Formal and Informal Organisation Last Updated : 13 Apr, 2023 Comments Improve Suggest changes Like Article Like Report Organising refers to identifying and growing different activities in the organisation. It brings together human and non-human resources to achieve organisational goals. Organising helps in the implementation of the plan by clarifying job and working relationships for the attainment of desired goals. Types of Organisation Organisations are a network of relationships amongst people working together so as to get the best output in an enterprise. The two types of the organisation formed on the basis of relationships are: Formal organisation Informal organisation Formal Organisation Formal organisation refers to the official structure of well-defined jobs, each being a measure of authority and responsibility. This organisational structure is designed by the management to accomplish a particular task. In formal organisation positions and authority of each level are clearly defined. It is deliberately designed to enable people to work together for achieving common objectives. It is a deliberate determination by which people accomplish goals by adhering to the norms laid by the structure. In this kind of organisation, each person is responsible for their performance. It has a formal setup of superior-subordinate relationships to achieve a predetermined goal. The structure of a formal organisation can be functional or divisional. Features Following are the features of formal organisation: Formation: Formal organisation is created by top-level management for the smooth functioning of the organisation.Purpose: It is created to achieve the organisational objectives, and it gives more emphasis on work rather than interpersonal relationships.Reporting Relationship: The position, responsibility, and accountability of each person are clearly defined. These things clarify who will report to whom and avoids confusion in an organisation.Stability: Formal organisation is stable due to its well-defined structure.Chain of Command and Communication: Formal organisation follows the official chain of command and communication at every step.Flexibility: Formal organisation is rigid because members are required to behave in a prescribed manner.Coordination: Formal organisation coordinates and integrates the effort of various departments. Advantages Following are the advantages of formal organisation: Fixation of Responsibility: It is easier to fix responsibility because mutual relationships are clearly defined.Clarity of Duties: The role and duties of each member are clearly and explicitly specified. So, there is no confusion, and it helps in avoiding duplication of effort.Unity of Command: There is unity of command as formal the organisation makes more use of official channels of command and communication.Helpful in achieving Objectives: It leads to the effective accomplishment of objectives by providing a framework for operations to be performed and clarify of roles in the minds of employees.Provides Stability: It provides stability to the organisation as the behavior of employees can be fairly predicted since there are specific rules to guide them. Disadvantages Following are the disadvantages of formal organisation: Delay in Action: Formal communication may lead to delays in decision-making and action, as the official chain of command has to be followed.Lack of Initiative: Formal organisation does not allow any deviation from policy and rules, which are laid down by the management. It kills the spirit of initiative and creativity amongst the members of the organisation.Ignore Human Elements: Formal organisation has given more emphasis on its work and structure. Therefore, it ignores the importance of interpersonal relations and human needs. Informal Organisation Informal organisation refers to a network of social relations, which emerges on its own due to formal roles and relationships amongst people. Informal organisations emerge from within the formal organisation when people interact beyond their official defined roles. When people have frequent contact, they cannot be forced into a rigid formal structure. It means the informal organisation is not pre-planned. It arises automatically due to frequent contact of people with each other. It arises to fill the social and personal needs of an individual, which cannot be satisfied through a formal organisation. Informal organisations have no prescribed rules and policies, but it comes into existence through social relations. Features Following are the features of informal organisation: Formation: Informal organisation emerges on its own within the formal organisation due to interaction amongst employees. Purpose: The main purpose of an informal organisation is to satisfy social and cultural needs and to fulfill the common interest of the members of the organisation.Reporting Relationship: There is no definite pattern of authority and responsibility.Stability: Due to the lack of a definite structure, the informal structure is less stable.Chain of Command and Communication: There is no definite direction of communication for the flow of information. Information flows independently.Flexibility: This organisation is flexible because it has no standard for measures of behaviour. Advantages Following are the advantages of informal organisation: Faster Communication: Informal organisation follows the independent channel of communication because there is no prescribed official channel. It leads to a faster spread of information as well as quick feedback. Sometimes, management also uses such communication to transmit certain information, which the formal system fails to convey.Fulfill Social Needs: Informal organisation satisfies the social needs of the members, which are not satisfied in formal organisation. This enhances their job satisfaction, as it gives them a sense of belongingness.Help in achieving Organisational Objectives: It contributes towards the fulfillment of organisational objectives by compensating for inadequacies in the formal organisation. Informal organisation provides feedback about the work experience as they discuss their views and ideas with superiors.Disadvantages Following are the disadvantages of informal organisation: Resistance to Change: Informal organisation is bounded by custom and culture, so it resists change. Such resistance may delay or restrict the growth of the organisation.Spread of Rumours: When an informal organisation spreads rumours, it becomes a destructive force and goes against the interest of the formal organisation.Pressure of Group Norms: In the case of informal organisation, people are under pressure to follow the group norms, even if such norms are against the interest of the formal organisation.Why Informal Organisation is Unavoidable?Why do members need informal organisation? Informal organisation provides personal and social satisfaction to its member. It provides the friendship and companion needs of the members, adding to the financial and non-financial benefits provided to them. Informal structure does not follow a scalar chain, so there can be a faster spread of communication. It protects the members from high-level management. Why does Formal organisation oppose it? An informal organisation is considered a threat to the authority of managers and also an obstacle to achieving organisational goals. It is considered a source of conflict, as it spreads rumours in an organisation that can mislead many employees. How does Informal Organisation help Formal organisation? Informal organisation contributes to the efficient functioning of formal organisation and also compensates for the inadequacies of formal organisation. This type of organisation is often used by management to transmit information, which is not possible through formal channels. Through informal structure, top-level managers can know the real feedback of employees on various policies, plans, and their work experience, which helps in improving organisational performance. What should be done? Informal organisation is unavoidable as it is a supplement to the formal organisation, making it more efficient in achieving organisational goals. It cannot be eliminated, as the goals can be achieved only when the personal needs of the employees are satisfied, which motivates them. Managers should adopt a positive approach toward informal groups, as it is in the interest of the organisation to have such types of groups. The organisation should recognize its existence and harmonize it with the formal organisation. Comment More infoAdvertise with us Next Article Difference between Formal and Informal Organisation R raiyaanakhtar786 Follow Improve Article Tags : Class 12 Business Studies Commerce Similar Reads CBSE Class 12 Business Studies Notes Business Studies is a study of how to control and manage an organization effectively and efficiently. 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Wha 2 min read Difference between Training and DevelopmentTraining and Development are one of the most important aspects of staffing. Training and development play an important role in improving the effectiveness and efficiency of the organisation and the employees. Training increases job skills while development shapes attitude. Training focuses on develo 2 min read Difference between Training, Development and EducationTraining, Development, and Education are different from each other. Training focuses on developing the skills, which are already possessed by an employee; development focuses on developing hidden qualities and talents of employees; and education focuses on increasing the knowledge and understanding 2 min read Chapter 7: DirectingDirecting: Meaning, Characteristics and ImportanceWhat is Directing?The process of instructing, guiding, counselling, motivating, and leading people in an organisation to achieve the organisational goals is known as Directing. Directing not only includes order and instructions by a superior to the subordinates but also includes guiding and inspiri 4 min read Principles and Elements of DirectingDirecting is the managerial function of guiding, inspiring, instructing, and harnessing people towards the accomplishment of the desired results. Directing includes issuing orders and instructions that are clear and complete; continuing guidance and supervision to ensure that the assigned tasks are 5 min read Importance of SupervisionSupervision refers to the process by which managers oversee the activities and performance of their subordinates to ensure that tasks are completed correctly, efficiently, and in alignment with organizational goals. Effective supervision involves various responsibilities and practices, including Gui 5 min read Features and Importance of MotivationWhat is Motivation?The process of stimulating and inspiring people at work to contribute to the best of their capability for the achievement of organisational objectives is known as Motivation. Motivation is the inner psychological force that activates and compels a person to behave in a particular 4 min read Process of MotivationThe process of stimulating and inspiring people at work to contribute to the best of their capability for the achievement of organisational objectives is known as Motivation. Motivation is the inner psychological force that activates and compels a person to behave in a particular manner. It is a pro 4 min read Maslow's Hierarchy of Needs TheoryBehind every successful organisation, there is a highly motivated and committed team of employees. Since motivation is complex as it deals with human behaviour, various researchers have given different theories. Maslow's Hierarchy of Needs theory is considered very significant as it highlights the n 7 min read Features and Importance of LeadershipThe process of influencing the behaviour of people towards achievement of organisational goals is known as Leadership. It indicates the ability of an individual to maintain good interpersonal relations with followers and motivate them to contribute to achieving organisational objectives. An individu 3 min read Types of Leadership StylesThe process of influencing the behaviour of people towards the achievement of organisational goals is known as Leadership. It indicates the ability of an individual to maintain good interpersonal relations with followers and motivate them to contribute to achieving organisational objectives. An indi 4 min read 10 Qualities of a Good LeaderLeaders are individuals who possess attributes of leadership. They focus on satisfying the behavior of each member of the group and the realization of group goals. A leader inspires employees, provides psychological support, helps in implementing changes, handles conflicts effectively, and works tow 5 min read Which is more effective Push or Pull marketing ?What is Push Marketing?Push marketing is when a company actively shows its products to people, instead of waiting for customers to come looking for them. It's like when someone tries to sell you something directly, by either talking to you about it, sending you ads in the mail, or putting up big pos 5 min read Communication: Meaning, Definition, Features and ImportanceWhat is Communication?Communication is an indispensable element in human relationships. Humans interact with one another through communication. The term 'communication' is derived from the Latin word 'communis', which means common. Therefore, communication is defined as an exchange of facts, ideas, 4 min read Elements of Communication ProcessThe process of exchange of ideas, views, facts, feelings, etc., between two or more persons in order to reach a common understanding is known as Communication. "Communication is the sum of all things, a person does when he wants to create an understanding in the minds of another. It involves a syste 3 min read Communication Channels | Formal and InformalThe path through which information flows from sender to receiver is known as the channel of communication.There are two main channels of communication: Formal CommunicationInformal CommunicationFormal Communication Official communication taking place in an organisation is known as formal communicati 3 min read Formal Communication: Meaning, Types, Merits and DemeritsWhat is Formal Communication ? Official communication taking place in an organisation is known as formal communication. It is related to the status or position of the sender and receiver. It generally takes place either between employees of different levels as in the case of superior-subordinate or 3 min read Informal Communication: Meaning, Networks, Merits and DemeritsThe process of exchange of ideas, views, facts, feelings, etc., between two or more persons to reach a common understanding is known as Communication. Communication is a social process as it involves two or more persons. It is a pervasive and continuous function. There are two main communication cha 3 min read Barriers to Effective CommunicationThe factors which obstruct the effectiveness of communication is known as Communication Barriers. These barriers cause a mismatch between the understanding of the message by the sender and the receiver. These barriers can occur at any stage of the communication process. Table of Content Classificat 6 min read Measures to improve Communication EffectivenessThe factors that obstruct the effectiveness of communication are known as communication barriers. Through these barriers, communication can be prevented or a part of it is filtered or incorrect information may be carried, which leads to misunderstanding.For the success of an organisation, effective 3 min read Chapter 8: ControllingControlling in Management: Meaning, Nature, Importance and LimitationsWhat is Controlling in Management?Every organisation aims at achieving some goals from its business activities and it is essential to ensure whether or not the firm is performing activities according to the pre-determined goals. The controlling function of management helps an organisation in ensurin 6 min read Relationship between Planning and ControllingPlanning and Controlling are inter-related to each other. Planning is a blueprint of the course of action to be followed in the future. It is also a mental exercise that requires imagination, foresight and sound judgment. It is thinking before doing. It is a preparatory step, and it refers to detail 4 min read Process of ControllingControlling means comparing the actual performance of an organisation with the planned performance and taking corrective actions if the actual performance does not match the planned performance. Controlling cannot prevent the deviation in actual and planned performance; however, it can minimise the 8 min read Chapter 9: Financial ManagementRole and Objectives of Financial ManagementWe all know that finance is essential for running a business. Business enterprises require careful financial planning and understanding of the resultant capital structure, risks, and profitability that they may have. All these have an effect on shareholders as well as the employees. They require an 5 min read Types of Financial DecisionsWhat is Financial Decision?The decisions regarding the financial matters of any organization are known as Financial Decisions. In simple terms, it refers to the decision regarding the investment of the funds of the business in various assets. Financial management focuses on providing solutions to th 3 min read Investment Decision: Meaning and Factors affecting Investment DecisionWhat is Investment Decision? Investment decision refers to the decisions that involve the investment of various resources of the firm to gain the highest possible return on investment for their investors. An investment decision is categorized as a long-term and short-term investment decision. Financ 4 min read Financing Decision: Meaning and Factors affecting Financing DecisionFinancial Management is concerned with the management of the flow of funds and involves decisions related to the acquisition and application of funds in long-term and short-term assets. It is concerned with two aspects, they are procurement of funds as well as usage of finance. Financial decision re 4 min read Dividend Decision: Meaning and Factors affecting Dividend DecisionFinancial Management is concerned with the management of the flow of funds and involves decisions related to the acquisition and application of funds in long-term and short-term assets. It is concerned with two aspects, they are procurement of funds and usage of finance. Financial decision refers to 3 min read Financial Planning: Objectives and ImportanceFinancial Planning is essential for the preparation of a financial blueprint for a business organization. Its main objective is to ensure that ample funds are available at right time. If enough funds are not available the firm will not be able to honour its commitments and carry out its plans. On th 4 min read What is Capital Structure?Finance being the life force of every organization, needs to be estimated, raised and utilized properly to maximize the returns from such investments. A correct estimate of current and future needs of capital needs to be made to have an optimum capital structure which shall help the organization to 6 min read Factors affecting the choice of Capital StructureWhat is Capital Structure? Capital structure decisions involve determining the types of securities to be issued as well as their relative share in the capital structure. The financial decision regarding the composition of the capital structure is made after the financial requirements have been estab 8 min read What is Fixed Capital and Working Capital?We all know that finance is essential for running a business. Business enterprises require careful financial planning and understanding of the resultant capital structure, risks, and profitability that they may have. All these have an effect on shareholders as well as the employees. They require an 10 min read Factors Affecting the Fixed CapitalThe assets which remain in the business for a period of more than one year are known as Fixed Assets. For example, plant, machinery, building, land, furniture, equipment, etc. These assets are not meant for sale. Fixed Capital is the money invested by a company in its fixed assets, which are to be u 4 min read Factors Affecting the Working CapitalExcess of current assets of an organisation over its current liabilities is known as Working Capital. Simply put, it is the finance available to an organisation for its day-to-day business operations. It can also be defined as that part of the total capital, which is required for holding current ass 6 min read Like