis superior. Similarly, the group helps elaborate vague policies and procedures.
*Speedy Communication. Informal communication is very fast as it is free from
e barriers of status and position. It can be used by the management to ensure
free flow of
(iv) communication.
Social Functions. Informal groups arise to satisfy social needs of members such
s Security, friendship, sense of belonging, etc. Thus, informal organisation gives
 MANAGEMENT
13.8
PRINCIPLES AND
psvchological satisfaction to its members.
their feelings. It also satisfies the
(v) Solution of Work Problems.
An informal
natural
It provides

organisation
them platform
desire of people to a
foorm
helps its
Agoups.P LICAIO
their work problems through the
and experience.
help of other members,
members tu
i.e., sharing of
(vi) Norms of Behaviour. Informal groups develop certain norms o.
conduct and
which differentiate between good and bad
illegitimate activities. These bring discipline and between legitimate
order among the
the organisation.
(vii) Better Relations. A manager can build better relations with his
informal contacts. He can consult the informal leaders and seek
empl
subordinatesoye s
in getting the things done from the
workers. their co0pertahtoiaugn
13.5 PROBLEMS CREATED BY INFORMAL GROUPS
Although informal groups contribute to smooth and efficient functioningyet of the
and provide social satisfaction and job satisfaction to its members,
because of existence
of some of such organisation
groups in the organisation is not always a smooth sailing dysfunctiond
aspects. Thev mav generate certain problems for the organisation and its management. Such
problems are discussed below :
(i) Restriction of Output. Informal groups may presurise their members to restin
their output and promote unauthorised behaviour. The group activities may mm
counter to the organisational goals. For example, Hawthorne studies revealed tha
an informal group had set production norms below the capacity of the group and
its members restricted their output so as to adhere to the group norms.
(ii) Conformity to Group Norms. Informal organisation exerts strong pressures kor
conformitv to group norms. Conformity can make group members reluctant to
act independently, creatively or assertively, for fear of losing group approval and
membership. Sometimes, informal group leaders manipulate the group towards
undesirable activities. Thev mav block positive contributions from capable people
limit for tea break.
Thev mav force members to restrict output, to exceed the time
to indulge in other undesirable activities, etc.
(iii) Politics by Informal Leaders. The informal leaders indulge in power politcs,
to undermine
seek dominance and to prevail upon the management, they tend
organisational structure, values,goals and its environment. Unhealthy rivalry a
organisation
the leaders for getting more prominence may also affect the working of
in an adverse manner.
of formal
(ip) Role Conflict. Everv member of informal group is also a member certain
to play same
roles
organisation. In an informal group, members have specific the
But at positive
conributions to be made and enjoy status and social ranking.
and to play br
time they are also expected to make valuable contributiondistinct roles played
rules
role in the formal organisation. Under different situations, with
compliance
members may create role conflicts. Too much observance and
for informal go
and regulations of formal structure may create problem
 FORMAL AND INFORMAL ORGANISATIONs 13.9
BE:TWEEN
INTERFACE
Generation of Rumours. Informal communication often carriers inaccurate,
() incomplete and distorted information. Group members often indulge in spreading
rumours to forestall management action. Rumours are more conmmon when the
employees are not kept informed on matters that directly affect them. Rumours
make the job of management difficult and also undetermine employee morale.
Resistance to Change. Informal groups generally pressurise the management tor
(vi) lowering down speed of change or to postpone them for future. Such tendency
on the part of group members, may impede introduction and implementation of
new ideas in the organisation and may hamper growth and diversification of the
organisation.
Operating Costs. Informal groups act as a safety valve for the frustrations and
(vii) other emotional problems of the group members. Studies have observed that
wocial interaction by reduCing monotony on the job actually contribute to higher
productivity. But this is true up to a certain point. Allowing informal groups to
engage in gossiping, joke telling and idle conversation that satisfy some of the
members' social needs result in higher operating costs to the organisation.
.acMANAGEMENT APPROÁCH TO HANDLE INFORMAL GROUPs
The following guidelines may be followed by the management to make effective use of
informal organisation :
(i) The informal groups operating in the organisation should be identified and their
existence recognised.
(i) The patterns of informal communication should be analysed carefully To know
the souces of misinformation, or rumour, an enlightened manager can use informal
contacts. He should try to influence the sources of misinformation or rumour and
also transmit authentic information through both formal and informal channels to
control further spread of rumour.
(iii) Often the leader of the informal organisation gains and maintains the recognition of
its members by working with or against the management. Knowing and understanding
the informal leadership can be extremely useful to a manager. A manager can build
favourable relationships with informal leaders in several ways. He can consult them
and seek their advice on technial matters and human relation problems. He can seek
their assistance in the orientation of emnplovees and also their training to increase
their competence.
9 The management should attempt to integrate the interests of informal groups with
the objectives of the formal organisation. If this could be achieved, much of the
role conflit would be
avoided.
anal
and
groups must be taken into confidence whenever a change in machines
work-methods
is to be introduced in the organisation. It is easier to introduce
.Lnge when group norms are changed. For overcoming resistance to change on
the
the rt of the gorups, the management must share complete information about
themchange
with them and try to persuade them to accept change by convincing
of the benefits of the
said change.