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Difference between Formal and Informal Organisation

Last Updated : 07 Feb, 2024
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Organisations are a network of relationships amongst people working together so as to get the best output in an enterprise. The two types of organisation formed on the basis of relationships are  Formal Organisation and Informal Organisation.

Difference between Formal and Informal Organisation

What is a Formal Organisation?

In every organisation, employees are guided by rules, policies, and procedures, and the structure of jobs and positions of employees are clearly defined for achieving smooth functioning of the organisation. Such a structure is known as Formal Organisation. In a formal organisation, the position, responsibility, authority and accountability of each and every employee is defined for achieving organisational goals. It is stable, rigid and coordinates the effort of every department.

What is an Informal Organisation?

Interaction amongst employees at the workplace gives rise to networks of informal communication and employees cut the official channels and form their own social groups, which are known as Informal Organisations. Such informal organisations emerge from within the formal organisation. It arises out of frequent contact of people with each other based on common interests. It has no definite structure as it comprises a network of social relationships. It has no specific direction for the flow of information and is flexible. It is helpful in faster communication and fulfils the social needs of employees at the workplace.

Difference between Formal and Informal Organisation:


Formal Organisation

Informal Organisation

Meaning The structure of jobs and positions, which is created by management is known as Formal Organisation. The network of social relationships arising out of interaction among employees is known as Informal Organisation. 
Formation It is formed deliberately as a part of the organisation’s rules and policies. It is not formed deliberately and is a result of social interaction. 
Authority Authority arises by virtue of position in management. Authority arises out of personal qualities.
Behaviour Behaviour is prescribed by the managers. There is no set pattern for behaviour.
Flow of Communication             Communication takes place through formal channels only. Communication takes place through informal channels having no fixed path.
Nature It is rigid in nature. It is flexible in nature.
Leadership Person with maximum authority is the leader. Person who has greater acceptance by the group is the leader.
Flow of Authority Authority flows from top to bottom. Authority can flow in all the direction.
Stability It is more stable as it exists till the survival of the organisation. It is relatively less stable as employees can change their social group based on their desire.
Purpose It is created to work systematically and achieve organisational goals. It is created to provide social satisfaction to employees.

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