Formal organization is a fixed set of rules of intra-organization procedures and structures.

As such,
it is usually set out in writing, with a language of rules that ostensibly leave little discretion for
interpretation. In some societies and in some organization, such rules may be strictly followed; in
others, they may be little more than an empty formalism.

Informal organization is the interlocking social structure that governs how people work together in
practice. It is the aggregate of behaviors, interactions, norms, personal and professional connections
through which work gets done and relationships are built among people who share a common
organizational affiliation or cluster of affiliations. It consists of a dynamic set of personal
relationships, social networks, communities of common interest, and emotional sources of
motivation. The informal organization evolves organically and spontaneously in response to changes
in the work environment, the flux of people through its porous boundaries, and the complex social
dynamics of its members.

Tended effectively, the informal organization complements the more explicit structures, plans, and
processes of the formal organization: it can accelerate and enhance responses to unanticipated events,
foster innovation, enable people to solve problems that require collaboration across boundaries, and
create footpaths showing where the formal organization may someday need to pave a way

Functions of Informal Organization:

1. They perpetuate the cultural and social values that the group holds dear,
2. They provide social status and satisfaction that may not be obtained from the formal
organization,
3. They promote communication among members,
4. They provide social control by infjuencing and regulating behavior inside and outside the
group.

Disadvantage of informal Groups:

1. Resistance to change.
2. Role conflict
3. Rumor
4. Conformity

Benefits to the Formal Organization:

1. Blend with formal system

2. Lighten management workload
3. Fill gaps in managemnt abilities
4. Act as a safety value
5. Encourage improved management practice

The informal organization and the formal organization:

The nature of the informal organization becomes more distinct when its key characteristics are
juxtaposed with those of the formal organization. Formal rules are often adapted to subjective
interests — social structures within an enterprise and the personal goals, desires, sympathies and
behaviors of the individual workers — so that the practical everyday life of an organization becomes
informal. Practical experience shows no organization is ever completely rule-bound: instead, all real
organizations represent some mix of formal and informal. Consequently, when attempting to legislate
for an organization and to create a formal structure, it is necessary to recognize informal organization
in order to create workable structures. However, informal organization can fail, or, if already set in
order, can work against mismanagement.

Formal organizations are typically understood to be systems of coordinated and controlled activities that arise
when work is embedded in complex networks of technical relations and boundary-spanning exchanges. But in
modern societies, formal organizational structures arise in highly institutional contexts

Key characteristics of the informal organization:

• evolving constantly
• grass roots
• dynamic and responsive
• excellent at motivation
• requires insider knowledge to be seen
• treats people as individuals
• flat and fluid
• cohered by trust and reciprocity
• difficult to pin down
• essential for situations that change quickly or are not yet fully understood

Key characteristics of the formal organization:

• enduring, unless deliberately altered

• top-down
• static
• excellent at alignment
• plain to see
• equates “person” with “role”
• hierarchical
• bound together by codified rules and order
• easily understood and explained
• critical for dealing with situations that are known and consistent

Historically, some have regarded the informal organization as the byproduct of insufficient formal
organization—arguing, for example, that “it can hardly be questioned that the ideal situation in the
business organization would be one where no informal organization existed.” However, the
contemporary approach—one suggested as early as 1925 by Mary Parker Follett, the pioneer of
community centers and author of influential works on management philosophy—is to integrate the
informal organization and the formal organization, recognizing the strengths and limitations of each.

Example:

Dhaka International University MBA 7th MBA and 21st EMBA class have 40 students contain several
informal groups that costitute the informal organization within the formal structure of the class. These
groups may develop out of fraternity or sorority relationships for Presentation team, Assignment
team or Project work teams.