Difference between Formal and Informal Organisations

The formal and informal organisations differ from each other in the following respects :

1. Origin: Formal organisations are created by conscious managerial decisions. But informal organisations arise spontaneously within the formal organisation because of the natural tendency of the individuals to associate and interact. Management has no hand either in the emergence or abolition of informal groups.

2. Purpose: Formal organisations are created for realising certain well-defined objectives. But informal organisations are created by organisational members for their social and psychological satisfaction.

3. Activities: Activities in case of formal organisation are differentiated and integrated around the objectives of the enterprise and are formalised into work-units or departments on a horizontal basis. In case of informal organisation, there are no specific activities. They arise from time to time as a result of interactions and sentiments of the individuals. Informal groups may be based on common values, language, culture or any other factor.

4. Structure: Formal organisation is hierarchical, pyramid shaped in structure with well defined positions, roles and superior-subordinate relationships. It involves enforcement of organisational order through a set of policies, procedures and rules, emphasises on status differentiation based on authority, upward and downward oriented communication system, etc. On the other hand, informal organisation is non-hierarchical; it looks like a complicated social network of interpersonal relationships. Informal organisation is loosely structured, with only unwritten norms of behaviour enforced by consent. Communication is informal and multidimensional. There are no rigid status differentials.

5. Membership: In a formal organisation every individual belongs to one work group only and works under one superior. But in case of an informal organisation, a person can be a member of more than one group, according to his choice. He may be a leader in one group and a follower in another. There is no rigidity about group membership.

6. Orientation: In case of formal organisation, values, goals and tasks are dominantly economic and technical, and they concern productivity, profitability, efficiency, survival and growth. But in case of informal organisation values, goals, and tasks are predominantly psycho-social, centred around individual and group satisfaction, affiliation cohesiveness and friendship.

7. Norms of behaviour: In a formal organisation individuals are required to behave in the prescribed manner in their work situation. They are expected to behave in a rational manner. Deviations from the standard are dealt with Organising according to the organisational rules and regulations. There is also a system of rewards and punishments. But in the case of informal organisation, individual behaviour and group behaviour influence each other. Moreover, behaviour is more natural and socialised. Informal groups develop their own norms of behaviour and system of rewards and punishments. Rewards take the form of continuous membership of the group, social status, recognition etc. While punishments include censure by the groups, isolation from the group, etc.