The key difference between formal and informal organization is that formal organizations are formed to achieve a common goal with official relationships between members, whereas informal organizations are formed within formal organizations based on interpersonal relationships between members of the organization.
Both formal and informal organization concepts are inter-related. It is because there are many informal organizations within formal organizations. Moreover, a formal organization that has the support of many informal organizations is an efficient and satisfactory organization.
1. Overview and Key Difference
2. What is a Formal Organization
3. What is an Informal Organization
4. Relationship Between Formal and Informal Organization
5. Side by Side Comparison – Formal vs Informal Organization in Tabular Form
What is a Formal Organization?
Formal organization refers to an organization where two or more people gather to achieve a common goal with a legal and official relationship. The organization is led by top management and has a set of rules and regulations to follow. The main objective of the organization is to achieve set targets. As a result, work is assigned to each individual based on their capabilities. In other words, there is a chain of command with an organizational hierarchy and authorities are delegated to get the job done.
Further, organizational hierarchy determines the logical authority relationship of formal organization and chain of command determines who follows the orders. The communication between the two members is only through planned channels.
Types of Formal Organization Structures
- Line Organization
- Line and Staff Organization
- Functional Organization
- Project Management Organization
- Matrix Organization
What is an Informal Organization?
Informal organization refers to an interlocking social structure that rules how people work together in real life. It is possible to form informal organizations within organizations. Further, this organization consists of mutual understanding, help, and, friendship among members due to the interpersonal relationship they build with each other. Social norms, connections and interactions govern the relationship between members, unlike in formal organization.
Although members of an informal organization have official responsibilities, they are more likely to interrelate with their own values and personal interests without discrimination.
The structure of an informal organization is flat. Moreover, decisions are made by all member in a collective manner. Unity is the best feature of an informal organization as there is trust between members. Moreover, there are no strict rules and regulations within informal organizations; rules and regulations are responsive and are adaptable to changes.
What is the Relationship Between Formal and Informal Organization?
Both organization concepts are inter-related. There are many informal organizations within formal organizations. Therefore, these are mutually exclusive.
The effectiveness of a formal organization depends on informal organization within it as interrelationships, trust and cohesion within the informal organization are highly effective for the success of an organization. In other words, a formal organization that has the support of many informal organizations is an efficient and satisfactory organization.
What is the Difference Between Formal and Informal Organization?
There is a significant difference between formal and informal organization. Primarily, the key difference between formal and informal organization is that rules, regulations and procedures govern formal organizations, whereas social norms, beliefs and values govern informal organizations. Furthermore, in formal organizations, jobs of all members are very well defined and authorities are delegated. However, in informal organizations, the interpersonal relationships that occur when members deal with each other are the basis of all tasks. Besides, in formal organizations, the top management makes all the decisions, whereas decisions of informal organizations is a collective approach. So, this is also a significant difference between formal and informal organization.
Moreover, the objective of a formal organization is to meet specific targets while the objective of an informal organization is to satisfy the social and psychological needs of members. The nature of the formal organization is permanent while informal organization has a temporary nature. Another major difference between formal and informal organization is that formal organization has a hierarchical structure, whereas informal organization has a flat structure. Additionally, formal organizations are performance-driven, whereas informal organizations are based on interpersonal relationships and communication. Also, communication is another difference between formal and informal organization. Communication in formal organizations is official and is through a chain of command while communication in informal organization is unofficial and flows in any direction.
Summary – Formal vs Informal Organization
The basis of formal organizations is the official relationships between members to achieve a common objective whereas the basis of informal organizations is interpersonal relationships between members of the organization. So, this is the key difference between formal and informal organization. In brief, there are many informal organizations within formal organizations.
1. “Informal Organization.” Wikipedia, Wikimedia Foundation, 10 June 2019, Available here.
2. “Informal Organization: Definition, Structure & Examples.” Study.com, Study.com, Available here.
3. “Relationship between the Formal and Informal Organization.” Sociologyguide.com, Available here.