About Lesson
Informal organization refers to the relationships between people in an organization based not on procedures and regulations but on personal attitudes, prejudices, likes and dislikes, etc. Informal organization is a natural or spontaneous network of relationships based upon individual needs, moods, and emotions.
Distinction between Formal and Informal Organization
| Formal Organisation | Informal Organization |
| It is based on delegation of authority and may grow to immense size | It arises on account of social interaction of people and tends to remain small. |
| It is shown on the organization chart. | It has no place in the formal chart. |
| Formal authority attaches to a position | Informal authority attaches to a person. |
| Rules, duties and responsibilities are written and clearly defined. | It has unwritten rules and traditions. |
| It is created deliberately and is consciously planned | It is natural and arises spontaneously |
| Formal authority flows downwards. | Informal authority flows upwards or horizontally. |
| It provides for division of labor and has a definite structure. | It is structure less and develops out of social contacts. |
| It is permanent and stable. | It is relatively fickle and unstable. |
| Formal organization is created to meet organizational goals. | Informal organization arises from mans quest for social satisfaction. |
Merits and Demerits of Informal Organization
| Merits | Demerits |
| Enables work to be done quickly and effectively | Opposes change of any kind |
| Reduces managerial work-load | Encourages negativism. |
| Promotes co-operation | Generates inter-personal and group rivalries |
| Leads to effective communication. | Promotes undesirable rumor mongering |
| Provides an outlet for employee emotions | Promotes dissatisfaction among employees |
| Promotes job-satisfaction on the part of employees | Causes undue harassment to certain employees |
| Makes the organizational system highly effective | Causes frustration and lack of motivation |