Formal and informal organisation

Formal and informal organisation

Formal organisation

Formal organisation: Formal organisation deliberately and consciously creates for the accomplishment of organisational goal. Organisation is a well-defined structure of authority and responsibility that defines delegation of authority and relationship amongst the organisational members. It provides official relationships between the individuals. The communication channel in a formal organisation is also official. Rules and procedures are well defined in formal organisation. Formal organisation facilitates coordination, integration of the diverse departments within an enterprise.

Definition of Formal organisation

According to M. P. Sharma, “Formal organisation means the organisation as deliberately planned, designed and duly sanctioned by competent authority”.

In the words of Barnard, “Formal organisation is a system of consciously coordinated activities or forces of two or more persons”.

Merits of formal organisation

1. Systematic    working:    Formal organisation  structure  results  in systematic and smooth functioning of an organisation.

2. Achievement of organisational objectives: It is established to achieve organisational objectives without any confusion.

3. No overlapping of work: Informal organisation’s work is systematically divided among various departments and employees. So there is no chance for overlapping of work.

4. Co-ordination: It results in coordinating the activities of various departments to attain the common goal.

5. Creation of chain of command: Formal organisational structure clearly defines superior subordinate relationship i.e., who should report to whom?

6. More emphasis on work: Formal organisational structure lays more emphasis on work than interpersonal relations.

Demerits of formal organisations

1. Delay: The actions will get delayed because of following chain of command and scalar chain.

2. Ignores social needs of employees: It does not give importance to social needs of employees which may lead to demotion of employees.

3. Emphasis on work only: It ignores creativity, human relations, talents etc and give importance to work only.

Informal organisation

Informal organisation is the outcome of personal and social relationship between the individuals and the organisation. It develops spontaneously as the result of interactions between persons. It exists outside the formal authority system, without any set of rigid rules. It was first systematically explored in the pioneering studies carried on by Elton Mayo and others at the Hawthorne plant of west ern Electric Company. It exists in all the offices such as Government, Private, Public and in business also. In Informal organisation there are no written rules like Formal organisation. It cannot be forced or controlled by the management. There is no defined structure for communication.

Definition

According to Chester Barnard, “Informal organisations as the aggregate of personal contacts and interactions and the associated group of people, such organisations is indefinite, structures less and are shapeless mass of varied densities”.

Merits of informal organisation

1. Fast Communication: It does follow scalar chain, so the communication will spread faster.

2. Fulfills social needs: It gives importance to psychological and social needs of employees which motivate the employees.

3. Correct feedback: Though the group is informal, they don’t have the fear of the boss, so the employers at top level may get the correct feedback from employees of various departments.

Demerits of informal organisation 

1. No smooth flow of work: Working in informal organisation will not be systematic, so there will be no smooth flow of work.

2. Spread rumours: The information may adopt a casual approach to work in an informal atmosphere. This may affect the quality of work.

Comparison between formal and informal organisation