In any organization, when the relationships among its personnel are based on personal attitudes, emotions, prejudices, likes, and dislikes, we call it an informal organization. Within the legal framework, informal relations characterize the behavior of the organization in actual practice. It is formed by the system of the actual behavior of the personnel engaged in carrying out its tasks and objectives. The actual behavior differs from the one laid down by its norms, procedures, rules, and regulations. Chester Barnard defines an informal organization “as the aggregate of personnel contacts and interactions and the associated groupings of people.”
While in a formal organization, the emphasis is on structure, in an informal organization, the emphasis is on personal and human relations. The latter consists of the pattern of actual behavior of people working in the organization. The Kitchen Cabinet, which aids and assists a President or a Prime Minister can be described as one of the best examples of an informal organization. Memebers of an informal organization can be even more influential than those who form a part of a formal organization. Informal organizations have often been viewed as shadow organizations. They do not have definite organizational goals. The relationship between their members, therefore, is not strictly legal. In an informal organization, the dominant actors are the personalities of its personnel.
Features of an Informal Organization:
(1) The members of an informed organization have a sense of psychological Unity- The spontaneous, unofficial, and unstructured relations among the members of an informal organization very often lead to the development of a favorable psychological environment which, in turn, increases their interactions and strengthens the bonds of identification. Their continuous association leads to the emergence and adoption of shared values and a sense of collective enterprise.
(2) Different styles of Leadership- Unlike a formal organization where members follow the leader because of his formal position or authority, in an informal organization, members follow the leader because of his influence and personality. The leadership of an informal organization enjoys popularity with the personnel.
(3) Better conformity to the standard of behavior- In an informal organization, members conform better to the standard of behavior accepted and expected by the group. In it, the aim of the members is to satisfy their social needs. Deviation from the accepted and expected standards of behavior leads to criticism and punishment at the hands of the group.
(4) Informal organizations evolve Naturally- Unlike a formal organization which comes into being as a result of design, informal organizations evolve naturally. An informal organization is more a child of evolution and less of design and construction. Further, it works on the basis of conventions which are the product of expediency and experience.
These are the four basic features of an informal organization.
Every organization has both a formal as well as informal dimension. The two sets of features of Formal and Informal Organizations appear to be totally distinct from each other. However, very often, they almost always co-exist side by side in an organization. Every formal organization has an informal dimension and the reverse of it is also true. No organization can hope to carry out its work effectively only on the basis of its formal structures, rules, and procedures. It can have organizational effectiveness only when its personnel has some degree of emotional unity and a sense of collective enterprise. However, an organization cannot be a totally informal arrangement. It has to have for its basis a set of formal structures, rules, and procedures. In practice, each organization works both in formal and informal ways. The conceptualization of an organization as accepted and advocated by Dimock and Dimcock and Schulz offers a composite and synthetic view of the organization as a formal structure as well as a humanistic and informal arrangement for accomplishing the desired objectives.
In fact, an informal organization helps a formal organization in a number of ways. It can be said without much exaggeration that formal organization and informal organization are two sides of the same coin. A society is structured by formal organizations and they are vitalized and characterized by informal organizations. In the actual operation of every formal organization, an informal set of relationships among its personnel (informal organization) always comes to develop naturally. It helps the working of the formal organization in an effective and smooth way. As such, both formal and informal organizations always exist side by side. Both are related and often stand meshed up with each other. Any result-oriented administrative system should be able to achieve a proper blend of both formal and informal aspects of an organization, which alone can enable it to effectively perform its due role in the environment.