1. PROF.CHHAYA PATEL
Formal and Informal
Organisation

2. Formal Organisation
-
-
Formal organisation is a well-defined structure of authority and
responsibility that defines delegation of authority and relationships
amongst various organisational members.
It works along pre-defined sets of policies, plans, procedures,
schedules and programmes.
Most of the decisions in a formal organisation are based on predetermined policies.
Formal organisation is a deliberately designed structure with formal
authority, responsibility, rules, regulations and channels of
communication.

3. Features of Formal
Organisation
1.
2.
3.
4.
5.
6.
7.
8.
Deliberately created structure
Job-oriented
Division of work
Departmentation
Formal authority
Delegation
Coordination
Based on principles of organising

4. Benefits of Formal
Organisation
1. It clearly defines objectives of the organisation and authority- responsibility
relationships amongst people for attainment of those objectives.
2. It results in optimum utilisation of scarce organisational resources.
3. Clear division of work and relationships amongst people develops effective
system of communication in the organisation.
4. The organisational hierarchy avoids overlapping of activities between two
individuals or two departments. Two individuals are not assigned the same task.
5. Career advancement and promotional avenues are clearly defined in a formal
structure of organisation.
6. The rate at which people join and leave the organisation is reduced (because of
clear objectives, policies, strategies etc.). The rate of labour turnover and
absenteeism, thus, remains low.
7. Formal organisation attempts to integrate formal goals of the organisation with
goals of individuals working in the organisation. There is, thus, synthesis of
individual, group and organizational goals.

5. Limitations of Formal
Organisation
1.
2.
Loss of initiative
Unsatisfied social needs

6. Theories of Formal
Organisation
Organisation theory is the study of organisations and people and
groups working in them. There is no unified set of organisation
theory that provides insight into organisation principles and
practices. Different theories have evolved over a period of time with
different sets of assumptions and features.
Organisational theories are classified as follows :
1. Classical Theory of
2. Human and Participative Theories of
3. Contingency Theory o

7. Classical Theory of Formal
Organisation
It focuses on structure, design and features of the organisation like
specialisation, scalar chain, departmentation, span of control,
centralisation/decentralisation etc. The structure is created and people
are appointed to run the various departments. It considers organisations
as closed system with very little or no interaction with the
environmental forces. It emphasises on tasks more than people.
Hierarchy of authority, division of work, specialisation, impersonal
relations, narrow span of control etc. are the important factors of
classical theories of organisation.
(a) People work only if they are directed to work. They do not assume
responsibilities on their own.
(b) Formal plans, motivational factors and communication channels are
designed to get the work done through subordinates.

8. Contd…
(c)
(d)
(e)
It achieves efficiency at the cost of social dissatisfaction.
It emphasises on division of work as a means to improve workers‟
performance.
It views unity of control as the basis for achieving coordination
amongst varied activities of organisational members.

9. Human and Participation
Theories of Formal Organisation
The classical theory of organisation was opposed in 1950‟s when the
behavioural theories emerged on the management scenario. The
classical theory was criticised for being highly mechanistic, formal and
impersonal.
Hawthorne experiments conducted by Elton Mayo supported social
and informal interactions amongst work groups to increase
organisational efficiency.
The human theories focused on people as means to achieve the tasks.
These theories characterised a shift from task - oriented approach to
people - oriented approach for achieving the organisational goals.

10. Contingency Theory
Classical and Participative theories are not unrealistic. However,
managers may choose a theory which consists of features from both to
adapt the organisation to its surrounding environment.
The contingency theory identifies four factors that affect manager‟s
choice of a theory.
1. Nature of people : People who are lazy, lack responsibility, do not wish
to work on their own, prefer to be led and guided, prefer to be governed
by the classical theory of organisations. People who enjoy their work,
wish to seek greater responsibility, exercise self-direction show better
results if managers adopt participative theory to organising.
2. Type of task and technology : Classical form of organisation is
preferred for producing goods through mass production technology
while participative theory is more suitable where job-order (small scale)
or continuous technology is adopted.

11. Contd…
3. The environment : Firms which operate in dynamic environment are
more flexible in their operations and, therefore, adopt a participative
theory while firms operating in a stable environment show better results
when they work according to principles of classical organisation.
4. Degree of change and uncertainty : Change in people‟s attitudes,
perception and knowledge from simple to complex shifts the
organisation structure from classical to participative.
As society moves from underdevelopment to development, managers
become educated, trained and skilled labour is available in abundant
supply, the general level of education and specialisation increases and,
therefore, a shift from classical to participative organisation structure is
observed.

12. Factors Affecting
Contingency Theory

13. Informal Organisation
As the formal organisation grows in size, parallel existence of informal
relationships along with formal relationships becomes unavoidable.
They arise because of inevitable social and personal needs of individuals
which cannot be satisfied by the principles of formal organisations. They
represent non-planned, unofficial, social interactions amongst people
working in formal structures. They arise out of common interests of
people. These organisations are not governed by formal set of principles
but nevertheless, are an important and integral part of formal
organisations.

14. Features of Informal
Organisation
1.
Unplanned structure
2.
Fulfillment of social needs
3.
No formal structure
4.
Informal leaders
5.
Informal communication system
6.
No rules and regulations
7.
No fixed tenure

15. Benefits of Informal
Organisation
1.
Promotes social and cultural values
2.
Relief to top managers
3.
Supplement to managers‟ capacities
4.
Social satisfaction and security
5.
Communication
6.
Better relationships
7.
Solve work-related problems
8.
Promotes creativity
9.
Self-control
10. Restraint on manager‟s discretion
11. Social satisfaction
12. Quick feedback to managers

16. Limitations of Informal
Organisation
1.
Conformity
2.
Attitude of leaders
3.
Role conflict
4.
Rumor
5.
Resistance to change
6.
Conflicting goals

17. Comparative Analysis of Formal
and Informal Organisations

18. Contd…

19. Integration of Formal and
Informal Organisation
Formal and informal structure are complementary to each other.
Managers must, therefore, give due regard to the requirements and needs
of both the forms of organisation structures. This can be done in the
following ways :
1. Resistance to change and problem of conformity can be overcome by
educating employees.
2. Role conflict can be reduced by integrating individual goals with
organisational goals.

20. Contd…
3.
Formal organisations must be flexible so that preferences for individual talents and
creativity can be incorporated in the formal structures.
4.
Managers should ensure that group norms are not against formal organisational
goals.
5.
Managers should understand that workers need to interact with each other during
long working hours and, therefore, recognise their informal relationships.
6.
Informal channels spread information at a fast speed. Managers should use this
channel for spreading important, official information. This will prevent spreading
of gossips and rumours.
7.
Managers should allow members to discuss their problems in groups rather than
discuss them with their immediate superiors.
8.
Managers should take leaders of informal groups into confidence while making
organisational plans and policies. This will promote easy and fast acceptance of
plans and policies by organisational members.

21. Group Dynamics
„Group dynamics‟ is an important aspect of organising. Managers cannot
do away with groups. Groups contribute to organisational and group
goals. A group refers to “two or more people who interact with one
another, are psychologically aware of one another, perceive themselves
to be members of the group, and work towards a common goal.”

22. Features of a Group
1.
Interaction : A group is an interaction of two or more people.
2.
Influence : The group members have reciprocal influence on each
other. Each member influences and is influenced by others in the
group.
3.
Mutuality : People develop mutual perceptions and emotional ties
with one another.
4.
Informal leadership : Every group has a formal leader elected by the
members. However, informal leaders are also elected by them.
5.
Role structure : Role structure is “the set of defined roles and interrelationships among those roles that the group or team members
define and accept.” Every individual performs a specific role which
influences and enhances expectations of the group members from
each other.

23. Contd…
6.
Group norms : Every group functions on the basis of certain norms.
A norm is “a standard of behaviour that the group accepts and expects
of its members.”
7.
Group cohesiveness : Cohesion is the power to stick together. Group
cohesiveness is the power of the group to remain attached to each
other.

24. Types of Groups
1.
The various types of groups can be categorised as follows:
Formal groups
(a) Permanent formal groups [Command groups and permanent
committees]
(b) Temporary formal groups [Task forces and project groups]
2.
Informal groups

25. Formal Groups
1.
Formal Groups : Groups which are deliberately created by managers
for carrying out specific tasks for attainment of organisational goals
are called formal groups. Committees, task forces and work teams are
different forms of formal groups.
(a) Permanent formal groups are formally represented on the
organisation chart. They are also known as command groups and
consist of managers and their subordinates.
(b) Temporary formal groups are formed to deal with a specific
problem. They dissolve once the problem is solved. Task groups,
project groups or ad hoc committees are the forms of temporary
formal groups.

26. Informal Groups
These groups are not created by managers but spontaneously grow out of
interaction amongst members of the formal groups. They are created by
choice for promoting the goals defined by the group, that is, group goals.
These groups may oppose or support the formal organisational
objectives.

27. Functions of Informal Groups
(i)
(ii)
(iii)
(iv)
Maintain group values and life-style
Provide social satisfaction
Operate communication systems
Maintain social control

28. Reasons for Joining Informal
Groups
People join informal groups for two reasons :
1.
Internal Reasons
2.
External Reasons

29. Internal Reasons for Joining
Informal Groups
(a) Interpersonal attraction
(b) Group activities
(c) Group goals
(d) Higher pay-off
(e) Need satisfaction

30. External Reasons for Joining
Informal Groups
(a) Interaction
(b) Personal goals
(c) Superordinate goals
(d) Perceived power
(e) Mutual trust
(f)
Communication
(g) Fait accompli

31. Group Cohesiveness
-
Group cohesiveness is the attraction of group members towards each
other in terms of their loyalty and commitment to group goals.
-
It is “the degree to which members are attracted to a group, are
motivated to remain in the group, and are mutually influenced by one
another.”

32. Factors Affecting Group
Cohesiveness
There are two sets of factors that affect group cohesiveness:
1.
Factors that increase cohesiveness
2.
Factors that decrease cohesiveness

33. Factors that Increase
Cohesiveness
The following factors increase group cohesiveness :
(a)
Similarity in attitudes, values, beliefs and interests of members
increases group cohesiveness, facilitates communication and develops
understanding amongst group members.
(b)
Inter-group competition, where two groups compete with each other
to reach a common goal increases cohesiveness of each group.
(c)
Personal liking and attraction for each other contributes to increased
group cohesiveness.
(d)
Success in achieving group goals leads to group cohesiveness.
(e)
Size of the group also determines cohesiveness of a group. Smaller
groups are generally more cohesive than bigger groups.

34. Contd…
(f) Increase in interpersonal interaction increases attraction of group
members to one another and increases cohesiveness of the group.
(g) Consensus amongst group members on group goals also leads to
increase in group cohesiveness.

35. Factors that Decrease
Cohesiveness
The following factors are detrimental to group cohesiveness :
(a) Increase in size of the group decreases group cohesiveness.
(b) When members have conflicting opinion about group goals, group
cohesiveness will decline.
(c) While inter-group competition increases cohesiveness, intra-group
competition decreases cohesiveness. Intra-group competition promotes
individual goals at the cost of group goals.
(d) Dominance, rather than agreement leads to less dominant members of
the group surrender to the desires of the dominant members.
(e) Unpleasant group interactions, lack of similarity amongst members‟
attitudes, beliefs and values and lack of enjoyable group activities
decreases group cohesiveness.

36. Contd…
(f) Involvement of group members in activities outside the group and
threatening internal environment where members compete for resources
within the group reduces group cohesiveness.

37. Consequences of Group
Cohesiveness
Highly cohesive groups lead to following consequences :
1. Group goals and group norms can be achieved effectively.
2. If there is high compatibility between group goals and organisational
goals, people perceive management as supportive of group goals and,
therefore, perform better than less cohesive groups.
3. Members communicate with each other frequently and better understand
the feelings of others.
4. Members achieve higher job satisfaction than members of less cohesive
groups.

38. Contd…
5. It leads to friendly competition amongst work groups that perform
similar activities and do not depend upon each other to get the work
done.
6. It affects group‟s willingness to innovate and change. Changes can be
introduced if they are accepted by members of the group.