Difference between Formal and Informal Organization

Definition of Formal Organization

Formal organisation, we mean a structure that comes into existence when two or more people come together for a common purpose, and there is a legal & formal relationship between them. The formation of such an organisation is deliberate by the top level management. The organisation has its own set of rules, regulations, and policies expressed in writing.

The basic objective of the establishment of an organisation is the attainment of the organisation’s goal. For this purpose, work is assigned, and authorities are delegated to each member and the concept of division of labour and specialization of workers are applied and so the work is assigned on the basis of their capabilities. The job of each is fixed, and roles, responsibilities, authority and accountability associated with the job is clearly defined.

In addition to this, there exists a hierarchical structure, which determines a logical authority relationship and follows a chain of command. The communication between two members is only through planned channels.

Definition of Informal Organization

An informal organisation is formed within the formal organisation; that is a system of interpersonal relationships between individuals working in an enterprise, that forms as a result of people meet, interact and associate with one another. The organisation is created by the members spontaneously, i.e. created out of socio-psychological needs and urge of people to talk. The organisation is featured by mutual aid, cooperation, and companionship among members.

In an informal organisation, there are no defined channels of communication, and so members can interact with other members freely. They work together in their individual capacities and not professional.

Formal organization

Difference between Formal and Informal Organization


Formal Organization

Informal Organization

Meaning An organization type in which the job of each member is clearly defined, whose authority, responsibility and accountability are fixed is formal organization. An organization formed within the formal organization as a network of interpersonal relationship, when people interact with each other, is known as informal communication.
Creation Deliberately by top management. Spontaneously by members.
Purpose To fulfill, the ultimate objective of the organization. To satisfy their social and psychological needs.
Nature Stable, it continues for a long time. Not stable
Communication Official communication Grapevine
Control mechanism Rules and Regulations Norms, values and beliefs
Focus on Work performance Interpersonal relationship
Authority Members are bound by hierarchical structure. All members are equal.
Size Large Small