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Republic of the Philippines

Calbayog City National High School


Senior High School Department
Calbayog City

Strand: Accountancy and Business Management


Subject: Organization and Management
TOPIC: Formal and Informal Organization
TEACHER: Michael D. Baculanta

FORMAL ORGANIZATION

 The Formal Organization is a system of well-defined jobs, each bearing a definite


measure of authority, responsibility and accountability. -Louis Allen

 Formal Organization is
 a system of consciously coordinated activities of two or more persons toward a
common objective. -Chester Barnard

Features

 It is deliberately designed by the top management


 It places more emphasis on work to be performed than interpersonal relationships among the
employees.
 It specifies the relationships among various job positions and the nature of their inter-
relationship.
 It lays down rules and procedures essential for achievement of objective
 Efforts of various departments are coordinated, interlinked and integrated through the formal
organization.

Advantages

 Easier to fix Responsibility


 No ambiguity in the role . This also helps in avoiding duplication of effort.
 Behavior of Employee fairly predicted
 Unity of command through an established chain of command
 Stability to the organization
Limitations

 The formal communication may lead to procedural delays


 Do not provide adequate recognition to creative talent
 More emphasis on Structure and Work, difficult to understand all human relationships in an
enterprise as it places

INFORMAL ORGANIZATION

 An Informal organization is an aggregate of interpersonal relationships without any conscious


purpose but which may contribute to joint results. -Chester Barnard
 Informal organization is a network of interpersonal relationship that arise when people
associate with one another . -Keith Davis

Features

 Originates from within the formal organization as a result of personal interaction among
employees.
 The standards of behavior evolve from group norms.
 Independent channels of communication without specified direction of flow of information are
developed by group members.
 Emerges spontaneously and is not deliberately created by the management.

Advantages:

 It helps to fulfill the social needs .


 Sense of belongingness in the organization
 Faster spread of information as well as quick feedback.
 It contributes towards fulfillment of organizational objectives. For example, employees reactions
towards plans and policies can be tested through the informal network.
Disadvantages:

 It spreads rumors. This may work against the interest of the formal organization.
 The management may not be successful in implementing changes if the informal organization
opposes them. Such resistance to change may delay or restrict growth.
 It pressurizes members to conform to group expectations.
DIFFERENCE BETWEEN FORMAL AND INFORMAL ORGANIZATION

BASIS FORMAL ORGANIZATION INFORMAL ORGANIZATION

FORMATION Formal relations are well Originates as a result of social


defined and create interaction.
deliberately.
PURPOSE It is created to achieve It will, satisfy social and
predetermined objectives. cultural needs.

STRUCTURE Structure of well defined Structure based on human


authority and responsibility emotions and sentiments.
relationships.
BEHAVIOR OF MEMBERS It has prescribed pattern of Social norms are developed
behavior of members. through mutual consent of
members.
COMMUNICATION Formal communication through Informal communication based
official lines. on convenience.

LEADERSHIP Managers are in superior Leaders are chosen by group


position. members.

STABILITY It is usually stable and The life of informal groups is


continues even if members short and disintegrate if
leave it. members leave it.

FLEXIBILITY It follows a rigid structure. It is loosely structured and


highly flexible.
ADHERENCE TO RULES Strict adherence to rules. No formal rules exist.
INTERDEPENDENCE It exists independently. It is dependable to formal
organization.

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