FREE online courses on Organisation - Formal and informal organization

Formal organization

A formal organization refers to the structure of well defined jobs, each bearing a definite measure of authority, responsibility and accountability. Thus, a formal organization is created through the co-ordination of efforts of various individuals. Every member is responsible for the performance of a specified task assigned to him on the basis of authority responsibility relationship in an organization.

Informal organization

Informal organization refers to the relationship between people in an organization based on personal attitudes, emotion, prejudices, likes and dislikes, etc. These relations are not developed according to procedures and regulations laid down in the formal organization.

Benefits of Informal organization

1.         To employees

(i)       Sense of belonging: In a formal organization, there is lack of sense of belongingness and personal satisfaction.

(ii)      Value for emotional problems: In the daily work routine there are many opportunities for tension and frustration.

(iii)     Aid on the job: In case of accidents or illness, members of an informal group help one another.

(iv)     Innovation and originality: By enabling members to modify the job situation more to their liking, the informal organization creates the necessary environment for individual innovation and originality. The individual can experiment with his ideas.

(v)      Important channel of communication: News travels quickly via informal groups. They are the clandestine transmitters and receivers of information before it is officially released.

(vi)     Social control: Informal groups provide all its members a set of norms or guides to correct behaviour. Members are expected to conform to those norms.

(vii)    Check on authority: Informal group forces the manager to plan and act more carefully than he would otherwise. Informal organization is a check and balance on unlimited use of authority by a manager.

2.         To management

(i)       Less supervision: Informal group is self-policing. This relieves the management of much of the burden of supervision.

(ii)      An aid to management: The information gives the manager much feedback about employees and their work experiences thereby increasing his understanding of what he needs to do.

Disadvantages of an Informal organization

(i)        Resistance to change: An informal organization is bound by customs, conventions and culture.

(ii)       Role conflict and sub-optimization: In an informal organization, everyone works towards the same objectives. Members put their own group objectives ahead of organization's objectives. Hence, the organization suffers.

(iii)      Rumour: An informal organization sometimes functions as a carrier of rumour.

(iv)     Group think philosophy: Workers become loyal to their groups.