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Difference between Formal and Informal Organization

Today more than half of the youth of the country are working. People work in several companies and organizations. Every organization works in a different way. For instance, there might be strict rules and protocols that have to be followed by every employee in some organizations. At the same time, there are some organizations that give employees a certain sense of freedom regarding work and job. Organizations work either like autocratic leadership or democratic leadership. It is important to have a good organization with a positive environment, as it leads to peace of mind and efficiency at the workplace. Today we will discuss about two significant kinds of organizations, i.e., formal organization and informal organization. So, let's begin.

Formal vs Informal Organization

Formal Organization

A formal organization is defined as an organization that has set rules and regulations. There is a definite hierarchical structure in this organization. A formal organization is formed to achieve the existing long-term goals of the organization. Examples of formal organizations include churches, hospitals, schools, companies, etc. In this kind of organization, the tasks are carried out smoothly and efficiently. The employer and the employees work together to achieve the organization's goal. The formal organization has its own distinguishing characteristics. Some of them include having well-structured rules, hierarchical structure, definite policies, and objectives, etc. There are many advantages associated with working in a formal organization. In a formal organization, short-term goals are completed efficiently as the employees work systematically.

Moreover, there is coordination, and more emphasis is given to work. Now, there are disadvantages of working in a formal organization as well. The social needs of the employees are completely ignored in the formal organization as the main emphasis is given to work and to achieve long-term goals. Sometimes the positive environment is not there as the employees are pressured by the workload. Due to this pressure, the work and the long-term goals of the organization are hindered. Apart from the disadvantages, a formal organization has efficiency, accurate division of labor, responsibility, delegation, unity of command, etc.

Informal Organization

An informal organization is defined as an organization that majorly focuses on building social relationships. The main aim of the informal organization is to create a positive work environment so that the goals of the company are achieved efficiently. Informal organization is a set of social relationships, communities, networks, etc. The employees remain motivated as there is a positive work environment, and the employees are provided with incentives/ promotions, etc. One of the major examples of an informal organization is the clubs or social networks. An informal organization aims to generate harmony among people and work together to achieve the goals. Well, there are three significant kinds of informal organization, namely vertical organization, horizontal organization, and mixed organization. Some of the informal organization features are that it does not have policies, rules, or regulations; it is formed on the basis of personal interactions, does not have any structured hierarchy, and is spontaneously built. An informal organization promotes cultural values, social satisfaction and promotes creativity. But on the other hand, it resists change, and more pressure is given on the norms. Now, let us look at some of the significant contrasting points between formal and informal organizations.

1. A formal organization is defined as an organization that has set rules and regulations to be followed by the employees. On the other hand, an informal organization is defined as an organization that focuses on building social relationships and networks.
2. The main aim of a formal organization is to achieve the long-term and short-term goals of the organization. The main purpose of the informal organization is to build social networks and create a positive work environment.
3. The formal organization has a hierarchical structure. An informal organization does not have a hierarchical structure.
4. The formal organization is created by the management. Informal organization is created spontaneously by the members. The organization is made based on personal interactions.
5. Achievement of goal is the priority of a formal organization. Fulfilling the psychological and social needs of the employees is the priority of the informal organization.
6. A formal organization is stable, i.e., it continues for a long time. An informal organization is spontaneously made and is not stable.
7. Formal organization follows official communication. An informal organization has a grapevine communication.
8. The employees are controlled by rules, regulations, and protocols. The employees are controlled by values, morals, norms, and beliefs.
9. In a formal organization, the main focus is on work performance. In an informal organization, the main focus is on building interpersonal relationships.
10. There are different levels of authority in a formal organization. The employees are bounded by the hierarchical structure. All the members in the informal organization are equal.
11. The size of the formal organization is large. The size of an informal organization is small.
12. The group leadership of a formal organization is explicit. The group leadership of an informal organization is implicit.
13. Vertical hierarchy is seen in a formal organization. Lateral hierarchy is seen in an informal organization.
14. In a formal organization, the emphasis is made on efficiency, discipline, consistency, etc. In an informal organization, the emphasis is made on spontaneity, freedom, and building relationships.

So, these are some of the significant contrasting points between formal and informal organizations. Nevertheless, both these organizations work together to achieve short-term and long-term goals. Now, both formal and informal organization has certain characteristics. So, let us take a look at them.

Features of Formal Organization

  1. Definite Interrelationship: A formal organization has a definite and mutual relationship among the employees. Every employee knows who has to report to whom. Through this hierarchical structure, a definite relationship is established among the employees.
  2. Rules and Regulations: A formal organization has rules and regulations that have to be followed by all the employees. The goals are achieved efficiently if one follows the rules and regulations.
  3. Division of Work: There are different departments working in the organization. Thus, the division of work is done for working smoothly and swiftly.
  4. Stability: A formal organization is stable in its work. It is deliberately made, and several rules are set to achieve the organization's objectives.

Features of Informal Organization

  1. No Rules and Regulations: An informal organization has no rules or regulations. It is spontaneously made based on the personal interactions of people. Thus, no rules are set up during the establishment of the organization.
  2. Communication: An informal organization has independent channels of communication. There is no official way of passing on information. However, the person with the lowest rank can be in direct contact with the person of the highest rank. Thus, grapevine communication is followed in an informal organization.
  3. No Stability: There is no stability in an informal organization. An individual can be a member of another organization or group, which makes this organization unstable.

So, these are the significant features of formal and informal organizations. Both have the main purpose of achieving the goals of the organization. However, the way of functioning of both these organizations is quite different. Thus, both formal and informal organizations work in different ways to achieve the same goal.

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