Informal Networks in Organizations and Organizational Effectiveness

“In every department that continues to operate, the workers have – whether aware of it or not – formed themselves into a group with appropriate customs, duties, routines, even rituals; and management succeeds (or fails) in proportion as it is accepted without reservation by the group as authority and leader” (Mayo, 1949)


This article discusses how informal networks in organizations operate and their role in both enhancing and detracting organizational effectiveness. The key argument being made in this article is that informal networks should be encouraged as long as they add value to the organization and not when they become the channels for political games and avenues for anti organizational activities.

Informal Networks in Organizations and Organizational Effectiveness

This points to the fact that individuals in organizations do not stop being social beings while working in those organizations. This in turn relates to the very core of the essential question of how to define an organization. While this question cannot be entirely resolved in this paper as such, the underlying assumptions will be that organizations are basically a web of coalitions and that coalition building is an important dimension of almost all organizational life (Morgan, 1997).


It is said that humans are social beings and hence, have an innate need to communicate, relate, and exchange information with others. We are all aware of how we form networks of familial relatives, peers, friends, and in this age of social media, virtual contacts. Therefore, being social and engaging with others comes naturally to us. In an organizational context, this means that employees tend to form networks comprising colleagues, superiors, and subordinates. Of course, the HR department also plays its part in making sure that networks are formed by periodically organizing get together events, offsite meetings, annual days, and family visits. Thus, there are two kinds of networks in place in organization and they are the formal or the organized networks that the management explicitly encourages, and the informal networks that are also known as organizational grapevine wherein news, views, and information are exchanged over coffee, tea, and less healthily, over drinks and cigarettes.

The Role of Informal Networks

Turning to the role that formal and informal networks play in ensuring organizational effectiveness, it is indeed the case that when employees know other employees not only from their immediate teams but across the organization, it leads to value enhancing activities. For instance, in this age when Information Technology or IT is ubiquitous and needed for competitive advantage, knowing someone in the IT support team on a personal basis can certainly help especially when your team or your team members need urgent access to hardware and software that would otherwise have to be routed through the time consuming bureaucratic processes. Of course, this does not mean that the official channels should be bypassed in favor of a free for all interactions. On the other hand, what this means is that you can convince your contact in the IT team to act swiftly while the organizational machinery grinds and hence, can get your job done quickly.

Further, informal networks are a major source of exchanging information and news related to the organization between peers, superiors, and subordinates and more often than not, the first people who get to know of impending announcements related to promotions and launches of new products are the ones who have their ears to the ground. Moreover, informal networks can be a good source of bonding and stress relief in these age of pressure wherein sharing a coffee or a tea during breaks and engaging in harmless talks or talking shop as it is also known as can enhance the value to the organization.

Downsides of Informal Networks

Having said that, one must not forget that informal and formal networks ought not to become places or meetings where intrigue, backroom maneuvers, and vicious gossip become the order of the day. In other words, informal and formal networks work best when the information being exchanged is in the interest of the organization and not against it. For instance, there are cases when employees have been approached by their peers with job offers and moves to rival companies that has resulted in situations where the management had to fir the person who was making these offers as it is against company policy. Moreover, such networks also tend to promote favoritism, formation of power centers in the organization that are outside of the purview of the formal networks, and can even lead to cases where these networks work against the organizational ethos through lobbying and creation of parallel reporting.

Informal Networks in Organizations and Organizational Effectiveness

Another big disadvantage with the informal networks are that they tend to be comprised mainly of men which is also known as the boys club because it has been the tradition for male employees to engage with fellow men and keep the women out. Though this can be dismissed as harmless bantering and when anyway women employees tend to bond with other women, the real kicker is when the managers (whether men or women) tend to favor others in their informal networks for promotions and other benefits. Apart from this, the other disadvantage of informal networks as well as perpetuate harassment, discrimination, and prejudice against those that are not part of the charmed circle. Moreover, it is also the case that employees with the bad intentions can leak the information obtained in the informal networks to competitors and the media thereby jeopardizing the interests of the organizations.


It is for this reason that management tends to keep a watch on what is being said where and when as otherwise, the downsides as discussed here can lead to the effectiveness of the organization being compromised. It is the argument being made in this article that informal networks must work towards enhancing organizational effectiveness instead of detracting the same. In conclusion, informal networks are good ways for employees to unwind, relieve their good as well as bad moments, crib about their bosses and let the pressure ease. However, they become dangerous when they become centers for political games. Therefore, the HR department must encourage and tolerate such networks as long as they are beneficial to the organization.

Contributed by Suchin Kulshrestha, (Class of 2008, IBS Hyderabad)

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