What do you understand by Informal Organization ? Explain the merits and demerits of informal organization.

Answer – Informal organisation is the network of personal and social relationships that develops spontaneously through interaction among employees.

Features: arises naturally; is based on friendship and common interests; has unwritten group norms; has leaders accepted by members; uses unofficial communication; has no fixed prescribed structure.

Advantages: fast communication; fulfilment of social needs; a sense of belonging; support for cooperation and the achievement of formal goals when group interests are aligned.

Limitations: rumours may spread; groups may resist change; pressure to conform can restrict individual initiative; informal expectations may conflict with official goals.

Management should understand informal groups, communicate openly and use their strengths without allowing rumours or group pressure to undermine organisational objectives.