Difference between Formal and Informal Organizations

This article highlights the key differences between formal and informal organizations with simple examples

In order to understand the difference between formal and informal organizations one first needs to know what an organization is. Firstly, an organization is made up of a group of people who are working together to achieve certain goals. These organizations have individuals who are connected through their relationships with one another, therefore, to know which organization is formal or informal is to look into the nature of the relationship between these individuals.

the key differences between formal and informal organizations with simple examples

To understand the difference between a formal and informal organization is easiest through comparing both as they are opposites to each other. Lets first start with a formal organization then compare it to an informal organization:

A Formal organization is created by management in the form of a structure of authority. The whole structure and procedure are usually set in their official documents which contain the rules and processes of the particular organization. In this organization, the roles, functions, and responsibilities of each member are properly defined the working progresses smoothly and systematically as a result of the structure.

  • The relationships between the Individuals are usually formal and the employee is bound together by the rules and procedures which usually has a code of conduct. Therefore the behaviour of the members is dependent on the rules and policies of the organization.
  • It is typically a top-down approach therefore the communication channels go on a linear line.  The communication will be formal and may take time to go from the lower divisions to the highest ones.
  • The power of decisions in a formal organization is often made by the highest position or the leader of the organization. The employees may meet and give their points however the final decision is taken by the leader who has the authority. The authority and power in this type of organization comes from the position in it.
  • An emphasis on discipline, efficiency, consistency, order, and control is therefore known to be slow to change and most of the time rigid. This also leads to the goals being well-defined and efficiency achieved as each member knows there roles and functions so no confusion in accountability.
  • They are usually permanent unless they are intentionally altered and changed according to the rules and regulations.
  • Lastly, it lays more weight on getting the work to be done without stressing much on interpersonal relationships and social networking.

Example of a formal organization: The National Human Rights  Commission is an example of a formal organization as it has documents citing the procedure, roles, and responsibilities, functions, rules, and regulations are all mapped out clearly with a hierarchy respected and must be followed properly. Each member in the organization knows their functions and work according to the set of rules and handbooks therefore if any mistake is made then the person responsible is easier to reprimand. The goals are mapped out and the organization strives to achieve them all.

An Informal organization is less structured and more fluid as it is born out of mutual relations and It arises spontaneously as people interact with each other. It usually does not have strict rules and regulations to be followed. Thus It depends on the social relationships of the individuals in the organization and the workings depend on the interactions between them.

Read: Informal Sector

  • Informal organizations encourage interactions between members and value social relationships. Therefore The unity and workings of the informal organization are built through the trust and mutuality of the members. The employees are not bound by any rules and hierarchy is usually not implemented therefore relations form on all levels.
  • The communication channel can go in any direction without any set of orders. Therefore the communication in this organization is swift with everyone trusting and speaking openly about their thoughts in meetings and it is known to have smooth or fast communications between members. It emphasis freedom, openness, and choice where members express themselves. There might arise problems of accountability if members do not work unlike in a formal organization.
  • The decisions made are generally come upon collectively as an opposite to the formal organization. The Collective decision really matters in an informal organization as relationships and freedom are held high. The leader in an informal organization is chosen from the interactions, relations and personal qualities of the members therefore a huge amount of stress is on emotional connections and social networks.
  • Informal organizations are continuously evolving and dynamic therefore it usually does not have well-defined goals instead it is more flexible in that area as goals can change with members’ interactions and attitudes. They are also known to be flexible and adaptable to change and their environment as they are sensitive to it.
  • Additional this type of organization exists in each and every enterprise whether it is a school or government organization. Since social interactions between people are unavoidable therefore informal organizations come up when people can associate themselves with each other socially which results in a feeling of togetherness that brings out social satisfaction to the members of the group or organization.

Example of an Informal Organization: An example of an informal group may be a college club that is formed such as a singing club in a college where members gather and interact with each other and elect a member to become the head of the club through their personal choice and interactions. As members graduated the club will change in its aims and goals while adapting quickly to new members and new club heads. This club is built on the relations between the college students and must have come into creation spontaneously as an interest in singing.  Another example can be in a company a group of people interact and form a common interest club or groups such as a hiking group or environmental group in the company and they can be from different divisions and positions in it.

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Mayumi Oseng Apang Nongrum is currently an undergraduate student pursuing anthropology, history and international relations. She is an individual striving for a better tomorrow.