The organizational structure of your business

refers to the way management levels are

established, and the way decisions are made
and implemented to achieve your desired goals.
As a business owner or company leader, it’s your
responsibility to decide whether the
organizational structure that underlies your
business is formal or informal.
 Formal organisation is a well-defined structure
of authority and responsibility that defines
delegation of authority and relationships
amongst the organisational members.
 It works along pre-defined set of policies,
plans, procedures, schedules and programmes.
Most of the decisions in formal organisation are
based on pre-determined policies.
 Formal organisation is “a system of well-defined
jobs, each bearing a definite measure of authority,
responsibility and accountability, the whole
consciously designed to enable the people of the
enterprise to work most effectively together in
accomplishing their objectives.”

 It is a deliberately designed structure with formal

authority, responsibility, rules, regulations and
channels of communication.

 Some degree of formalization is necessary for

organisations to function effectively; to avoid
taking time-consuming decisions, to handle
conflicting situations and exercise control over the
activities of subordinates.
 Deliberately created structure:It is a deliberately
created structure that defines official relationships
amongst people working at different job positions.
 Job-oriented: It focuses more on jobs than people.
It allocates jobs to people and defines the structure
of relationships to achieve the formal
organisational objectives.
 Division of work: work is divided into smaller
units and assigned to individuals on the basis of
their skills and abilities. Division of work results in
specialisation and increases organisational output.
 . Departmentation:Departmentation is the
foundation of organisation structure, that is,
organisation structure depends upon
departmentation. Departmentation helps in
fixing responsibility of various departmental
heads
 Formal authority:People exercise authority by
virtue of their position in the organisational
hierarchy. It involves the right to command, to
perform, to make decisions and spend
resources.
 . Coordination: Managers integrate the
activities and units of different departments
into a concerted effort so that departments and
individuals work towards a common goal.
The informal organization is the interlocking social
structure that governs how people work together in
practice. It is the aggregate of, 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, and the complex social dynamics of its
members also.
You can best understand the concept of an informal
organization by comparing it to a formal organization.
 Contrary to a formal organization, an informal
organization does not depend on relationships of
ranks per se. Even functions of people do not define
their position within the organization.
 In informal organizations, personal attitudes,
prejudices, likes and dislikes determine human
relationships. People find a place in the organization
depending on these informal factors.
 Informal organizations generally emerge by
default. Policies, procedures or ranks do not play a
role in establishing them. People end up creating
them by interacting with each other.
Formal organization, no doubt, is an important part of the
organization. But informal organization is also not less
important. If handled properly, it will help in performing
the activities of the organization very efficiently and
effectively.
 Informal organization may act to fill in gaps in a
manager's ability. For instance, if a manager is weak
in planning, one of his subordinates may informally
help him in such a situation.
 Management may also make use of informal group
leaders by taking them into confidence to mediate as
bridges of understanding between the management
and the employees.
 Managers also benefit from informal organizations
by using them to understand the grievances of
employees. Since employees freely interact with
each other, they can unify and address their
problems collectively.
 INFORMAL
ORGANISATION
STRUTURE
An informal organization is the social structure of the
organization, as opposed to the formal structure of an
organization. It establishes how an organization functions from a
practical standpoint. The informal organization can work in
concurrence with the formal organizational structure, parallel with
it, or against it.
It's primarily a social creature - made up of the sum total of social
norms, relationships, and interactions that affect how an
organization works. While a formal organization is cold and
impersonal, an informal organization is intensely personal. It's all
about social interactions and relationships between the members.
Members of an informal organization can certainly hold official
offices and have formal duties, but they also bring their own
values, personal interests and assumptions into the equation of
how they act.
Members develop friendships, alliances, enemies, trusted sources of
information, and preferences on how tasks should be performed.
These social influences may cause a member of the informal
organization to work in conjunction with the organization, in parallel
with it, or even against it. In some respects, you can think of an
informal organization as:
An organization within the formal organization working with it
An organization beside the formal organization working towards the
same goals but not necessarily together
Or an organization working outside the formal organization
and against it
The structure of an informal organization is usually quite different
from its formal counterpart. Its structure is usually fluid and rather
flat. Decisions are often made collectively rather than unilaterally by
one leader. Cohesion is often established through trust and reciprocity
between members. An informal organization is also able to be
dynamic, responsive, and adaptable to
 Informal organizations come into existence due to
limitations of formal structure. Informal
organization yield the following benefits to its
members and management:-

Promotes social and cultural values
 Relief to top managers
 Communication
 Social satisfaction and Security
 Better Relationships
 Quick feedback to managers
 Solve work-related problems
 Provides a source of friendships and social
contact for organization members.
 Helps employees feel better informed about
and connected with what is going on.
 Provides status and recognition not available
from the formal organization.
 Aids the socialization of new employees.
 Helps employees to be more aware of what is
happening in the workplace.
To Its Members
Sense of Belonging
Safety value for emotional problems
Social control and communication
Check on authority
Breeding ground for future leaders
To Its Management
Cooperation
Reduced managerial workload
Employee communication
Encourage improve of management
practice
Filling gaps in a manager abilities
 Distortion of the message – The most striking feature of informal communication
is that it transmits distorted information. These communication networks do not
follow any rules, absolute methods or ways. Informal communication does not
follow any set rule or formality. So it can convey any sort of information to any
individual without any admiration or fear. For this reason, people transmit distorted
information through informal channels without any fear, hesitation or responsibility
of spreading false information. It may spread false or distorted news which might
sometimes be detrimental even to the employees.
 2. Creating misunderstanding ¬- Lack of conduct, confidence, decency, and
rules cause misunderstanding in informal communication. In many cases, this
communication creates conflicts and misunderstandings in the organization. As a
result, there may be disagreement between employees. Because, informal
channels of communication transmit false, distorted and wrong information. Under
this system, usually, the employees do not obey the formal approval system.
 3. Lack of secrecy - Informal communication also suffers a hoot secrecy problem.
Everybody can liberally cooperate as there are no boundaries or rules. Since it
follows no rule and revision, important mitten of the organization is likely to be
disclosed through it. Any undisclosed subject is likely to be flashed without any
predicament or uncertainty. This might reason enormous harm to any organization.
 4. Spreading rumours - Most of the time, informal communication
fabricates the actual facts and makes some flushed picture. Since
informal communication is not any rule-bound, people try to use this
channel to present the real fact colorfully or by mixing untrue matted. In
this method, the miss-information or rumor extends quickly. This turns the
real fact into a rumor and spreads that rumor quickly. The original
information may be transformed into the wrong information.
 5. Contradicting formal information - In some cases, messages sent
through the informal channel of communication may contradict or differ
with that of formal information. Sometimes, mystification develops among
the persons involved in informal communication. As a result, they may
stay detach without any co-operation. This also creates conflict and
misunderstanding among the people in the organization.
 6. Damaging discipline - This sort of communication is subject to errors
and mistakes because no officials rules or parameter operate in this case
of this communication. By nature, informal patterns of communication are
independent of the formal channel and do not follow the organization’s
established chain of command. This communication is completely
disorganized and it is not essential that information reaches the person
concerned.
 If the informal organisation is managed correctly it can confer a number of
advantages to the formal organisation. So managers have to develop strategies for
working with the informal organisation

1. The informal groups operating in the organization should be identified and their
existence recognized

2. The patterns of informal communication should be analyzed carefully. To know the

sources of misinformation, rumor, etc. an enlightened manager can use informal
channels to plug the loopholes of the formal communication system.

3. The management should try to achieve equilibrium between formal and informal
organizations. Conflicts between the two should be avoided through two-way
communication with he group and their leaders.

4. The management should attempt to integrate the interests of informal groups with
the objectives of the formal organization. If this could be achieved, much of the role
conflict would be avoided.
5. The desirable patterns of informal relationships may be incorporated into
the formal structure. This will make the organization strong.

6. Informal group must be taken into confidence whenever a change in

work methods is to be introduced in the organization. It is easier to
introduce a change when group norms are changed. For overcoming
resistance to change on the part of the groups, the management must
share complete information about the change with the groups and try to
persuade them to accept change by convincing them of the benefits of the
said change.

To sum up, informal groups can be used constructively for attainment of

organizational goals. If the interests and goals are integrated with the
company's, the groups will work for the company objectives rather than
against them.
 Manvi Mehrotra 1221
 Pragati Chauhan 1251
 Saloni Singhal 1191
 Kriti Mittal 1084
 Saloni Garg 1027