Concept of Formal and Informal Organization
- 1. Concept of Formal and Informal Organization: Features, Advantages and Disadvantages Formal Organization: When the managers are carrying on organizing process then as a result of organizing process an organizational structure is created to achieve systematic working and efficient utilization of resources. This type of structure is known as formal organizational structure. Formal organizational structure clearly spells out the job to be performed by each individual, the authority, responsibility assigned to every individual, the superior- subordinate relationship and the designation of every individual in the organization. This structure is created intentionally by the managers for achievement of organizational goal. Key characteristics of the formal organization: enduring, unless deliberately altered top-down
- 2. missionary static excellent at alignment plain to see equates “person” with “role” hierarchical bound together by codified rules and order easily understood and explained critical for dealing with situations that are known and consistent Features of Formal organization: (1) The formal organizational structure is created intentionally by the process of organizing. (2) The purpose of formal organization structure is achievement of organizational goal. (3) In formal organizational structure each individual is assigned a specific job. (4) In formal organization every individual is assigned a fixed authority or decision-making power. (5) Formal organizational structure results in creation of superior- subordinate relations. (6) Formal organizational structure creates a scalar chain of communication in the organization.
- 3. Advantages of Formal Organization: 1. Systematic Working: Formal organization structure results in systematic and smooth functioning of an organization. 2. Achievement of Organizational Objectives: Formal organizational structure is established to achieve organizational objectives. 3. No Overlapping of Work: In formal organization structure work is systematically divided among various departments and employees. So there is no chance of duplication or overlapping of work. 4. Co-ordination: Formal organizational structure results in coordinating the activities of various departments. 5. Creation of Chain of Command: Formal organizational structure clearly defines superior subordinate relationship, i.e., who reports to whom. 6. More Emphasis on Work: Formal organizational structure lays more emphasis on work than interpersonal relations.
- 4. Disadvantages of Formal Organization: 1. Delay in Action: While following scalar chain and chain of command actions get delayed in formal structure. 2. Ignores Social Needs of Employees: Formal organizational structure does not give importance to psychological and social need of employees which may lead to demonization of employees. 3. Emphasis on Work Only: Formal organizational structure gives importance to work only; it ignores human relations, creativity, talents, etc. Informal Organization Concepts and Structure You can best understand the concept of an informal organization by comparing it to a formal organization. Let's look at the formal organization first since it's a bit easier to understand. The structure and operation of a formal organization is typically set forth in the official documents, rules, and procedures of the organization (like a corporation's articles of incorporation and bylaws). The roles, authority and responsibilities of each member of the organization are clearly defined. For example, a limited liability company's operating agreement outlines the scope of authority and
- 5. responsibilities of the managers of the company. A formal organization is cold, sterile, and impersonal. Now, let's take a look at an informal organization. It's primarily a social creature - made up of the sum total of social norms, relationships, and interactions that affect how an organization works. While a formal organization is cold and impersonal, an informal organization is intensely personal. It's all about social interactions and relationships between the members. Members of an informal organization can certainly hold official offices and have formal duties, but they also bring their own values, personal interests and assumptions into the equation of how they act. Members develop friendships, alliances, enemies, trusted sources of information, and preferences on how tasks should be performed. These social influences may cause a member of the informal organization to work in conjunction with the organization, in parallel with it, or even against it. In some respects, you can think of an informal organization as: An organization within the formal organization working with it An organization beside the formal organization working towards the same goals but not necessarily together Or an organization working outside the formal organization and against it The structure of an informal organization is usually quite different from its formal counterpart. Its structure is usually fluid and rather flat. Decisions are often made collectively rather than unilaterally by one leader. Cohesion is often established through trust and
- 6. reciprocity between members. An informal organization is also able to be dynamic, responsive, and adaptable to change, because formal rules and hierarchy don't pin it down. Example This example will help you understand an informal organization. Let's say you're a recently hired associate attorney fresh out of law school. You were fortunate enough to be hired by one of the top law firms in Washington D.C. You are one of 26 new associates, making for a total of 467 lawyers in the firm. A formal mentor has been selected for, and you have access to a common pool of legal secretaries and paralegals to assist you as necessary. Your job duties and responsibilities are clearly outlined in the firm's associate's manual. In the formal organizational structure individuals are assigned various job positions. While working at those job positions, the individuals interact with each other and develop some social and friendly groups in the organization. This network of social and friendly groups forms another structure in the organization which is called informal organizational structure. The informal organizational structure gets created automatically and the main purpose of such structure is getting psychological satisfaction. The existence of informal structure depends upon the formal structure because people working at different job positions interact with each other to form informal structure and the job positions are created in formal structure. So, if there is no formal
- 7. structure, there will be no job position, there will be no people working at job positions and there will be no informal structure. Informal Organization Informal organization refers to a small group the members of which are tied to one another as persons. The group is characterized by informal and face to face relations, mutual aid, cooperation and companionship. The members of informal organizations work together not in their official capacities but as persons. They share their hopes and fears, their joys and sorrows. The informal organizations consist of only rules and not statuses. Here there is no authority but only leadership. Informal organizations have their own unwritten norms of behavior. They have their own ways of correcting and punishing the violators of the norms. Though they are smaller in size they give strength to the formal organizations to function effectively. Definition of informal organization The informal organization is the interlocking social structure that governs how people work together in practice. It is the aggregate of, norms, personal and professional connections through which work gets done and relationships are built among people who share a common organizational affiliation or cluster of affiliations. It consists of a dynamic set of personal relationships, social networks, communities of common interest, and emotional sources of
- 8. motivation. The informal organization evolves, and the complex social dynamics of its members also. Tended effectively, the informal organization complements the more explicit structures, plans, and processes of the formal organization: it can accelerate and enhance responses to unanticipated events, foster innovation, enable people to solve problems that require collaboration across boundaries, and create footpaths showing where the formal organization may someday need to pave a way. Informal Organization by “Bernard” Bernard regarded informal organization as joint individual activity without conscious joint purpose, even though contributing to joint results. All types of groups, namely, a bus load of passengers, people watching a cricket match, people walking do the street etc, fall within the compass of informal organization. Informal organization fosters communication between people and establishes pattern of behaviour, namely, conformity in speech dress, conduct or other behaviour and thereby promotes smooth group operations. Whereas For the Informal organization refers to the relationships between people in an organization based not on procedures but on personal attitudes, prejudices, likes and dislikes. 7 Main Characteristics of Informal Organization By Saritha Pujari Following are the main characteristics of informal organization:
- 9. (1) Based on Formal Organization: This is based on formal organization where people also have informal relations. (It means first of all the formal organization is established and then informal organization is created out of it.) (2) It Has No Written Rules and Procedures: In this organization, there are no written rules and procedures to govern interrelationship. But there are group norms which have to be observed. For example, employees working in an organization and belonging to a particular community form a separate group in an informal way. Gradually some norms do emerge like helping the member of their group to find solution to the problems related to his work or his own self. Similarly, they protect the members of their community from the managerial exploitation. In this way, all the persons joining this informal group will be bound to observe the norms of the group. (3) Independent Channels of Communication: In this organization, relations among different people are not defined because a person at the lowest rank can have direct contact with the person at the highest level. The flow of communication cannot be specified. (4) It is not deliberately created: Informal organization is not deliberately created. It emerges out of mutual relationship and tastes.
- 10. (5) It Has No Place on Organization Chart: Informal organization has no place on the properly prepared organization chart. Moreover, there is no information about it even in the organization manual. (6) It is Personal: It’s being personal means that under this the feelings of individuals are kept in mind and nothing is imposed upon them. (7) It Lacks Stability: There is generally a lack of stability in such an organization. For example, an individual mixes with one group of people today but can cross over to another group tomorrow. Not only this, an individual can be a member of more than one group at a time. Relationship between the Formal and Informal Organization The formal and informal organizations are inter-related. They are not mutually exclusive. There exist many informal organizations simultaneously with the formal organizations. A single formal organization like the state, the university, the industry, the church etc may consist of several informal organizations in the form of gangs, friendship groups' etc. The line separating formal and informal organization is not always clear. Any formal organization functions best when the informal organization supports it. The most orderly and efficient structure does not automatically produce a successful organizational administration if the members have no
- 11. Goodwill towards one another and have only personal hostilities. On the contrary, the best goodwill in the world will be insufficient for the successful pursuit of an organizational activity if the formal organization is deficient. The most efficient and satisfactory organization is the one in which formal organization is supported the informal organization. The relationship between the formal and informal organizations is always subtle always complicated and always interesting. According to Page, the continuous interaction and association among the members of formal organization result in the emergence of informal structure of roles and relationships. He calls such informal structure consisting of primary group relations, friendships and cliques, ties of mutual obligations of aid and assistance. According to Charles Bernard the informal organizations are necessary to the operation of formal organizations as a means of communication of cohesion and of protecting the integrity of the individual. Features of informal organization: (1) Informal organizational structure gets created automatically without any intended efforts of managers. (2) Informal organizational structure is formed by the employees to get psychological satisfaction. (3) Informal organizational structure does not follow any fixed path of flow of authority or communication.
- 12. (4) Source of information cannot be known under informal structure as any person can communicate with anyone in the organization. (5) The existence of informal organizational structure depends on the formal organization structure. Advantages of Informal Organization: 1. Fast Communication: Informal structure does not follow scalar chain so there can be faster spread of communication. 2. Fulfills Social Needs: Informal communication gives due importance to psychological and social need of employees which motivate the employees. 3. Correct Feedback: Through informal structure the top level managers can know the real feedback of employees on various policies and plans. Strategic Use of Informal Organization: Informal organization can be used to get benefits in the formal organization in the following way: 1. The knowledge of informal group can be used to gather support of employees and improve their performance. 2. Through grapevine important information can be transmitted quickly.
- 13. 3. By cooperating with the informal groups the managers can skillfully take the advantage of both formal and informal organizations. Disadvantages of Informal organization: 1. Spread Rumours: According to a survey 70% of information spread through informal organizational structure are rumors which may mislead the employees. 2. No Systematic Working: Informal structure does not form a structure for smooth working of an organization. 3. May Bring Negative Results: If informal organization opposes the policies and changes of management, then it becomes very difficult to implement them in organization. 4. More Emphasis to Individual Interest: Informal structure gives more importance to satisfaction of individual interest as compared to organizational interest. 5. Resistance to change: Perpetuation of values and lifestyle causes informal groups to become overly protective of their "culture" and therefore resist change. For example, if restriction of output was the norm in an
- 14. Autocratic management group, it must continue to be so, even though management changes have brought about a more participative administration. 6. Role conflict: The quest for informal group satisfaction may lead members away from formal organizational objectives. What is good for and desired by informal group members is not always good for the organization. Doubling the number of coffee breaks and the length of the lunch period may be desirable for group members but costly and unprofitable for the firm. Employees' desire to fulfill the requirements and services of both the informal group and management results in role conflict. Role conflict can be reduced by carefully attempting to integrate interests, goals, methods, and evaluation systems of both the informal and formal organizations, resulting in greater productivity and satisfaction on everyone's behalf. 7. Conformity: Social control promotes and encourages conformity among informal group members, thereby making them reluctant to act too aggressively or perform at too high a level. This can harm the formal organization by stifling initiative, creativity, and diversity of performance. In some British factories, if a group member gets "out of line”, tools may be hidden, air may be let out of tires, and other group members may refuse to talk to the deviant for days or weeks. Obviously, these types of actions can force a good worker to leave the organization.
- 15. Benefits of the informal organization: Although informal organizations create unique challenges and potential problems for management, they also provide a number of benefits for the formal organization. Blend with formal system: Formal plans. Policies, procedures, and standards cannot solve every problem in a dynamic organization; therefore, informal systems must blend with formal ones to get work done. As early as 1951, Robert Dubin recognized that "informal relations in the organization serve to preserve the organization from the self- destruction that would result from literal obedience to the formal policies, rules, regulations, and procedures." No college or university could function merely by everyone following the "letter of the law" with respect to written policies and procedures. Faculty, staff, and student informal groups must cooperate in fulfilling the spirit of the law" to effectuate an organized, sensibly run enterprise. Lighten management workload: Managers are less inclined to check up on workers when they know the informal organization is cooperating with them. This encourages delegation, decentralization, and greater worker support of the manager, which suggests a probable improvement in performance and overall productivity. When a professor perceives that students are conscientiously working on their term papers and group projects, there are likely to be fewer "pop tests" or impromptu progress reports. This eases the professor’s load and that of the students and promotes a better relation- ship between both parties. Fill gaps in management abilities: For instance, if a manager is weak in financial planning and analysis, a subordinate may informally assist in preparing reports through either suggestions or direct involvement.
- 16. Act as a safety valve: Employees experience frustration, tension, and emotional problems with management and other employees. The informal group provides a means for relieving these emotional and psychological pressures by allowing a person to discuss them among friends openly and candidly. In faculty lounge conversations, frustrations with the dean, department head, or students are "blown off" among empathetic colleagues. Encourage improved management practice: Perhaps a subtle benefit of informal groups is that they encourage managers to prepare, plan, organize, and control in a more professional fashion. Managers who comprehend the power of the informal organization recognize that it is a "check and balance" on their use of authority. Changes and projects are introduced with more careful thought and consideration, knowing that the informal organization can easily kill a poorly planned project.