Formal and Informal Organisations

Formal Organisations

A formal organisation is a structured setup with clearly defined rules, regulations and areas of responsibility. These organisations have formal authority and hierarchy.
The structure of a formal organisation is usually depicted using an organisational chart which visualises different roles and relations.
Formal organisations operate on a set of pre-specified written rules and regulations making operations consistent and predictability.
Controlled by a management hierarchy, decision-making flows through a chain of command from top to bottom.
Positions within a formal organisation are defined by job descriptions, which spell out responsibilities and accountability.
The main objective of formal organisations is to accomplish its goals and targets in a systematic way.

Informal Organisations

In contrast, an informal organisation is a social network comprising personal and social relationships among employees, often transcending the formal organisational structure.
Informal organisations do not follow a predefined structure or relationship chart. The relations are based more on conversations and personal bonds rather than job roles.
Informal organisations can develop out of shared interests, common backgrounds or similar work profiles.
Decision-making in these structures can be more democratic and less binding.
Informal organisations often foster a sense of cohesiveness, which can have a profound impact on productivity, job satisfaction, & communal harmony.
Although these organisations have loosely defined goals, the focus is often on ensuring a good working environment and strong interpersonal relationships.

Interaction Between Formal and Informal Organisations

Informal organisations can supplement formal structures by promoting better communication and cooperation among employees.
Nevertheless, a balance must be struck: overdependence on informal structures can lead to ambiguity, conflicts, and a lack of accountability.
An effective organisation often manages to entwine their formal and informal structures, making use of the strengths of both to promote a positive work culture and achieve organisational objectives.
Organisational leaders should recognise and understand the informal groups within their organisation and leverage them to improve overall performance.