In studying, you will often come across the concepts of formal and informal organisations.
The formal organisation is what management has deliberately designed, it’s what management knows about, and also it’s often written down in some manner. Therefore management knows about the organisation chart and knows who is manager of the department, who is supervisor, and who works in it. Management will have caused procedures manuals to have been written to set out the proper ways of doing things. Staff appraisals, showing which staff may be better and which ones have certain weaknesses will also be carefully recorded.
However, an enormous amount of the organisation is informal.
This diagram is supposed to depict that, because what it shows in the middle is an iceberg. Only a relatively small part of an iceberg is seen or is known about. By far the greater part of it is invisible, but dangerous. If management is unaware of the informal organisation then they are liable not to be able to manage very well. So, for example, if you have two people who hate each other but nevertheless, according to the organisation chart, are supposed to co-operate, then that department will not work well.
Similarly, despite lower management issuing newsletters and e-mails to all their staff , rumour and gossip gets around organisations very quickly. It’s often inaccurate, but that doesn’t mean it’s not going to be believed.
Group norms is another important example. A group norm is an arrangement people come to, often slowly, about how they should behave. For example it might be the group norm that nobody ever works past 5 o’clock on a Friday. They have come to this arrangement somewhat informally but anyone new joining the organisation will generally fall in line; otherwise they are frightened they are not going to fit in. And once certain group norms have been adopted by a number of people, it can be very difficult for management to shift those norms to something else as all of those people resist together.
Mutual cover-up. If you make a mistake, it should be reported to your manager, but you have a friend in the other department and you and your friend agree to conceal that mistake. After all, your friend never knows when he will need the favour again one day.
Management nowadays is generally familiar with the existence of informal organisations, but will find it difficult is to understand the nature and details of the informal organisation. What are people’s personal ambitions? What alliances have been made? What personal problems or relationships have been formed? What ways have people decided to act that could be wildly different from what’s laid down in the procedures manuals?