Formal and Informal Groups in Organizational Behaviour

Introduction to Groups in Organizations

A group is defined as two or more individuals who are interacting with each other, interdependent on each other, and work together to achieve certain specific objectives (Robbins, Millett, Cacioppe & Water-Marsh, 2001). Groups are formed to address social and security needs, achieve specific goals, pursue common interests, and operate on the basis of various other attributes (Robbins et al., 2001). Within organizations, generally two main types of groups are formed: formal groups and informal groups.

Formal Groups: Structure, Functions, and Impact

Formal groups are created by the systematic and deliberate grouping of people in an organization based on organizational needs to achieve certain set organizational goals. Informal groups, by contrast, are formed spontaneously and naturally by employees of an organization when they work or interact with each other over a period of time (University, 2006). This essay examines the functions of these groups—both formal and informal—within an organizational context, along with the advantages and disadvantages of each for an organization. The essay then explores how understanding of group behaviour can be used by managers to perform effective management. Throughout the essay, different theories and concepts are used to justify the points and opinions made, including division of labour theory, Maslow's hierarchy of needs theory, social identity theory, balance theory, and groupthink theory.

Formal groups are the groups formed and defined according to organizational structure and have designated work duties, tasks, and responsibilities (University, 2006). In these formal groups, the activities performed by individuals are limited and communication takes place through a straight chain of command. These formal groups exhibit behaviour that is defined and directed towards broader organizational goals.

The main function of formal groups is to establish division of work based on specialization in a formal structure (Farivar & Esmaeelinezhad, 2012). This division of work in a formal group is based on division of labour theory, which defines roles based on the work that an individual must perform in an organization (Farivar et al., 2012). Another function is to create formal teams that are responsible for fulfilling particular tasks that ultimately contribute to the fulfillment of overall organizational goals. This in turn increases the efficiency of the organization and its employees. Additionally, formal groups create a structure that provides effective division of power, authority, and accountability (Aghion & Jean, 1997). As already mentioned, formal groups maintain a straight chain of command. This ensures that power is effectively distributed—individuals at the top of the organizational hierarchy retain supreme power, with power distributed according to role down the hierarchy.

Formal groups in an organization have substantial benefits related to them. These groups provide a basic structure for the division of responsibilities and work (Robbins, DeCenzo, Coulter & Woods, 2011). This structure enables management to use the organization's human resources in the best possible way, as it is easier to divide work and responsibilities among employees when their designation and scope of work are known. This also benefits employees, as they know what is required of them. Furthermore, formal structure enables effective management of large-sized organizations and organizations that tend to grow over time (Robbins et al., 2011).

Informal Groups: Formation, Functions, and Dynamics

Apart from these benefits, formal groups also negatively affect organizations in several ways. According to Blau and Scott as cited in Farivar et al. (2012), employees in a formal setup do not accomplish their tasks and duties through the powers vested in them, because formal authority often fails to motivate employees completely. Furthermore, in formal organizational groups, the formal communication devised by management is more likely to be underprivileged and unidirectional (Farivar et al., 2012). Due to this communication nature, communication is not very effective and delays in message passing frequently occur, which can negatively impact employees and organizations. Additionally, employees in formal organizations are required by policies and regulations to exhibit certain standardized behaviours, which hinders creativity and innovation (Farivar et al., 2012). Moreover, formal groups do not address the social or psychological needs of employees, as employees are placed into formal groups according to organizational needs, thereby neglecting basic sociological needs. In terms of Maslow's Hierarchy of Needs theory, sociological or sense of belonging needs of employees are not fulfilled, and as a result, employees are far less likely to be motivated.

Besides formal groups, the other type of groups in organizations are informal groups. These are groups formed independently in organizations by employees to satisfy and meet their social needs (University, 2006). These groups emerge whenever employees of an organization come together and interact with each other on a regular basis and serve several major functions in an organization.

One primary function is to provide a sense of social satisfaction, security, and status to members involved in the group (Farivar et al., 2012). These are achieved by providing a feeling of belongingness to some entity—in this case, the other team members in the group. Another function is to provide an additional communication channel—the grapevine—apart from the formal communication channel in an organization (Robbins et al., 2001). By utilizing the informal communication channel, members of an organization are able to communicate and learn about information and matters that can be important and affect them and others. One of the other important functions of these groups is to strengthen and maintain the values and norms that members in the group possess in common (Farivar et al., 2012). This enables team members to bind together and operate as a unit. Finally, informal groups help solve problems in an organization, as members can help each other through any difficulties related to job, health, and recreation. Hence, these groups can help individual employees reach and perform at their full potential.

These groups prove beneficial to almost all organizations worldwide. Social Identity Theory as cited in Farivar et al. (2012) states that employees are able to gain satisfaction from the sense of belonging, as that sense stimulates the process of motivation and improves an individual's self-esteem, resulting in high levels of performance. Informal groups cater to these social needs stated in the theory and prove advantageous to employees and the organization. Furthermore, communication in informal groups is interactive, spontaneous, and far more effective than communication in formal organizational setups (Aghion et al., 1997). This is because members in informal groups come from various divisions of the organization, making the informal communication network very extensive. Thus, important information can be communicated throughout the organization very spontaneously, and informal communication can add value to organizations. Additionally, informal group members are able to reduce levels of stress and psychological pressure among themselves related to their work responsibilities and duties (Farivar et al., 2012). Due to this reduction in stress and emotional pressure, there are visible improvements in employee efficiency, which in turn leads to improved employee performance. Furthermore, the existence of informal groups is advantageous to organizational management because informal groups establish norms that institute accurate behaviours, which in turn reduces the workload on the organization's management to a great extent.

In some aspects, informal groups do not work ideally for an organization and have associated drawbacks. According to Groupthink Theory as cited in Robbins et al. (2011), informal groups are a source of conflict, as members in an informal group become loyal to that group and put their informal group's aims and objectives ahead of the formal organization's goals. As a result, conflicts can arise. Furthermore, in informal groups, misleading and inaccurate information can spread very quickly, as informal groups are far more extensive than formal organizational groups (Farivar et al., 2012). Sometimes, even rumours can spread rapidly, which can affect the reputation of a company or the individuals who work in it. Additionally, individuals in informal groups tend to be like-minded and have similar perspectives on different things. This trait of conformity that exists in informal groups can play a negative role when an organization is trying to implement changes in formal organizational structure, as some informal groups can oppose those changes, leading to resistance to change in an organization.

Managerial Implications of Group Behaviour

Managers in an organization can greatly benefit from understanding group behaviour and implementing this understanding for better management and improved productivity. As discussed in the disadvantages of formal groups, the formal group setup in an organization is not able to fulfill the social belongingness needs of individuals; without fulfilled social needs, employees can become unmotivated and hence less productive. Therefore, managers should focus on the social needs of groups and try to address them by making efforts to increase interaction among employees. According to Maslow's Hierarchy of Needs theory, when social needs are fulfilled, there is a greater probability that the individual will be motivated and confident. A motivated workforce is one of the biggest assets an organization can possess, which will improve its efficiency, productivity, and hence its revenues.

As mentioned in the disadvantages of formal groups, employees are not able to think outside the box because of restrictions posed by the formal structure. Management should understand the adverse effects of this practice on the organization and undertake steps to rectify it. For example, Google frees its employees from the formal restrictions of the company for 20 per cent of their time, during which employees are free to think creatively and produce whatever they want (as cited in Farivar et al., 2012). During this 20 per cent, one of Google's employees invented Gmail, which today is one of the main services offered by Google. From this, it can be inferred that if managers are able to free employees from the restrictions of the formal structure for certain periods, they can allow employees to think creatively, which can ultimately lead to innovation. This innovation can greatly benefit an organization and make considerable contributions to company revenues.

As discussed in the advantages of informal groups, informal groups are capable of motivating members of an organization and helping them achieve high productivity. Managers, by respecting and recognizing the existence of such informal groups, can use the optimism and high levels of energy produced among members of these groups towards achieving organizational goals and increasing productivity within an organization.

As noted in the disadvantages of informal groups, these can be a source of conflict when their goals are not aligned with the goals of the organization, so it is essential for managers to treat these groups appropriately (Aghion et al., 1997). Hence, if the manager is capable of addressing the issues of these groups that arise from conflicting organizational goals, the manager is able to utilize the workforce in an efficient and positive manner to fulfill organizational goals.

Conclusion: Integrating Formal and Informal Groups

Based on the above discussion, it can be said that both formal and informal groups are of utmost importance and benefit to an organization. Formal groups have formal acceptance within an organization and are used to achieve overall organizational goals, whereas informal groups tend to have no formal acceptance and are created by employees who are members of different formal groups. Informal groups are mainly created to address the social needs of employees. Formal groups have proper work distribution, specified goals, and know what is expected of them, but are restricted by the formal structure so much that they tend to lack innovation and creativity. Informal groups, by contrast, operate on a voluntary basis free from all the pressures that exist in formal groups and hence foster free thinking and motivation among members.

Both formal and informal groups complement each other by covering each other's shortcomings in an organization. Therefore, managers in an organization can greatly benefit if they try to understand the concept of group behaviour of both formal and informal groups and implement this understanding for better management and hence improve employee productivity to efficiently, speedily, and effectively achieve organizational goals.