Formal organisation refers to the officially established pattern of relationships among departments, divisions and individuals to achieve well-defined goals and is a consciously designed structure of roles.

In other words, formal organisation clearly spells what a person has to do, from who he has to take orders and what rules, policies and work procedures are to be followed. Thus, it is a system of well defined jobs, each bearing a definitive measure of authority, responsibility and accountability. This promotes order and facilitates planning and controlling functions.

Informal organisations on the other hand, refers to relationship between individuals in the organisation based on personal attitudes, likes and dislikes and originates to meet their social and emotional needs and develops spontaneously. It represents natural grouping of people in work situation and is supplementary to formal organisation as it serves the needs not satisfied by formal organisation.

The formal organisation does not provide opportunity to members to exchange personal views and experiences and so they interact informally to fulfil such interest and needs. In fact, informal organisation comes into being because of the limitations of the formal structure and both are interlinked. However, they differ in respect of their origin, purpose, structure, authority, channels of communication and behaviour of members.

Difference between Formal and Informal Organisations

Formal Organisation

  1. It is created by the top management.

  2. It is created to get the jobs of an organisation performed in a planned and systematic manner.

  3. It is managed by officially appointed managers.

  4. Managers of formal organisation have formal authority.

  5. Formal organisation is permanent and stable.

Informal Organisation

  1. It is not created by top management. It arises out of the natural desire of the people to associate.

  2. It is formed to satisfy those needs of members which can not be satisfied through formal organisation.

  3. Members of the informal group select some one as their leader to take care of the interests of the group members.

  4. The authority of the leader of the informal group depends upon the combined support of group members.

  5. Informal organisation is of temporary nature. It changes its size and membership from time to time.