Informal organizations: structure, function, and impact

Social Capital

Applying Concepts of Social Capital to a Real-World Situation: A Personal Managerial Case Study

Organization Overview

I recently held a managerial position at a commercial real estate firm working on many projects of different scale and potential profitability. The organization had a fairly simple if extensive formal structure, with a direct chain of command that did not include an abundance of redundancies. At the same time, there was a great conscious reliance on the informal structures of the company, and often the official chain of command was bypassed altogether due to common practice and a knowledge of individuals' areas of expertise, interest, and skill. The informality of the company's structure was more evident in certain departments than in others, and at times this led to difficulties in inter-team projects.

Given the complex nature of many of the real estate transactions in which the firm was engaged, most projects required a great deal of inter-team cooperation and coordination; achieving this was quite often more easily said than done. The informality that was highly prevalent in certain departments was far less so in others, and though the organization as a whole ran on a more informal basis communications between different departmental teams could become difficult in the early stages of a project, when knowledge of different individual proclivities and the structures of other departments had not yet been established. Ultimately, project success often depended on a sole individual's knowledge of the right individuals to speak to about specific project elements, and their ability and willingness to communicate.

The Case

A major project I was placed in charge of involved the development of an existing shopping centre into a larger retail structure, and the various elements of this project involved the company's development team, its marketing team, the asset management team, and a few other departments were also tangentially involved. From the above description of the problems typically experienced in this organization, it should be fairly clear that communications ended up being a major problem in the progress and completion of this project. The standard interdepartmental communications problems experienced in the organization were exacerbated by two other prominent factors in this particular project, however.

The first of these was my lack of time with the company. A recent arrival, this was my first major project and it cam before I really knew many people at the company or how the various formal and informal structures actually functioned. This left me with very few places to turn to when problems arose, and issues were not dealt with as efficiently as they could have been. I was having trouble obtaining certain necessary authorizations from the city for the planned expansion of the retail structure, and could not get clear answers or definitive actions from the development team personnel that I would engage with. At the same time, the marketing department seemed to be having trouble generating interest in the project, which was beginning to cause doubts amongst senior management as to the viability of the project as a whole. Deadlines were being missed, and going through formal channels was not yielding the results I needed.

This leads to the second major exacerbating issue of this particular case of communications problems within the company: the extreme informality of the development department. In addition to two managers and a director, the department had many young graduates and an urban planner that had been with the company for years but that everyone all but ignored because they didn't really know what it was he did. As it would turn out, of course, this individual was key in actually getting things done, as he knew almost everyone in the company in all of the departments, and was also well-networked with certain city officials and clerks. His formal status in the company remains something of a mystery, but informally he was the man successful project leaders went to in order to learn whom to speak to about what, to make introductions expanding the project leader's own network amongst relevant company and city individuals, and sometimes to do the necessary communicating itself.

The Analysis

This experience is a clear-cut case of the informal structure of an organization being key to its success, and also illustrates the extreme importance of networking within one's own organization in order to achieve managerial success. The only reason this project did not fail was that I ultimately decided to talk to everyone in the development department I could find that was somehow related to the project I was leading; I stumbled on the urban planner as much out of happenstance and desperation as anything else. Had I taken the time to get to know the members of my team early on, actively working to expand my network, months of frantic under-performance could have been avoided.

Part of the problem in this case is also the inadequacy of the company's formal structures, however. While informal structures are doubtless vital to the successful operation of any organization, this does not preclude the use and actual practical existence of formal structures, but these were truly lacking in the development department in this case. The two managers and the director were virtually indistinguishable in their tasks and responsibilities, and meanwhile the urban planner was quietly coordinating everything that came across his desk, yet took no part in attempting to direct the project. The planner was quite successful in performing his role informally, but this resource went untapped for far too long due to his obscurity.

Recommendations

The organization as well as future project leaders would receive a great deal of benefit from making the urban planner's position in the company more formally known and established. A formalization of the leadership of the development department as a whole is required to make the department more efficient and responsive; distinguishing the managers' roles and ensuring that the director is able to coordinate and oversee the multiple projects the department is working on at any one time would enable project leaders to receive efficient coordination and communication through official channels. Making the urban planner more officially a coordinator of project elements would also assist in this regard. It is not only in the company's formal structures that changes should be made, however; the under-utilization of the company's informal structures was also a major problem in this case.