Formal organization

Formal organization refers to the organization structure which is designed by the management to accomplish a particular task.

It specifies clearly the boundaries of authority and responsibility and there is a systematic coordination among the various activities to achieve organizational goals.

The structure in a formal organization can be functional or divisional.

Features of formal organization

  1. It specifies the relationships among various job positions and the nature of their inter-relationship. This clarifies who has to report to whom.
  2.  It is a means to achieve the objectives specified in the plans, as it lays down rules and procedures essential for their achievement.
  3.  Efforts of various departments are coordinated, interlinked and integrated through the formal organization.
  4. It is deliberately designed by the top management to facilitate the smooth functioning of the organization.

Advantages of formal organization

  1. It is easier to fix responsibility since mutual relationships are clearly defined.
  2. There is no ambiguity in the role that each member has to play as duties are specified. This also helps in avoiding duplication of effort.
  3. Unity of command is maintained through an established chain of command.
  4. It leads to effective accomplishment of goals by providing a framework for the operations to be performed and ensuring that each employee knows the role he has to play.

      5. It provides stability to the organization. This is because behavior of employees can be fairly predicted since       there are specific rules to guide them.

      6.It places more emphasis on work to be performed than interpersonal relationships among the employees.

Limitations of formal organization

  1. The formal communication may lead to procedural delays as the established chain of command has to be followed which increases the time taken for decision making.
  2. Poor organization practices may not provide adequate recognition to creative talent, since it does not allow any deviations from rigidly laid down polices.
  3. It is difficult to understand all human relationships in an enterprise as it places more emphasis on structure and work. Hence, the formal organization does not provide a complete picture of how an organization works.

Informal organization


Informal organization is a ‘network of social relationships among employees’ arising out of Interaction among people at work.

Informal organization emerges from within the formal organization when people interact beyond their officially defined roles. Informal organization has no written rules, is fluid in form and scope and does not have fixed lines of communication.


  1. It originates from within the formal organization as a result of personal interaction among employees.
  2. The standards of behavior evolve from group norms.
  3. Independent channels of communication are developed by group members.
  4. It emerges spontaneously,based on common interest and friendship.
  5. It has fluid, complex structure based on network of social relationships among members.


  1. It leads to faster spread of information as well as quick feedback as prescribed lines of communication are not followed.
  2. It helps to fulfill the social needs of the members and enhances their job satisfaction.
  3. It contributes towards fulfillment of organizational objectives by compensating for inadequacies in the formal organization.


  1. Informal organization may disturb the functioning of formal organization when it spreads rumors.
  2. Informal organization can result in resistance to change which may delay or restrict growth.
  3. It pressurizes members to conform to group expectations that can be harmful to the organization.

Informal organization cannot be altogether eliminated. The management should skillfully take advantage of both the formal and informal organization so that work continues smoothly.

Difference between Formal Organisation and Informal Organisation

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