Informal Organisation: it’s Meaning, Functions and Advantages!


Informal organisation refers to the network of personnel and social relationships which arise spontaneously when people working together interact on personal whims, likes and prejudices.

Such relations are not created by the top management and they are not recognised formally.

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The informal groups sometimes run parallel to the formal ones. Informal relations are not portrayed on organisation charts and manuals. An informal organisation provides an opportunity to workers to come close to each other, develop a feeling of co-operation and co­ordination among themselves.

According to Chester I. Barnard, “informal organisation is a joint personal activity without a conscious joint purpose, even though possibly contributing to joint results.” Informal organisation is pervasive and it is based on informal authority, informal communication and informal leaders. It is fickle and changes from time to time.

In every organisation it is commonly found that several persons are in frequent contact with each other although their relationships are not necessitated or governed by the formal organisations. The contact may be accidental or incidental to organise activities or it may arise from some personal desire.

It is quite natural whenever people associate social relationships and groupings are bound to come about. This type or sort of relationship or grouping is known as informal organisation.


It should also be remembered that the existence of a formal organisation is a condition precedent for the creation of an informal organisation. However, Theo Haimann says “informal organisation can exist even without a formal organisation”.

Both formal and informal organisations are considered necessary by modern authors as they are complementary to each other. In short, both formal and informal relations are to any group action what two blades are for a workable pair of scissors.

Functions of the Informal Organisation:

Informal organisation performs a number of functions which even formal organisations cannot perform.

The principal functions are as follows:


1. It helps to preserve the integrity of the group as a whole.

2. It provides social satisfaction, personal attachment and status. All these ultimately lead to job satisfaction.

3. It acts as an effective communication channel.

4. It controls social behaviour, influences it and regulates it more effectively than the formal organisation.

The above functions also highlight the benefits derived from informal organisation and also its importance.

Advantages or Benefits of Informal Organisation:

The following are the benefits of informal organisation:

(1) Greater Co-Operation:

Many requirements which cannot be met successfully by a formal organisation can be met better by the informal organisation. A good leader can secure better co-operation through the informal organisation.

(2) Reduction of Work Load:

An informal organisation reduces the work load of the formal manager. If the manager has the support of the informal organisation, he can freely delegate and decentralise authority and thereby reduce his workload.

(3) Job Satisfaction:

It gives satisfaction and stability to the work group. It is the means by which workers achieve a sense of belongingness and security. This situation leads to job satisfaction.

(4) Employee Communication:

It can act as an effective communication channel. Certain type of information can be quickly passed on only through informal organisation. It acts as a safety valve of the frustration and other emotional problems.

Dangers of Informal Organisation:

The informal organisation, which can work better than a formal organisation, has certain inherent defects. In fact it will even produce dangerous results if it is handled carelessly. It can exercise both constructive as well as destructive influence on the formal organisation.

1. Managers may form groups and cliques. This will ultimately lead to conflicts and even to industrial unrest.

2. Formation of group may even take the employees away from the organisational goals.

3. Informal organisation has the effect of spreading rumours. The rumours will not only spoil the team spirit and morale but may lead to a heavy loss.

4. If the informal organisation is not properly used, control over employees can also become ineffective.

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