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.