Formal and informal organisation

Formal organisation is the structure designed by management, with clearly defined authority, responsibility and channels of communication (through the scalar chain). The functional and divisional structures are formal organisations.

• Advantages: responsibility is easy to fix; there is no ambiguity in roles; unity of command is kept; goals are achieved through planned teamwork; the structure is stable.
• Limitations: communication through the proper channel causes delays; creative talent may be ignored; it gives an incomplete picture of how the organisation really works, since it leaves out personal relationships.

Picture the two side by side. Walking into the principal's office, you knock, ask 'May I come in?' and follow the rules: that is formal. Chatting with your friends at lunch, with no rules at all, is informal. The formal organisation exists to reach goals; the informal one meets people's social needs.

Informal organisation is the network of social relationships that arises spontaneously when people work together: friends who lunch together, colleagues who play cricket together on Sundays. It is not created by management, and its leaders are chosen by the group itself.

• Advantages: fast communication; it meets people's social needs, which gives them satisfaction; it fills gaps left by the formal structure.
• Limitations: it can spread rumours; it may resist change; it puts pressure on members to conform to group norms.

Managers should not try to get rid of the informal organisation. They should recognise it and use both kinds together.