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What is Formal & Informal Organization?

Formal & Informal Organization

Formal & Informal Organization

Formal Organisations

A formal organization is an organization in which emphasis is placed on efficiency. Discipline, consistency and control. It is based on delegation of authority and unit of command. The communication system is formal and flows on certain established patterns.

In the words of Barnard, “An organization is formal when activities of two or more persons are consciously coordinated towards a given objective.” In the words of Roethlisberger and Dickson, “The pattern of human interrelation, as defined by the systems. Rules. Policies and regulations of the company, constitute the organization.

Characteristics of Formal Organisation

A formal organization has the following important characteristics:

  1. It is established with the explicit aim of achieving well – defined goals.
  2. It is bound together by authority relationships among the members.
  3. It recognizes certain tasks and activities which are to be carried out to achieve its goals.
  4. Formal organization is based on delegated authority.
  5. Organisation charts are usually drawn in a formal organization.

Advantages of formal organization

  1. It minimizes the conflicts since authority and responsibility are clearly defined.
  2. Overlapping of responsibility is avoided.
  3. Differences in responsibility between different persons can be filled.
  4. Exact standards f performance can be established
  5. Chances of favourism may come to an end.


  1. It reduces the spirit initiative since the persons are governed by the rules and regulations.
  2. Authority is sometimes over exercised, regardless of the need.
  3. Sentiments and values of each person are not taken into consideration by the formal organization, which are present in the social organization.
  4. Such organizations are mechanistic type, where the rules are superior than people.
  5. It may impede informal communication.

Informal Organisation

The term informal organization refers to those personal and social relation social relations which arise when people associate with one another. Keith Davis regards informal organization as, “that network or personal and social relation which is not established or required by formal organization. It is formed for not achieving any specified objectives, but to meet personal needs.”

In the words of Earl P. strong,” The informal organization is social structure designed to meet personnel needs.” According to Joseph L. Massie, “The concept of informal organization is any human group interaction that occurs spontaneously and naturally over a long period of time.”

Characteristics of informal organisation

  1. Informal organization is formed spontaneously not with the explicit aim of achieving well-defined goals.
  2. It is a social structure designed to meet personal needs.
  3. The power structure in informal organization is very complex and uncharitable.
  4. It acts as agency of social control. It does not have and well-defined tasks, nor are they divided and sub- divided.
  5. Informal organization can be formed at every level of an organization.
  6. It has its own rules and tradition that are not written but are commonly observed.

Advantages of Informal Organisation

  1. It replaces the drawbacks of formal organization.
  2. It gives satisfaction and stability to employees of the organisation.
  3. It is very useful channel of communication.
  4. It ensures good relationship between employees at different levels.
  5. It motivated the employees for better performance. Existence of informal organization helps managers to plan and act carefully.

Disadvantages of Informal Organisation

  1. Informal organizations generally act according to mob psychology.
  2. It tends to nullify the efforts of the management to promote greater productivity.
  3. It has the habits of spreading rumours.

Differences between formal and informal Organisations

  1. Origin:

    Formal organization originates on account of social interaction of the people.

  2. Emphasis:

    Formal organization emphasis on terms of authority and functions. Informal organization emphasizes on people and their relationship.

  3. Creation:

    Formal organization is created deliberately and at the same time informal organization is created spontaneously.

  4. Authority Relationship:

    In formal organization, the formal authority is attached, with the position, but in informal organization authority is attached to a person.

  5. Well-defined authority and responsibility:

    In formal organization rules, regulations, right and duties etc. are well-defined. In informal organization, it has unwritten rules and tradition.

  6. Hierarchical authority:

    In formal organization, formal authority passes in any hierarchical form from top bottom. Informal organisation authority flows upward or horizontally.

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