Difference Between Formal and Informal Organization

It is conventional among scholars of administration to distinguish between formal and informal organization.

Formal Organization: a formal organization is an organization that is specifically established for the purpose of achieving certain goals. It possesses rules and regulations for the achievement of those goals. It is deliberately planned, designed and duly sanctioned by established competent authorities.

In essence, a formal organization has an officially well defined structure that may describe its authority, power accountability and responsibility relations. An example of formal organizations include government agencies, parastatals, corporations, universities and tertiary institutions.

In a formal organization, there is centrally organized co-ordination of activities which makes it possible for the effective and efficient attainment of set goals.

A crucial feature of a formal organization is the organizational chart which is a visual device that shows the various departments in an organization and how they relate to one another. The organizational chart helps the employees, the management and other stakeholders to see at a glance, the division of responsibility and the lines of authority in an organization.

Informal Organization: an informal organization with special reference to public organization refers to voluntary groups of people within an organization without a formal assignment or procedure. It is a network of persons and social relations not established or required by the formal organization but arising spontaneously as people associate with one another.

Unlike formal organizations, an informal organization does not have well defined rules and procedures guiding its activities. Examples of informal organizations are students unions in institution of higher learning, academic and non-academic unions in tertiary institutions. Both informal and formal organizations have goals and objectives.

Outlined difference between Formal and informal Organization

  • A formal organization is legally recognized while informal organization is not.
  • A formal organization has a separate existence from its owners while informal organization is an appendage of formal organization.
  • A formal organization can and do have the right to dissolve informal organization.
  • A formal organization has long term objectives while informal organization can dissolve after the short-term objectives for which it was formed must have been achieved.
  • A formal organization employs staff but informal organization draw their membership from the staff of formal organization.

Problems of Informal Organization

It is true that informal organizations render some services to their members and to the formal organization; they also create problems in the formal organization in which they exist. Such problems are:

  • Informal groups may resist change in formal organizations, which are not to the comfort of the informal group.
  • The communication system in the informal group may generate rumour, which may be disorganizing. The grape vine which is usually the informal means of passing news or rumours from person to person is not reliable mean for correct, authentic and authoritative information. Generally, the influence of the informal groups in an organization is a force to be reckoned with because they can constitute a threat to the smooth running of the organization if ignored by the management.

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