What do understand by formal and informal groups in a firm?

The more common terms used are formal and informal
"organizations" rather than groups. Formal organization refers to the groupings of all
he persons working for a firm in different divisions, department, sections, etc., that
is formally defined and specified. The formal organization also defines haw the total
work of the firm is divided among such different organizational units or groups and
among persons within each group. The formal organization also determines the
relationship between people within a group and across the group. These relationships are
primarily in terms of boss-subordinate reporting relationships. Work within the
enterprise is carried within the framework of formal organisation
structure.

However the effectiveness of work within any
firm is influenced significantly by informal organization that exists side by side with
the formal one. The informal organization is not designed or implemented by any one
purposely. It develops spontaneously because of interaction between people working
together. The informal organizations is based on personal relationships that exists
between people, rather than on work requirement. The primary purpose of informal
organization is to serve the personal need of the people. However, it invariable impacts
the basic work of the enterprise, and consequently its performance. For example,
friendship between a sales person and someone working in production planning, may enable
the sales person to get information on delivery commitments faster. This will help the
sales effort of the company. However, this may also result the production planning
person playing favourites in delivery of selected orders based on considerations of
friendship. This may hurt the interest of the firm.

In view
of statement made in the post above, it is desirable to clarify that neither the formal
or informal groups need to be ad hoc. Also the informal relationships in firms tend to
be longer lasting than the formal organization structures. Thus, though in some other
settings ad hoc informal groups may form, in firms the informal organizational groups
are not ad hoc.