Classification of Organization | Features | Merits | Demerits

Formal and Informal organization

Image: Formal and Informal organization

Classification of Organization

The organization can be classified on the basis of authority and responsibility assigned to the personnel and the relationship with each other. In this way, an organization can be either formal organization or informal organization. Both formal organization and informal organization are explained below.

Formal Organization

Formal organization is formed on the basis of delegation of authority. Each formal organization has its own objects and the activities are performed to achieve them. Under formal organization, the duties and responsibilities of each employee are well designed and exhibited in the organization chart.

Scot has defined a formal organization as,

“a system of coordinated activities of a group of people working towards a common goal under authority and leadership”.

Features of Formal organization

The main features of formal organization are presented below:

1. Formal organization is consciously designed.

2. It provides for specialization.

3. It is based on delegation of authority.

4. The authority, responsibility, duties, policies and rules are properly well defined.

5. The principle of unity of command is usually observed.

6. It is deliberately impersonal.

7. It is supported by organization chart.

Merits of Formal Organization

The merits of formal organization are briefly described below:

1. There is no conflict among the employees since their respective duties and responsibilities are clearly defined.

2. Overlapping of responsibility is easily avoided.

3. It results in the motivation of employees.

4. There is no personal bias since clear cut rules and regulations are framed and followed.

5. It makes the organization less dependent on one man.

Demerits of Formal Organization

The followings are the demerits of formal organization.

1. It reduces the spirit of initiative.

2. There is a delay in taking a decision since rules and regulations are getting importance than situation.

3. It does not give any importance to sentiments and values of employees.

4. It reduces the free flow of communication.

5. It creates the problems of co-ordination.

Informal Organization

Informal organization refers to the informal relationships develop among the group of employees in an organization. These groups fulfill their needs which are largely personal in nature by creating informal relationships. Relationships are created during breaking hours of an office (say coffee or tea break, lunch hour etc.) and in sometimes even outside the office.

One cannot predict the time of formation of such informal organization. At the same time, the informal organization can be dissolved at any time by itself. The group members of the informal organization may be consisting of not only from the same department but also from the several other departments and cut across the status boundaries. Generally, these groups members are having same type of taste, opinions, views and expectations.

Features of Informal Organization

The features of informal organization are given below:

1. An informal organization arises spontaneously.

2. It is based on personal attitudes, emotions and likes and dislikes.

3. It provides social satisfaction to its members.

4. It is an integral part of a total organization and the management cannot eliminate it.

5. It has no place in the formal chart.

6. It is a network of personal and social relations.

7. It has its own rules and traditions.

8. It is indefinite and has no structure.

Merits of Informal Organization

The followings are the merits of informal organization.

1. The informal organization overcomes deficiency and fills up the gaps of the formal organization.

2. The flow of communication is very fast.

3. The motivation of employees is very easy.

4. Decisions are taken very quickly.

Demerits of Informal Organization

The demerits of informal organization are presented below.

1. It ruins the morality among the employees.

2. It acts according to mob psychology.

3. There is no evidence available for the information received under informal organization.

4. It spreads rumor among the employees regarding the attitude or approach of top management unnecessarily.