Introduction to Organizational Behavior

In a formal organization, the primary focus is on the official position, held by an individual while in an informal organization; it is on the relationships between people. Another significant difference between formal and informal organizations is that power in a formal organization is derived from the position held in the organization, while, in an informal organization, the personality of the individual provide him with power. According to J. L. Gray and F. A. Starke, formal and informal organizations also differ from each other on the parameters of organizational structure, position terminology, goals of the organization, basis of influence, control mechanisms, channels of communication, charting of member relationships, and mixed characteristics. Members of an informal organization differ from one another in their experience, seniority, salary, educational or technical qualifications, personality, birthplace and the nature of their workplace. These characteristics not only differentiate the members of an informal organization, but also accord status to them. The informal leaders are chosen on the basis of the status ascribed to them by the other members of the informal organization.

Informal organizations benefit the organization in many ways. They help in the development of an effective organizational system and reduce the workload of managers. Informal organizations also provide employees with an outlet to express their anxieties and problems, improve job satisfaction, and reduce employee turnover. In spite of its merits, informal organizations, at times, also create many problems. It may act as a barrier to organizational change. Conflicts may also arise between the members of the informal organization. Sometimes, its members may experience a conflict due to the diverse roles they have to play as members of the formal work group and the informal group. The biggest problem an informal organization faces is to ensure that the members conform to its norms and the use of penalties and sanctions to punish those who deviate from these norms. The communication channel in an informal organization is called the grapevine. The grapevine thrives in all those places where people interact with one another and tends to be active in periods of stress or insecurity.