Informal organization refers to relationships between individuals in the organization based on interest, personal attitudes, emotions, prejudices, likes, dislikes, physical location, the similarity of work et. The informal organization comes into existence because of the limitations of the formal structure and it represents a natural grouping of people in working situations and the birth of small groups in an organization is a natural phenomenon. The informal group may overlap because an individual may be a member of more than one informal group. Informal groups come into being to support and supplement the formal organization. The formal and informal organization are inextricably interlinked. As Joseph L. Massie said, “Informal organization has been defined as any human interactions that occur spontaneously and naturally over long periods of time”.


The main characteristics of informal organization are:

  1. It has no place in the formal chart.
  2. It is definite and has no structure.
  3. It is a network of personal and social relations.
  4. It has its own rules and traditions.
  5. It provides for social satisfaction to its members.
  6. An informal organization arises spontaneously.
  7. It is an integral part of a total organization and management cannot eliminate it.
  8. It is based on personal attitudes, emotions likes and dislikes etc.


The informal organization is a psycho-social system and the main advantages of an informal organization are:

  1. Informal organization evolve short cuts and eliminate various individuals and departments.
  2. Informal organizations help in solving work problems of members.
  3. Informal groups recognise talented workers as their leaders.
  4. A manager can build better relations with his subordinates through informal contacts.
  5. Informal groups do not allow managers to cross the limits of authority.
  6. Informal groups often fill up the communication gaps which might arise in the organization.
  7. The informal organization may fill in gaps, if any, in the abilities of managers.
  8. Informal groups develop certain norms of behaviour which differentiate between good and bad conduct and between legitimate and illegitimate activities.


Informal groups have negative aspects too. They may create problems for the organization as mentioned below:

  1. Informal groups generally tend to resist change and change requires new skills but informal groups want to maintain the status quo and this creates obstructions in implementing new ideas and thus organization’s growth.
  2. An informal leader may turn out to be a troublemaker for the organisation and to increase his influence, he may work against the policies of management, and try to manipulate the behaviour of his followers.
  3. Every member of an informal group is also a member of the formal organization and sometimes role conflict may arise because the ideas, expectations and requirements of both the organizations may be opposite to each other.
  4. An informal group exerts strong pressure on its members for conformity and the members may become so loyal to their group that following the group norms may become a part of their life.
  5. Informal communications may give rise to rumours which may create conflict and misunderstanding among the people and rumours may prove dangerous for the organization.