Informal Organizations
by Muhammad Iqbal Malik
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).
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)
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
Scope of Informal Organizations
 Informal organizations exist within:
 Organization
 Community
 State or
 Everywhere
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
Creation of Informal by
Formal Organizations
 Formal systems of cooperation are
inherently informal in nature
 Formal activities involve people and
result in informal association through
continuous interactions
 Formal organizations provide individuals
the means to fulfill social and individual
needs through social interaction
Creation of Informal by
Formal Organizations
 All organizations host informal
organizations
Functions of Informal in
Formal Organizations
 Communication (which is largely
informal)
 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
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 socialpsychology 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.
References
 Informal Organizations and Their Relation to
Formal Organizations, Chester I. Barnard
 In Search of Excellence, Tom J. Peters
 Understanding Business, 6/e, (William G.
Nickels )
 Encyclopædia Britannica