The Differences Between an Informal and Formal

Organization
There are key differences between formal and informal organizations. Formal
organizations are oriented toward reaching specific goals. Informal organizations
are more oriented toward human psychological needs.

Often, formal organizations are more publicly visible than informal organizations.
Informal organizations can form within formal organizations and also become
formal over time.

The primary differences between an informal and formal organization are levels of
structure and hierarchies that determine how members interact. Formal
organizations are more structured and rely on authority based upon chains of
command. Informal organizations do not require hierarchies of authority or
structured internal processes. They are not formed in order to reach specific goals
like a formal organization.

Authority

Formal organizations have clear hierarchies of leadership. These hierarchies and

power relationships are clearly documented. Authority is appointed from upper
levels of the hierarchy, such as management. For example, only management
usually holds the authority to hire or fire employees.

Informal organizations typically do not follow hierarchies for authority. There is less
emphasis on established authorities or multiple levels of hierarchy. Rather,
authority is equal among all members. An example would be a book club where
members are all equal because they are not pursuing a goal that would require
authority.

Structure

Formal organizations are very structured in order to reach stated goals. A formal
structure enables members to work together toward the same objectives. There are
established laws and rules that govern labor and norms within a formal
organization. An organizational chart would be an example of documented
structure.

Informal organizations often are not very structured because their goals might be
temporary or entirely social. There is no need for the extensive requirements of a
formal organization. However, an informal organization may become formal over
time. A study group of students for a semester-long course would typically not need
a formal structure for organizing.

Influence

Formal organizations rely on status through predetermined authority roles for

influence. Members of a formal organization look to leadership roles to provide
guidance. There is a clear flow of influence through a formal organization. For
example, a subordinate employee would not hold the same influence as a manager
within a company.

Informal organizations tend to have more subtle norms that are expressed through
customs, morals or beliefs that are often not written. Members are not pressured to
perform by superiors. Members of an informal organization mostly have equal
influence. For example, a volunteer group might rotate leadership among members
on an ad hoc basis.

Members

Formal organizations possess involved rules and laws regarding behavior and the
outcomes of labor. There are also processes in place for hiring, firing and replacing
members. Expectations for each member are outlined and documented. A job
description is an example of a formal document describing the specific
requirements for the members of a formal organization.

Informal organizations provide a psychological or social benefit for members.

Relationships among members are more personal than role-related. Behavior is
determined by group consensus. For example, social groups will follow norms that
are not explicitly written.

Communications

Formal organizations may have rules regarding the flow of information and
communication. The chain of command will determine how members communicate.
Communication flow is determined by hierarchy. Often, information flows from
leadership down to other members.

Informal organizations do not have specific guidelines for communication. All

members are able to interact with each other without considering hierarchy.
Members of informal organizations communicate freely with one another. An
example might be a musical group where members do not need to inform a specific
leader when they will be absent from a performance.

Purpose

Formal organizations are formed to serve a specific purpose or meet set goals.
There is a constitution or plan and extensive guidelines directing the organization
toward its purpose. Leadership will regularly review how well goals are being met
and plan accordingly. A formal organization will exist even if specific members
leave the organization.

Informal organizations serve the needs of individuals and can be created

spontaneously with a purpose that is not well-defined. Goals are not always clear
because informal organizations primarily serve social requirements for members.
An informal organization might dissolve if certain members leave the organization.
What are the Benefits of Informal and Formal
Organizations?
Formal organizations are useful for reaching defined goals. The structure of a
formal organization makes it effective for realizing profit or conducting business.
The components and structure of a formal organization are necessary in order to
efficiently meet stated objectives.

Informal organizations can be more responsive to change due to the lack of rigid
structure. They are inherently more oriented around people rather than outcomes.
An example would be a company softball team that allows employees to interact
socially away from the formal hierarchies in order to build morale.

Both formal and informal organizations serve human needs and meet goals ranging
from financial to values-based. They allow people to build communities and
achieve goals that would not be possible alone.