Formal and informal organizational structures are examined. Formal structure establishes clear lines of authority and accountability. It aims to achieve objectives in a systematic manner without duplication of work. However, it can lead to delays and ignore employee needs. Informal structure fulfills social needs and allows fast communication but can spread rumors and lack systematic working. Both structures have advantages and disadvantages for the functioning of an organization.

1. VADODARA INSTITUTE OF
ENGINEERING
Engineering Economics and Management

2. Formal & Informal
Organizational Structure
Presented By: Stanley Christy 16ME009
Guided By: Prof. Kinjal Patel

3. Formal Organization
The formal interpersonal relations as superior, subordinate and
peer is depicted in a formal structure as designed by the top level
management. The authority, responsibility and accountability of the
organizational members towards the organization and the superiors are
established as per the positions created under the formal structure.
The FORMAL organization is an outcome of the deliberate efforts
of the management. The rights and duties of each position are prescribed
in the manual, the rules, regulations and policies are framed for the
discipline, smooth functioning and clarity about goals and roles of each
person in the organization. The person is empowered through the
designated position rather than personal power and traits.

4. Informal Organization
Informal organization is a spontaneous creation which is
generated automatically based on some common characteristics like
caste, religion, region or some other form of mental matching. The
relationships among the informal network is not restricted by the formal
authority

5. Advantages of Formal Organization:
1. Systematic Working:
Formal organization structure results in systematic and smooth
functioning of an organization.
2. Achievement of Organizational Objectives:
Formal organizational structure is established to achieve organizational
objectives.
3. No Overlapping of Work:
In formal organization structure work is systematically divided among
various departments and employees. So there is no chance of duplication
or overlapping of work.
4. Co-ordination:
Formal organizational structure results in coordinating the activities of
various departments.

6. Disadvantages of Formal Organization:
1. Delay in Action:
While following scalar chain and chain of command actions get delayed
in formal structure.
2. Ignores Social Needs of Employees:
Formal organizational structure does not give importance to
psychological and social need of employees which may lead to
demotivation of employees.
3. Emphasis on Work Only:
Formal organizational structure gives importance to work only; it
ignores human relations, creativity, talents, etc.

7. Advantages of Informal Organization:
1. Fast Communication:
Informal structure does not follow scalar chain so there can be faster spread
of communication.
2. Fulfills Social Needs:
Informal communication gives due importance to psychological and social
need of employees which motivate the employees.
3. Correct Feedback:
Through informal structure the top level managers can know the real
feedback of employees on various policies and plans.

8. Disadvantages of Informal organization
1. Spread Rumours:
According to a survey 70% of information spread through informal
organizational structure are rumors which may mislead the employees.
2. No Systematic Working:
Informal structure does not form a structure for smooth working of an
organization.
3. May Bring Negative Results:
If informal organization opposes the policies and changes of management,
then it becomes very difficult to implement them in organization.