An organization is a group of people whose activities are coordinated to achieve predetermined objectives.

There are two basic types of organization, namely: Formal and informal organization

While formal and informal organizations have some similarities, they also have significant differences, which will be discussed in this post.

But first, let's define each of them.

Formal organization

Formal organization refers to the formal system of relationships deliberately set up by the top management to achieve pre-determined objectives.

Because formal organizations are usually created to achieve some objectives, information about instructions, responsibility, authority, accountability and chain of command are clearly defined and declared. 

This ensures that each person is aware of his duties and authority.

In a formal organization, each subordinate is expected to obey his supervisor in the formal chain of command.

Formal organisation is usually created after careful identification, classification and assignment of business activities.

Formal organisation is thus the conscious creation of relationships for the attainment of organisational objectives.

Informal organization

Informal organization refers to the network of personal and social relationships that emerge spontaneously when people working together interact based on personal impulses, likes and preconceptions.

Such relationships are not created by the top management and they are not recognized formally.

They are, nevertheless, just as important as the formal organisation from which they arise.

Informal organization is not depicted on organization charts and manuals because they cannot be formally depicted.

Workers get to know one another better, establish a sense of teamwork and coordinate their efforts through the informal organization.

Difference Between Formal and Informal Organizations 

1. Unlike formal organizations, which are purposefully created by management to achieve the objectives of the organizations, informal organizations spontaneously emerge from the social relations of members of an organization.

2. Formal organisations are based upon rules and procedures whereas informal organization is based upon the emotions and attitudes of the people.

3. While formal organizations seek to achieve organizational goals, informal organizations seek to meet members' psychological and social needs.

4. In a formal organization, rules and regulations serve as the control mechanism, whereas in an informal organization, norms and values serve as the control mechanism.

5. The performance of duties is emphasized informal organization. The informal organization, on the other hand, places a greater emphasis on developing interpersonal relationships.

6. Formal organization can be represented on an organisational chart and organization manual but informal organization can neither be represented on an organizational chart nor an organizational manual.

7. Chain of commands exists informal organizations, but not in formal organizations.

The chain of command is the path a directive should take in moving from top-level management to lower-level management.

8. Formal organization is predictable and stable. The informal organization, on the other hand, is neither stable nor predictable, as individuals may leave or join based on their interests.

9. While the formal organization is dominated by authority and function, the informal organization is dominated by people and their relationships.

10. Delegation of authority is a feature of the formal organisation while a delegation of authority is not a feature of informal organization.

11. In formal organizations, communication is usually formal and precise, as opposed to informal organizations, which use informal communication methods (grapevine).

12. A formal organization is usually larger in size and scope than an informal organization.

In the same vein, informal organizations are lower in size and scope than formal organizations.

13. In a formal organization, top-level management makes major decisions, whereas, in an informal organization, members make decisions collectively.

14. A hierarchical structure exists in formal organizations, whereas a flat structure exists in informal organizations.

15. Formal organizations communicate through the chain of command.

Communication in informal organizations, on the other hand, is scattered because there is no chain of command and information can flow in any direction.

16. Formal organizations are rigid while informal organizations are flexible.

Bottom line

The main difference between formal organization and informal organisation is that the former is deliberately created for the attainment of organisational objectives while the latter arises spontaneously from the personal and social interaction of members of an organisation.

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