Informal organization

The informal organization is the interlocking social structure that governs how people work together in practice. It is the aggregate of behaviors, interactions, norms, personal and professional connections through which work gets done and relationships are built among people who share a common organizational affiliation or cluster of affiliations. It consists of a dynamic set of personal relationships, social networks, communities of common interest, and emotional sources of motivation. The informal organization evolves organically and spontaneously in response to changes in the work environment, the flux of people through its porous boundaries, and the complex social dynamics of its members.

Tended effectively, the informal organization complements the more explicit structures, plans, and processes of the formal organization: it can accelerate and enhance responses to unanticipated events, foster innovation, enable people to solve problems that require collaboration across boundaries, and create footpaths showing where the formal organization may someday need to pave a way.

The informal organization and the formal organization

The nature of the informal organization becomes more distinct when its key characteristics are juxtaposed with those of the formal organization.

Key characteristics of the informal organization:
*evolving constantly
*grass roots
*dynamic and responsive
*excellent at motivation
*requires insider knowledge to be seen
*treats people as individuals
*flat and fluid
*cohered by trust and reciprocity
*difficult to pin down
*essential for situations that change quickly or are not yet fully understood

Key characteristics of the formal organization:
*enduring, unless deliberately altered
*top-down
*static
*excellent at alignment
*plain to see
*equates “person” with “role”
*hierarchical
*bound together by codified rules and order
*easily understood and explained
*critical for dealing with situations that are known and consistent

Historically, some have regarded the informal organization as the byproduct of insufficient formal organization—arguing, for example, that “it can hardly be questioned that the ideal situation in the business organization would be one where no informal organization existed.” [Mescon, Michael H., “Comments on Organization.” "The Journal of Educational Sociology", Vol. 33, No. 1 (September, 1959), pp. 34-36] However, the contemporary approach—one suggested as early as 1925 by Mary Parker Follett, the pioneer of community centers and author of influential works on management philosophy—is to integrate the informal organization and the formal organization, recognizing the strengths and limitations of each. Integration, as Follett defined it, means breaking down apparent sources of conflict into their basic elements and then building new solutions that neither allow domination nor require compromise. [ Davis, Albie. Dynamic Conflict Management: The Wisdom of Mary Parker Follett. Conference: “Beyond Mediation: Strategies For Appropriate Early Dispute Resolution In Special Education.” Washington, DC: CADRE (Consortium for Appropriate Dispute Resolution in Special Education), 2002.] In other words, integrating the informal organization with the formal organization replaces competition with coherence.

At a societal level, the importance of the relationship between formal and informal structures can be seen in the relationship between civil society and state authority. The power of integrating the formal organization and the informal organization can also be seen in many successful businesses.

Business Approaches

#Rapid growth. Starbucks, which grew from 100 employees to over 100,000 in just over a decade, provides structures to support improvisation. In a July 1998 Fast Company article on rapid growth, [ [http://www.fastcompany.com/magazine/16/one.html July 1998 Fast Company article on rapid growth] ] Starbucks chairman Howard Schultz said, “You can’t grow if you’re driven only by process, or only by the creative spirit. You’ve got to achieve a fragile balance between the two sides of the corporate brain.” [ Muio, Anna, “Growing Smart: Unit of One.” FastCompany, July 1998, Issue 16, page 73.]
#Learning organization. Following a four-year study of the Toyota Production System, Steven J. Spear and H. Kent Bowen concluded in Harvard Business Review that the legendary flexibility of Toyota’s operations is due to the way the scientific method is ingrained in its workers – not through formal training or manuals (the production system has never been written down) but through unwritten principles that govern how workers work, interact, construct, and learn. [ Spear, Steven J. and H. Kent Bowen, “Decoding the DNA of the Toyota Production System.” "Harvard Business Review", September 1999.]
#Idea generation. Texas Instruments credits its “Lunatic Fringe”—“an informal and amorphous group of TI engineers (and their peers and contacts outside the company),” according to Fortune Magazine—for its recent successes. "There's this continuum between total chaos and total order," Gene Frantz, the hub of this informal network, explained to Fortune. “About 95% of the people in TI are total order, and I thank God for them every day, because they create the products that allow me to spend money. I'm down here in total chaos, that total chaos of innovation. As a company we recognize the difference between those two and encourage both to occur." [ Lewis, Peter, “Texas Instruments’ Lunatic Fringe.” "Fortune Magazine", November 14, 2006.]

Related Concepts

*Organizational behavior; organizational structure; organizational communication
*Community; community of practice; knowledge management
*Formal network; social network; value network; social Web
*Network analysis; social network analysis; social network

Further reading

* [http://money.cnn.com/magazines/fortune/fortune_archive/2007/07/23/100135706/index.htm?postversion=2007071811 Reingold, Jennifer and Yang, Jia Lynn "The Hidden Workplace" Fortune, July 23, 2007]
*Creating an Informal Learning Organization.” Harvard Management Update, (July 1, 2000).
* [http://sloanreview.mit.edu/smr/issue/2002/spring/7/ Cross, Rob, Nitin Nohria and Andrew Parker, “Six Myths About Informal Networks—and How to Overcome Them.” SMR (MIT Sloan Management Review), April 1, 2002]
*Cross, Rob and Laurence Prusak, “The People Who Make Organizations Go—or Stop.” Harvard Business Review, June 1, 2002.
* [http://www.businessweek.com/careers/content/feb2007/ca20070214_709560.htm Goldsmith, Marshall and Jon Katzenbach, “Navigating the ‘Informal’ Organization.” BusinessWeek, February 14, 2007]
*Krackhardt, David and Jeffry R. Hanson, “Informal Networks: The Company Behind the Chart.” Harvard Business Review, July 1, 1993.
*Follett, Mary Parker, “The Psychological Foundations of Business Administration.” Paper presented before a Bureau of Personnel Administration conference group, January 1925. Reprinted in Dynamic Administration: The Collected Papers of Mary Parker Follett, edited by Henry C. Metcalf and L. Urwick, in The Early Sociology of Management and Organizations, Volume III. Kenneth Thompson, series editor. Routledge, 2003.
* [http://www.businessweek.com/@@4pDSSIUQ5Pw0mB0A/magazine/content/06_09/b3973083.htm “The Office Chart That Really Counts.” BusinessWeek, February 27, 2006]
* [http://www.ft.com/cms/s/699f502c-6f29-11db-ab7b-0000779e2340.html Murray, Sarah, “Putting the House In Order.” The Financial Times, November 8, 2006]
* [http://www.cfo.com/article.cfm/5572875/c_3666324 Shaw, Helen, “Not So Small, Still Beautiful.” CFO.com, March 3, 2006]

References