Informal Organizations by Muhammad Iqbal Malik

About Chester Irving Barnard (1886 – 1961) American business executive, public administrator, and sociological theorist who specialized in the nature of corporate organization His book, Functions of the Executive (1938), was widely influential in sociology and business theory

About Chester Irving Barnard (1886 – 1961) An employee of the AT&T (1909) Became president of an AT&T subsidiary in 1927 During the Great Depression, directed the New Jersey state relief system Served as president of the United Service Organizations (1942 to 1945) Also served as chairman of the National Science Foundation (1952–54).

Preface “A society is structured by formal organizations, formal organizations are vitalized and conditioned by informal organizations…. If one fails the other disintegrates” (Chester I. Barnard)

Informal Organizations The aggregate of the personal contacts and interactions and the associated groupings of people (Chester I. Barnard)

Informal Organizations “The system of relationships and lines of authority that develops spontaneously as employees meet and form power centers; that is, the human side of the organization that does not appear on any organization chart” Understanding Business, 6/e, (William G. Nickels )

Basic Characteristics Involves two or more people Informal relationships, groupings & interactions Repeated contacts but without any conscious joint purpose Involves the human need to socialize Includes both friendly and hostile relationships and interactions

Basic Characteristics Informal association precedes formal organization, as it requires preliminary (informal) contact and interaction before establishment

Scope of Informal Organizations Informal organizations exist within: Organization Community State or Everywhere

Effects and Consequences Affects knowledge, beliefs, attitudes and behaviour, which may spread across the entire organization with a chain reaction Forms habits, norms, customs institutions Creates conditions that may lead to the establishment of a formal organization (e.g. families, societies, clubs, company etc.)

Effects and Consequences Formal and informal practices often diverge (e.g. “failure” of a policy or procedure due to “nonacceptance” by the “people”) Informal groups also act as window to formal organizations (all organizational contacts are based on few individual interactions)

Effects and Consequences Informal organization persists and expands with formal organization through continuity of interactions Repeated interactions imply common (unconscious) purposes such as social, professional (unofficial), material Lasting interactions are fundamentally based on human need for action.

Effects and Consequences Such personal relationships are often more intense and significant than institutional (individual vs. org. loyalty) Purposive cooperation a means of individual (or social) development All these purposes are indirectly fulfilled through formal organizations Thus formal organizations serve societal cohesiveness and social integration

Creation of Informal by Formal Organizations Formal systems of cooperation are inherently informal in nature Formal activities involve people and result in informal association through continuous interactions Formal organizations provide individuals the means to fulfill social and individual needs through social interaction

Creation of Informal by Formal Organizations All organizations host informal organizations

Functions of Informal in Formal Organizations Communication (which is largely informal) Creates cohesiveness and integration Facilitates in creating “social” conditions that encourage willingness to work, by adding social motives Creates a feeling of independence as informal interactions are not governed by formal rules and authority

Functions of Informal in Formal Organizations Protects individual personality and character against negative (or corrupt) organizational influences Informal organizations play a significant role in the development of an organizational culture, that is the aggregate of the values, norms and attitudes of its people

Conceptual Application and Related Themes A public administrator should understand and harness the social forces in the organization to the advantage of the system To shape and guide values in the system, utilizing informal organizational concepts Can fight against corrupt practices by encouraging developing positive informal organizations

Conceptual Application and Related Themes Human Relations Movement – focus on human and group dynamics Trend towards organic vs. bureaucratic systems Organizing around values that drive people, rather than purely economic objectives Maslow’s hierarchy of needs - Social

Conceptual Application and Related Themes Systems theory – recognizing the influence of components on each other, on the system and vice versa Reinforced by research in social-psychology and sociology Recognition in modern organizational theory, of the relatively informal roles of champions and agents for change for significant organizational purposes

Examples Six senior most supreme court judges refused to take oath under LFO. All were “sacked”. The informal organization protected their individual morality from the corrupt influences of the formal system

Examples Organizational workers in Australia as a protest vowed to strictly “go by the book”, paralysing business activity – signifies the role of informal behaviour for organizational well being, even in routine formal matters. Informal cooperation in govt. institutions among corrupt public servants, protecting both individual and group interests

Examples The institution of prophethood, initially emerges as an informal organization within a social structure. After substantial growth, the institution becomes complex, and thus becomes formalized, thereby creating several other formal organizations and institutions - e.g. mosque, madrissa, shariah, fiqha, salat, zakat etc.

References Informal Organizations and Their Relation to Formal Organizations, Chester I. Barnard In Search of Excellence, Tom J. Peters Understanding Business, 6/e, (William G. Nickels ) Encyclopædia Britannica