Business and Technology · The formal and informal business organisation
Informal Groups, the Grapevine and Mintzberg's Informal Organisation
Updated 11 October 2026
An informal group forms from personal relationships, not from the organisation chart. It creates networks and a grapevine, the unofficial channel for news and rumour. These can speed communication and lift morale, but can also spread rumours and resist change. Exam answers should give both benefits and risks.
Understand Informal Groups and Mintzberg's Informal Organisation
Every organisation has a formal organisation: the official structure, job titles, reporting lines and rules. Alongside it sits an informal organisation: the relationships that grow between people because they like each other, work nearby, share interests or face the same problems.
An informal group is a set of people who interact regularly without being set up by management. Examples are colleagues who lunch together, a car-sharing group, or staff from different departments who trained together. Informal groups have their own norms, such as how hard to work, what to wear or who to trust. They often have an informal leader who may not be the official manager.
These relationships join up into networks. A network lets someone ask a friend in another department for help, bypassing the official route. Mintzberg described the informal side of an organisation as a system of informal communication and power that runs alongside the formal chart and can shape how decisions actually get made. Treat it as the real-life layer on top of the official structure.
The grapevine is the informal communication channel that carries news, opinion and gossip. It is fast and flexible. It also lacks control, so information can be incomplete, distorted or false. Managers cannot switch it off, so they should understand it and use it.
The effect on performance depends on the group. If its norms support the organisation's goals, it can raise morale, cooperation and productivity. If its norms oppose management, it can encourage restricted output, resistance to change or spreading of rumours.
How to solve Informal Groups and Mintzberg's Informal Organisation questions
Quickest way: Label, effect, response
When to use it: Use this for objective test questions when you have about a minute per question.
- Label it: informal group, network, informal leader or grapevine.
- Name the effect: faster communication, better morale, or distortion and resistance.
- Check the scenario for who benefits: the organisation or only the group.
- Eliminate options that say informal groups are always harmful or always helpful.
- Pick the option that recognises both sides, or the one that matches the scenario's specific effect.
Common mistakes in Informal Groups and Mintzberg's Informal Organisation
Saying informal groups are always bad for the organisation.
Students link informal communication with gossip.
Fix: Remember they can improve morale, cooperation and information flow. The effect depends on whether group norms match organisational goals.
Confusing a formal team with an informal group.
Both are groups of people working together.
Fix: Ask who created it. If management created it for a task, it is formal. If it formed from personal ties, it is informal.
Assuming the grapevine only carries false rumours.
The word grapevine suggests gossip.
Fix: Treat it as an unofficial channel. It can carry accurate news quickly, but with less control over accuracy.
Thinking management can abolish the informal organisation.
Students assume rules control all behaviour.
Fix: Informal relationships form naturally. Management should understand and work with them, not try to remove them.
Treating the informal leader as the same person as the formal manager.
Leadership and position are mixed up.
Fix: Informal leaders gain influence from respect, skill or personality, not from the chart. They may be a junior member of staff.
Giving only one side when asked to assess the effect on performance.
Students stop after the first point they think of.
Fix: Give at least one positive and one negative effect before you conclude.
Worked examples
Example 1
Staff in a finance department hear on the grapevine that the company will close an office. No announcement has been made. Morale falls and two key employees start looking for other jobs. Which action is the most appropriate for management? A) Ignore the rumour until it fades. B) Discipline anyone found discussing it. C) Issue a clear, honest communication through formal channels. D) Deny the rumour without checking the facts.
Show the solution
- The issue is a grapevine rumour harming morale and risking staff loss.
- Ignoring it (A) lets the rumour grow in the absence of facts.
- Disciplining staff (B) treats the grapevine as banned. It cannot be stopped and would damage morale further.
- Denying without checking (D) risks losing trust if the rumour proves true.
- Clear, honest formal communication (C) fills the information gap and reduces speculation.
Answer: C
Example 2
Explain two ways in which an informal group could harm organisational performance and one way it could help.
Show the solution
- Harm one: the group may set norms that restrict output, for example agreeing not to work faster than the slowest member. Productivity falls below what the organisation wants.
- Harm two: the group may resist change, for example a new system, and may spread negative views through the grapevine. This slows implementation and lowers morale elsewhere.
- Help: the group provides social support and quick, informal sharing of knowledge across departments. This improves morale, cooperation and problem solving.
- Conclude that the outcome depends on whether the group's norms are aligned with organisational goals, so managers should engage with informal leaders.
Answer: Harm: restricted output and resistance to change with rumour spreading. Help: social support and faster information sharing. The net effect depends on whether group norms align with organisational goals.
Practice questions from The formal and informal business organisation
- In Mintzberg's model of organisational structure, which part of the organisation consists of staff such as work-study analysts and accountan…
- A hospital employs highly trained surgeons who largely control their own work, with standards set by their professional bodies and training.…
- Handy's four cultural types include the 'role culture'. Which description fits a role culture?
- Marlow Retail Co has 80 stores. Head office sets prices, selects suppliers and approves all expenditure above $500. Store managers complain …
- A company organises all of its staff into departments such as production, marketing, finance and human resources, each headed by a specialis…
Informal Groups and Mintzberg's Informal Organisation: frequently asked questions
What is an informal group in an organisation?
It is a group formed by personal relationships or shared interests, not by management. It has its own norms and often an informal leader. It exists alongside the formal structure.
What is the grapevine in business communication?
The grapevine is the informal channel through which news, opinion and rumour travel between staff. It is fast but not controlled, so information can be distorted. Managers should monitor it and give accurate information through formal channels.
How does the informal organisation affect performance?
It can improve performance by raising morale, supporting cooperation and speeding up communication. It can reduce performance when group norms oppose management goals, for example by restricting output or resisting change.
Can managers control informal groups?
Not fully. Informal groups form naturally, so managers cannot remove them. They can understand the groups, communicate openly and involve informal leaders to align group norms with organisational objectives.