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A company’s informal organization

A company’s informal organization is also called its social network. It is said to reveal problems which remain hidden from the normal organizational hierarchy. The information flow and the web of networks that lie in an informal system have very powerful impact on the way an organization will respond not only to internal but also to external situations. (Cross. Parker, 2004). Informal organization is also significant in building collaboration in an organization. A manager who has an accurate view of the network is able to make better decisions and can promote effective collaboration.

Thus the social network can be used positively by executives to advantage. As more and more companies are forming alliances and joint initiatives, their effective functioning can be accurately assessed through feed back received from informal networks, as the information flow through the formal hierarchy is generally delayed or may be biased. (Cross. Parker, 2004). Where companies are involved in knowledge intensive work, core competencies are a product of collaboration across many departments, it is only through informal networks that an effective knowledge coalition can be build.

It is particularly useful for top level decision making as it provides sound information to the leadership on how decisions will impact the organization in different ways and how these need to be reviewed based on feedback through the social network which will be faster than that through the formal organization. Informal networks are also known to foster greater innovation in an organization as like minded people who think beyond the normal limits tend to skip hierarchy and coagulate to foster ingenuity and thus be more inventive.

A change process is best initiated by firstly identifying the key people in an informal network who need to be engaged to win their confidence and initiate the change process simultaneously through the social network. (Cross. Parker, 2004). While some chief executives some times feel threatened by informal networks, their significance in any organization is substantial.


1. Cross. Parker. 2004. The Hidden Power of Social Networks: Understanding How Work Really Gets Done in Organizations. Harvard. Harvard Business School Publishing.

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