The points of distinction between the formal and informal organizations are as follows.
- Informal organization and formal organization go hand in hand, i.e., they co-exist. It can even exist without a formal organization.
- Formal organization is the result of authority i.e., it is created by the virtue of power or sanctions. Informal organization is the result of social relationship. It is not the outcome of power but is created spontaneously.
- Formal authority attaches importance to positions. Informal authority gives importance to persons and not to positions. In other words, informal authority is personal while formal authority is institutional.
- There are neither specific nor written rules or authority and responsibility for any informal organization. But formal organization is governed by written rules and established conventions.
- Formal organization is simple while informal is highly complex.
- The formal organization does not consider the human sentiments and values of the social organization. In an informal organization, the main consideration is human relationship and social values.
- Informal organization is more powerful than a formal organization. It also functions as a protective mechanism. The informal organization can exert constructive as well as destructive influence on the formal organization and on the realization of the corporation’s objective.