What is the Difference Between Formal and Informal Organisation?

The formal and informal organisation are two structures that exist within any workplace. A formal organization is defined as an official system with distinct roles and responsibilities, whereas an informal organization develops between employees naturally through personal relationships and interactions. These two structures work differently but can overlap frequently in the sense that they impact how work is completed and how people interact in a company. These concepts make businesses balance efficiency and a positive work environment.

What is Formal Organisation?

A formal organisation is the structured, official framework of a company. It is designed to achieve specific goals and follows a hierarchy where every individual has a defined role. The organisation operates based on rules, policies, and procedures, ensuring clarity in responsibilities and decision-making.

For example, in a formal organisation, a sales manager is responsible for overseeing the sales team and reporting to the director. The tasks and objectives for each role are clearly outlined, which minimizes confusion and promotes efficiency.

Characteristics of Formal Organisation

A formal organisation operates with a clear structure and defined rules to ensure smooth functioning. It focuses on achieving specific objectives by assigning roles and responsibilities to each employee.

1. Hierarchy and Structure: Formal organisations have a clear chain of command. Each employee knows their role and whom to report to. For instance, an assistant reports to their manager, who in turn reports to the department head.
2. Defined Roles and Responsibilities: The roles and duties of each employee are predefined. For example, the finance department handles budgets, and the marketing team focuses on campaigns.
3. Rules and Regulations: Formal organisations function based on established rules and policies. These guidelines ensure consistency and discipline across all operations.
4. Goal-Oriented: Formal organisations focus on achieving specific objectives, such as increasing sales or launching a new product.
5. Impersonal Relationships: Interactions in formal organisations are often professional and task-oriented, leaving little room for personal connections.

What is Informal Organisation?

An informal organisation is a network of personal relationships and interactions that naturally develop among employees. Unlike a formal organisation, it does not follow official rules or hierarchies. It is based on mutual trust, shared interests, and personal connections, which influence how people collaborate and support one another.

For example, a group of employees who meet during lunch breaks to share ideas and experiences forms an informal organisation. This network can provide emotional support and foster creativity within the workplace.

Characteristics of Informal Organisation

An informal organisation develops naturally through personal relationships and interactions among employees. It operates without a formal structure, focusing on mutual support and collaboration.

1. No Defined Structure: Informal organisations lack a formal hierarchy or official roles. People connect based on shared interests or goals.
2. Flexible Interactions: Relationships in informal organisations are fluid and not restricted by company policies. Employees freely share ideas without following formal channels.
3. Emotional Support: Informal networks provide emotional comfort, especially during stressful times. For instance, colleagues may help each other manage work pressure through casual conversations.
4. Influences Work Culture: The informal organisation significantly impacts workplace morale and culture. Positive relationships can boost collaboration, while conflicts may hinder productivity.
5. Hidden Power Structure: Informal leaders often emerge based on experience, knowledge, or personality, influencing decisions without holding official authority.

Difference Between Formal & Informal Organisation

Understanding the difference between formal and informal organisation helps businesses balance efficiency and workplace harmony. Below are the five key distinctions:

Structure

• Formal Organisation: A formal organisation has a clear structure with defined rules and a hierarchy. This structure helps establish authority and a chain of command. It ensures that everyone understands their role and responsibilities within the organisation.
• Informal Organisation: An informal organisation does not have a set structure. It forms naturally through personal relationships and social interactions between employees. The lack of a clear hierarchy means that authority is more flexible and based on trust and friendships.

Formation

• Formal Organisation: Formal organisations are intentionally created by management to meet specific business objectives. The formation of these organisations is planned, with a focus on setting goals, assigning roles, and establishing systems.
• Informal Organisation: Informal organisations, however, develop naturally over time. They arise through day-to-day interactions and personal connections, without any formal planning by management. These organisations grow based on mutual interests and relationships.

Communication

• Formal Organisation: In a formal organisation, communication follows official channels such as meetings, emails, and reports. This ensures that information flows systematically and reaches the right people in an organised manner.
• Informal Organisation: Communication in informal organisations is more casual. It often takes place through group chats, informal conversations, or word of mouth. This makes information sharing quicker and less structured.

Objective

• Formal Organisation: The main objective of a formal organisation is to achieve specific business goals, such as improving profits or meeting targets. Every action is aimed at helping the organisation succeed and grow.
• Informal Organisation: In an informal organisation, the focus is more on personal satisfaction, support, and maintaining good relationships. People in informal groups help each other out, sharing advice or providing emotional support, rather than working toward organisational objectives.

Relationship Type

• Formal Organisation: Formal organisations are professional and impersonal. Relationships in these organisations are based on work roles, with interactions typically limited to job-related tasks.
• Informal Organisation: In informal organisations, the relationships are personal and emotional. Employees form bonds through shared experiences and mutual trust, often leading to strong friendships outside of work.

Aspect	Formal Organisation	Informal Organisation
Structure	Has a defined structure with rules and a hierarchy	Lacks a fixed structure; based on personal relationships
Formation	Created intentionally by management	Develops naturally through interactions
Communication	Follows official channels like meetings and reports	Uses informal methods like casual talks or group chats
Objective	Focuses on achieving organisational goals	Focuses on personal satisfaction and mutual support
Relationship Type	Professional and impersonal	Personal and emotional

Formal vs Informal Organisation FAQs

What is the formal and informal organisation?

Formal organisation is a system that is official with roles defined and rules. An informal organisation is a natural personal relationship network in the workplace.

How are formal and informal organisation different from each other?

The basic difference is the structure. Formal organisations follow definite rules and hierarchies. Informal organisations have no structures and rely on the interaction between people.

Why is informal organisation so important?

Informal organization encourages teamwork, gives emotional support, and enhances morale. It helps to create a better workplace culture and increase productivity.

Do formal and informal organizations go together?

 In most workplaces, both systems are present. They balance efficiency with employee satisfaction, thus complementing each other.

How does communication differ in formal and informal organizations?

Formal communication follows official channels like emails. Informal communication happens casually through chats or personal interaction.