Formally, many things we deal with in our daily life, are organized and regulated. We are formally employed or have registered our business. Working hours are set and we have a job description. Traffic is also regulated; there are traffic rules, and we need to get a driving license that proves we are capable of safely driving a vehicle through traffic. We know what is expected of us and we know what to do. Or so it seems.
Indeed, we all know the traffic rules but the way we behave in traffic here is a different story altogether. We honk to anybody in our way, meaning: get out of my way! We prefer to drive on the left side of the road; we therefor overtake on the right side; we speed; we don’t give way; we don’t stop at pedestrian crossings; we try and jump the red traffic light; we park where there is a “No Parking” sign; we try and repair our car in the middle of the road; name it. The formal rules simply don’t seem to apply. An informal set of traffic rules have emerged instead, and it seems most drivers know the informal rules better than the formal rules. Follow the formal rules and other drivers will throw a strange glance at you, meaning: “This is not the way we do things here!”
The same applies to organizations. Formally, things are regulated, and rules are followed. Informally though, things may be done differently. It is important to be aware of the reality of the informal organization within the formal organization and managers do well to identify the informal realities of the organization and even make use of it. Let us look at the formal and informal organization a bit closer.
A formal organization is the literal structure of the organization including its organization chart, hierarchical reporting relationships and work processes. The informal organization is the informal working relationships that develop in organizations and contribute strongly to the work culture. An organizational chart effectively outlines the structure of the formal organization. It shows the hierarchy from the CEO and top management to mid-level management to front-line employees. It also shows the horizontal interrelationships of various functional divisions or departments. The organizational chart provides a functional framework and is important in the workplace to establish stability, clarity in working relationships and reporting relationships between superiors and subordinates. Though top management often does not consider the reality of the informal organization when trying to establish culture, it does have a significant influence on workplace dynamics. Employees interact with each other at lunch, in the break room and in daily interactions in passing. These encounters either positively or negatively impact each employee’s sense of belonging within the workplace. If these encounters are generally negative, work morale is typically poor. Understanding the direct reporting relationships outlined in the organizational chart is often less important than knowing the influential people in your company. For ambitious employees, this may mean looking beyond immediate coworkers and managers and finding helpful mentors and internal coaches that want to help them succeed. Information communication networks are also a useful means of learning how the company works beyond just what is conveyed from top management.
Also, when front-line employees get promoted into management positions, they often forget the importance of balancing the formal structure and informal networks within organizations. Disciplined structure and clear reporting relationships are important. However, managers also have a lot to gain by remembering that informal networks are real and useful. Managers can often get the most insight on how employees feel and how departmental teams are functioning through informal, friendly conversations. While formal relationships are key to accomplishing organizational and departmental objectives, they are sometimes restrictive to open interactions.

Ton Haverkort
References:
“Bloomberg Businessweek” article “Navigating the ‘Informal’ Organization,” Marshall Goldsmith and Jon Katzenbach
What Is the Difference Between an Informal & Formal Organization?
by Neil Kokemuller, Demand Media