What are informal groups in the workplace?

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Many companies often have informal organizations in combination with the formal structure of the work environment. Informal organizations are often essential for building relationships and support systems among staff members. If you're thinking about forming an informal organization, there are several things to consider in regard to benefits and differences from formal structure. In this article, we explore what informal organizations are, why they're beneficial and how they differ from formal organizations.

Related: The 5 Common Types of Business Structures

What is an informal organization?

Informal organizations are social structures that provide direction for how people work together in the workplace or other environment. Informal organizations represent the cluster of personal and professional connections and norms that give structure to how teams complete projects and tasks and build relationships at work.

Typically, informal organizations aren't public-facing entities, but are instead a type of dynamic within a work setting that supports personal relationships, communities that share common interests and social networks. Informal organizations also provide motivational and emotional support to members who are involved or affiliated with them.

Informal organizations also provide a way for individuals to collaborate across teams, foster innovation and enable teams to solve problems outside of traditional structures and processes of more formal organizations.

Related: What Is Organizational Culture?

What is a formal organization?

Formal organizations have explicit structures in place, as well as processes and plans for achieving specific business goals. Unlike informal organizations, formal organizations may often be public-facing entities that apply hierarchical and ordered procedures that direct work situations that are consistent.

In a formal organization, members often have specific roles they fill to achieve certain objectives that support a larger goal of the organization. Many business structures use formal organization as a way to form consistent processes for addressing various aspects of business operations.

Related: What Is Business Hierarchy and Does It Work?

Benefits of informal organizations

Although informal organizations don't generally have the same structure as formal organizations, there are several benefits of forming one. Consider the following advantages of creating and maintaining an informal organization:

More responsive to changes

Because of the flexibility and informal nature of these types of organizations, informal affiliations tend to be more responsive to changes in structure and situations that can affect members. Since no one holds a specific role within an informal organization, all members have equal opportunity to make decisions that support their wellbeing in different circumstances. This is highly beneficial because with the flexibility that informal organizations have, all members can have an impact on the direction of the organization.

Greater focus on individuals

Informal organizations also have a direct focus on emotional and motivational outcomes, which can be advantageous for encouraging supportive relationships. Members of informal organizations in their workplaces can have greater opportunities to find emotional support, encouragement from their peers and build relationships with other members in the group. This atmosphere creates a positive culture where members encourage creativity, inclusion and open communication.

More opportunities for communication

People who are part of informal organizations at work also have more opportunities for communicating about different topics. Since informal organizations don't implement specific processes for achieving goals, people who are part of these types of affiliations often find opportunities to connect more with others and communicate across different areas of their workplaces.

Supports social and cultural values

Rather than setting and achieving business objectives, informal organizations exist within companies to provide social support. Informal organizations often place more focus on social and cultural values rather than quantitative outcomes, making these types of structures essential in encouraging staff members to feel comfortable in their work environments.

Combines with formal organizations

Formal organizations benefit from informal organizations because the informal structure of emotional support, peer motivation and opportunities for informal collaboration can help employees find more engagement in the processes, procedures and performance standards of a formal organization. Additionally, informal organizations provide the social and cultural values that help teams connect with one another when performing more formal work processes.

Related: Forms of Business Organizations: Advantages and Disadvantages

Advantages of formal organizations

Along with the benefits of informal organizations, formal organizations are advantageous for directing various processes that provide opportunities for employees to create informal organizations. Consider some of the advantages of having a formal organizational structure in place:

Provides structural hierarchy

Most businesses rely on formal organization to create hierarchies within the workplace. Typically, formal organizations use a top-down approach, where upper-level management is responsible for making decisions and setting goals. Staff in mid-management communicate these standards with team members to carry out specific objectives that support revenue growth and profitability.

Gives members specific roles

Formal organizations also give staff members specific roles with responsibilities for their roles. For instance, managers and supervisors have specific leadership roles that require them to direct, monitor and evaluate staff members. With specific roles, teams in a formal organization have better understanding of what employers expect of them and the tasks necessary for them to reach their objectives.

Outlines standards and practices

Formal organizations also have practices in place for measuring and evaluating performance, productivity, financial outcomes and other business processes. The structure that formal organizations give to businesses enable professionals to set standards for conduct, expectations for performance and specific strategies for reaching important goals.

Related: 17 Business Structures To Consider for Incorporating Your Company or Organization

Differences between formal and informal organizations

There are several key differences between informal organizations and formal organizations, including:

Purpose

One of the biggest differences between formal and informal organizations is the purpose behind each. An informal organization often serves individual needs where members can create purpose as the organization evolves. Additionally, goals aren't always a focus and may not always be clear due to the social requirements of the organization rather than specific company guidelines.

In a formal organization, however, there is a specific purpose and clearly set goal that members work toward achieving. Professionals in formal organizations plan and implement guidelines that direct the organization in achieving its purpose. Members in leadership roles often evaluate how effectively members are working toward the organization's purpose, whereas employee evaluations are not usually an activity within an informal organization.

Hierarchy and structure

Informal organizations don't rely on any real structure or hierarchy to provide support and foster social interaction. The absence of hierarchical structure in informal organizations can be due to temporary goals or because the organization is entirely social. Additionally, many informal organizations don't have the extensive requirements that formal organizations do, sometimes eliminating any kind of hierarchical structure entirely.

Formal organizations use specific structures that support the achievement of specific business goals. With the hierarchical structure a formal organization provides, staff members are able to work together to achieve the same outcomes. Formal organizations have established policies, procedures and expectations that form the structure of the organization, where staff members each have their place in a different hierarchical role.

Authority and management

Informal organizations lack specific roles, giving members equal authority and oversight of the organization. Similar to hierarchical structure, hierarchical authority isn't present within an informal organization. This means informal organizations place less emphasis on established management hierarchy, giving everyone equal opportunity to make decisions and add to the organization.

In a formal organization, though, there are clearly established authority and management hierarchies. For instance, upper-level management commonly oversees mid-level management, which oversees staff members in lower-level roles. This structure of authority gives teams a clear understanding of who is in charge of decision-making, initiating processes and influencing change.

Influence

Informal organizations support members so that everyone has equal influence on the direction of the affiliation. Additionally, informal organizations often have less noticeable norms that members express through their values, beliefs, customs or morals. There may also be less of a focus on pressure to perform, and members of informal organizations may all have opportunities to act in leadership capacities, regardless of their experience level.

In a formal organization, conversely, authority figures and higher-level members often have the most influence on the direction of processes and operations. For instance, an upper-level manager typically has more influence within a formal organization than an employee under their supervision.

Processes

The processes within an informal organization are often less structured than formal organizations, too. For example, communication processes within an informal organization don't generally follow any guidelines or set protocols, so all members can interact with one another without having to follow a specific protocol.

The processes within a formal organization, though, are highly structured and follow specific protocols that supervisors and directors set. This process structure is also evident in communication processes, for example, where information usually flows from members in leadership roles down to subordinate members.

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