Lesson 4.

Informal Organizations

Organization and Management

General Academic Strand | Accountancy, Business, and Management
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Slides.
Organization is not only
about the lines and
boxes in the
organizational chart.
There is an entirely
different organization
beneath its surface.

3
Organization refers to
the structure of
relationships among
positions and jobs
created to achieve
certain objectives and
goals. It is the
mechanism developed
by management to
unite the efforts of the
people to realize the 4
But unlike the
organization that we
knew as formed with
formal authority, there
is an organization that
is formed voluntarily
and through personal
relationships by
individuals in an 5
 Learning
Competen
cy Differentiate formal from informal
organization (ABM_AOM11-ih-j-19).

6
 Learning
Objectives
● Differentiate informal from formal
organization.

● Discuss informal organization and its

impact on the firm’s day-to-day
operations.

7
 Guess My Type
Let’s Guess if the examples of organization below
Conne are formal organization or informal
ct
organization.

Church Advocacy
group
Fans club School
Hospital Bible group
Gaming societies Crime watch
Corporation Basketball
league 8
 1. What are the organizations that you
Let’s
have classified as formal
Conne
ct organizations?

9
 2. What characteristics do the groups
Let’s
you classified as informal
Conne
ct organizations share?

10
 3. In what ways do formal and informal
Let’s
organizations differ from each other?
Conne
ct

11
Essenti
al
Questio
n
What are the impacts of informal
organizations on the firm’s day-to-day
operations?

12
Formal vs. Informal Organization

Formal Organization
13
 Formal vs. Informal Organization
Formal Organization

● This is formed to accomplish a common purpose.

● All of the members are consciously and
systematically combining their efforts to achieve a
common goal.
● The structure is well-defined.

14
Formal vs. Informal Organization

Informal Organization
15
 Formal vs. Informal Organization
Informal Organization

● This is formed by those individuals in the organization

who have or share the same personal attitudes and
values, emotions, prejudices, likes, dislikes, friendships,
and other affiliations.
● This is naturally formed, not planned, or automatically
developed within a formal organization without a
conscious effort and a clearly defined joint purpose of
the members.
● There is no chain of command to follow. 16
 Check
Your
Progress

What are the other information groups that

you know?

17
Impact of the Informal Organization

Informal organizations arise

from a formal organization.

18
 Impact of the Informal Organization

The reason is because when

people frequently interact with
each other, a bond over
common interests form a
group, which is typically based
on social interactions.

19
 Impact of the Informal Organization
Advantages of Informal Organization

1. Communication is faster relative

to formal organizations.
2. It ensures that there is
socialization within the
organization.
3. Individuals working in the
organization experience the
sense of belongingness and job
satisfaction. 20
 Impact of the Informal Organization
Advantages of Informal Organization

4. Other limitations of a formal

organization like getting true
feedback from employees is
easier.
5. It helps members with their
emotional problems.
6. It creates the necessary
environment for innovation
and creativity. 21
 Impact of the Informal Organization
Advantages of Informal Organization

7. It gives the management a

benefit to control and
correct behavior, and
impose discipline in the
organization.
8. It serves as a check and
balance on the unlimited
use of authority by the
22
 Impact of the Informal Organization
Disadvantages of Informal Organization

1. It may result in the spread of rumors or false

information.
2. Without the support of the information
organization, it is impossible for formal
organization to grow and effect changes in the
organization.

23
 Impact of the Informal Organization
Disadvantages of Informal Organization

3. There is a risk when the group standards set in

the informal organization are against the
organizational interests and goals.
4. It may bring negative results whenever the
informal organization opposes the policies and
changes in management.
5. It gives more emphasis to individual interest
than organizational interest.
24
 Check
Your
Progress

How can the existence of informal groups

be beneficial in a formal organization?

25
 ● Informal organizations arise from formal
Wrap- organizations.
Up
○ Formal organizations are based on rules,
authority, responsibility, and accountability,
while informal organizations are based on
values, interests, and social relationships.
○ Informal organizations are not planned
but they are naturally and automatically
developed within an organization. This is
not subject to management control and
management cannot abolish them.
26
 ● An informal organization has several
Wrap-
Up
features that set them apart from formal
organizations:
○ It has an unplanned structure.
○ It addresses social needs.
○ There is no formal structure.
○ There are no formal leaders.
○ Communication can flow in any
direction.
○ There are no rules and regulations.
○ It can be formed and dissolved at the 27
 ● Informal organizations benefit the
Wrap-
Up
organization by creating a workplace
where innovation and creativity can
blossom by the following features:
○ Communication is faster.
○ Employees working in the organization
feel job satisfaction and belongingness.

28
 ● The informal organization also has
Wrap-
Up
fallbacks as this may give an adverse
impact on the organization.
○ Rumors and false information can
spread easily.
○ Growth may be slow or declined if the
informal groups become unsupportive.
○ Informal groups may give negative
results as they are more focused on
individual interest rather than
organizational interest. 29
 True or False. Write true if the statement is
Try correct. Otherwise, write false.
This!

1. A formal organization is formed for

an accomplishment of a common
purpose.

30
 True or False. Write true if the statement is
Try correct. Otherwise, write false.
This!

2. Even without the support of the

information organization, it is
impossible for formal organization to
grow and to effect changes in the
organization.

31
 True or False. Write true if the statement is
Try correct. Otherwise, write false.
This!

3. Through informal organizations,

communication is faster relative to formal
organizations.

32
 True or False. Write true if the statement is
Try correct. Otherwise, write false.
This!

4. Formal organizations ensure that

there is socialization within the
organization.

33
 True or False. Write true if the statement is
Try correct. Otherwise, write false.
This!

5. The formal organization gives more

emphasis on individual interest than
organizational interest.

34
Challen
ge
Yourself
“Boxes and lines on a formal organization
chart do not tell the whole story of an
organization.” What do you think this
statement means?

35
Bibliography

“Informal Organisation: Meaning, Features and Limitations”. Business Management Ideas. August 9, 2016.
https://www.businessmanagementideas.com/management/organisation-management/informal-org
anisation-meaning-features-and-limitations/4883
.

Koonts, Harold, and Cyril O’Donnell. Principles of Management: An Analysis of Managerial Functions, Fifth
Edition. Singapore: McGraw-Hill, 1977.

Miranda, Gregorio, and Carmelita Miranda. Management Principles and Practices. San Juan: L & G Business
House, 1981.

36
Bibliography

Salvador, Samuel, Estelito Bagunas, and Ellinor Geronimo. Principles and Practices of Management and
Organization, Second Edition. Santa Maria: Allen Adrian Books, Inc., 2009.

Santos, Emmanuel T. Organization and Management. Makati City: International Academy of Management
and Economics, 1999.

“What Are the Three Branches of Government?: The Judicial Learning Center.” The Judicial Learning Center
| An online companion to the Judicial Learning Center in St. Louis, Missouri., August 7, 2019.
https://judiciallearningcenter.org/the-constitution/.

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