Why a Company’s Informal Structure Is Just as Important as the Formal One

Anyone who has started a new job has probably received an important document in his or her orientation or onboarding packet: The organizational chart.

Organizational charts reveal the overall structure of the company, showing who reports to who, who is responsible for what, and generally establishing the pecking order for the company. Usually, the owner or CEO is at the top, with some vice presidents or senior managers under him or her, midlevel managers under them, and so on.

While many organizations point to the organizational chart as the most important document for determining corporate structure, and remind employees to remember the “pecking order” for handling problems and assignments, for most people, the organizational chart is little more than a document revealing who earns the most money. In fact, in most companies, the real corporate structure can’t be found on any chart, but actually within the way that employees relate to each other and their work. This “informal structure” is, arguably, a more important determinant of how any company actually operates and a better predictor of how successful the company will be in reaching its goals.

Informal Structure: What It Is

Informal structures tend to form naturally within organizations, usually around formal divisions; for example, team members tend to form their own hierarchies, or people within the organization doing the same job in different departments, such as administrative assistants. In some organizations, the informal structure is actually the real way of things. In other words, while the official organizational chart might direct people in lower level positions to approach their senior managers with issues and escalate issues up that particular section of the chart, the informal structure might dictate that issues be resolved via other people.

The informal structure of organizations often dictates how communication flows throughout the organization, and how information is actually interpreted and filtered. While the organizational chart might show that one person reports to another, the informal organization consists of the conversations taking place in the hallway and at the water cooler, or even the exchanged glances and whispers in meetings. In a meeting about a new project, for instance, a shared glance between colleagues can communicate more about how the project will actually be carried out than the actual assignments themselves.

Informal structure also plays a role in the leadership of the organization. Everyone knows that there are leaders within most companies that aren’t technically leaders — these are the people that often set the tone for projects, serve as sounding boards for others, and take the lead on departmental projects. These informal leaders are often among the most valuable team members of any organization, even if they aren’t officially leaders — or paid as such.

The Benefits of Informal Structure

The informal structure of the organization is often considered the more important corporate structure, as it reveals how the organization actually operates. In the best case, a functioning informal structure is actually indicative of a healthy organization in which there is camaraderie, teamwork, and communication.

The informal organizational structure also helps employees make sense of the flow of communication within the organization. Certain people are known to be “in the loop,” and can be relied upon to share valuable information and interpretation, while those who aren’t considered knowledgeable or reliable sources can be safely ignored, or at the very least serve as a springboard to find out more information.

The Drawbacks to Informal Structure

Of course, not everything about the informal structure is a good thing. In some organizations, the informal structure is actually quite toxic, and serves more as a forum for rumormongering and other negative behaviors, such as backstabbing or bullying. When someone gains power outside of the corporate structure, there’s always a chance that he or she could become a negative influence on the entire team or department, or even the organization as a whole.

A healthy informal structure also relies upon getting the right group of people together — or as one might say, serendipity. That’s not to say that the entire organization will fall apart, since team members can rely on the formal structure for guidance, but when employees don’t mesh and fulfill their roles within the informal structure, the organization is likely to rely too heavily on the leadership chart, and lack flexibility or creativity.

Of course, informal structures aren’t always permanent, and there are often several different structures and hierarchies at play at any given time. However, understanding that a company’s organization isn’t always limited to the little boxes on an organizational chart can go a long way toward increasing the company’s effectiveness, identifying potential leaders, and fostering a better understanding of how to communicate with employees and improve their performance and satisfaction.

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