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1.4 The informal organisation and its relationship with the formal organisation

So far, we have been looking at formal organisational structures – they have been designed by management to try and ensure that an organisation can meet its goals.

We now look at the informal organisation. This organisation evolves over time and is a network of relationships that exist within an organisation. The relationships arise due to common interests or friendships. These relationships can be across divisions and it is through these relationships that daily interactions between members of staff take place.

Within a formal organisation, an informal organisation will be present and all organisations have some mix of the two.

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There are many reasons for the informal organisation, including:

§ individuals’ goals may differ from the organisations – workers with the same goals gravitate together.

§ Personal relationships may arise between individuals.

§ A group of individuals may share common interests, e.g. football and so form an informal group.

§ Certain members of the organisation may be natural leaders and so lead a group, even though they have no formal managerial place.

§ Workers find new ways of doing things which save them time.

Test your understanding 12

Informal relationship are shown on organisational charts. True or false?

The advantages and disadvantages of an informal organisation are

AdvantagesDisadvantages

§ Better motivation

§ Better communication§ Inefficient organisations

§ Opposition to change can be intensified

§ The ‘grapevine effect’

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Advantages

§ If managers can work with the informal groups within their department, there should be higher levels of motivation and productivity.

§ Interdivisional communication should be better through the informal network. This could lead to increased innovation which should help the company succeed.

Disadvantages

§ If the formal structure is in conflict with the informal structure, the organisation may end up being inefficient at meeting its objectives. This can arise due to, e.g. formal lines of communication are more efficient and become more important.

§ If managers try to implement change, they may find opposition from not only the formal but also the informal organisation e.g. change in one division, may lead to company wide unrest as word of the changes spread through the informal network, and other divisions start to be concerned that ‘they will be next’ (the grapevine effect).

Test your understanding 13

Social relationships within an organisation can be across divisions. True or false?