Formal vs Informal Organization: Difference and Comparison

Key Takeaways

1. Structure: Formal organizations have a defined structure, while informal organizations emerge naturally within formal structures based on social interactions.
2. Communication: Formal organizations follow formal communication channels, while informal organizations rely on informal communication networks.
3. Influence: Formal organizations have authority based on positions, while informal organizations may have their informal leaders and influencers based on personal relationships.

What is Formal Organization?

A formal organization is defined as a hierarchical or structured group that is formed together with a set of procedures, policies, and rules. The structure of a formal organization is clear and defined and has specific roles and responsibilities for individuals. In a formal organization, the communication pattern follows a hierarchical pattern from juniors to seniors and vice versa.

These kinds of organizations have their objectives or goals, like – accomplishing a specific mission, maximizing profits, delivering services, etc. Examples of such organizations are – government agencies, cooperations, and schools.

What is Informal Organization?

An informal organization is when a few individuals come together based on their values, interests, or personal relationships. The structure of an informal organization is loosely defined with no particular role or responsibilities. The authorities are primarily based on relationships and influence, not their formal position or roles.

Unlike in a formal organization, the communication pattern is hierarchical. Still, an informal organization is more open, and colleagues can share their views and ideas more openly and freely.

This makes it more comfortable and decentralized decision-making in the organization. Examples of such organizations are – social groups, communities, and clubs.

Difference Between Formal and Informal Organization

1. A formal organization is defined as a hierarchical or structured group that is formed together with a set of procedures, policies, and rules. On the other hand, informal organization is defined as when a few individuals come together based on their values, interests, or personal relationships. 
2. The structure of a formal organization is clear and defined and has specific roles and responsibilities for individuals. In contrast, the structure of an informal organization is loosely defined with no particular role or responsibilities.
3. In formal organizations, the authorities of the individuals are clearly defined with their specific responsibilities. On the other hand, in informal organizations, the authorities are primarily based on relationships and influence and not on their formal position or roles.
4. In formal organizations, communication follows a hierarchical pattern and a chain of command. Alternatively, in informal organizations, communication is informal and more open, as they freely share their view and ideas with others.
5. The goals and focus in the formal organization focus on achieving the specific goals set by the higher authorities. While the goals and focus in informal organizations are more flexible, and it revolves around their interest and goals.
6. Formal organizations include schools, government agencies, corporations, large institutions, etc. On the other hand, the example of informal organizations is – communities, clubs, social groups, etc.

Comparison Between Formal and Informal Organization

Parameter of Comparison	Formal Organization	Informal Organization
Definition	It is a hierarchical or structured group which is formed together with a set of procedures, policies, and rules	It is formed when a few individuals come together based on their values, interests, or personal relationships
Structure	It is clear and defined and has specific roles and responsibilities for individuals	It is loosely defined with no specific role or responsibilities
Authority	It is defined explicitly according to the individual’s position in the organization	It is primarily based on the relationships and influence and not on their formal position or roles
Communication	It follows a hierarchical pattern and a chain of commands	It is informal and more open, as they freely share their view and ideas with others
Goals and Focus	They are primarily focused on achieving their specific determined goals set by the higher authorities	They have more flexible goals, and it revolves around their interest and goals
Examples	Schools, large institutions, government agencies, corporation	Clubs, social groups, communities

References

1. https://onlinelibrary.wiley.com/doi/abs/10.1002/smj.1966
2. https://www.sciencedirect.com/science/article/abs/pii/S0001879104000466