ORGANISING (PART-II)

Formal and Informal Organization

Formal Organization:
Meaning:
Formal organization refers to the structure of jobs and posituions
which is designed by the management to accomplish a particular
task. It specifies clearly the boundaries of authority and
responsibility and there is a systematic co- ordination among
various activities to achieve organizational goals.

Definition:
According to chester barnard, “an organistion is formal when the
activities of two or more persons are consciously co-ordinated
towards a common objective.”

Features:

1. Formal organization structure is laid down by the top

management ti achieve organisational goals.

2. Formal organization prescribes the relationships amongst the

people working in the organisation.

3. A formal organization is bound by rules, regulations, and

procedures.

4. In a formal organization the position, authority, responsibility,

and accountability of each level are clearly defined.

5. The authority and responsibility relationships created by the

organisation structure are to be honoured by everyone.

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Merits:

1. Formal organsiation is easier to fix responsibility since mutual

relationships are clearly defined.
2. Unity of command is maintained through an established chain of
command.
3. It leads to effective accomplishment of goals by providing a
framework for the operations to be performed.
4. It provides stability to organization as behaviour of employees can
be fairly predicted due to the presence of specific rules to guide
them.
5. There is no ambiguity in the role that each member has to play as
duties are specified. This also helps in avoiding duplication of
effort.

Demerits:

1. The formal communication does not consider the goals of the

individuals. It is designed to achieve the goals of the organisation
only.

2. The formal organisation is bound by rigid rules, regulations and

procedures. This makes the achievement of goals difficult.

3. The formal organisation does not take into consideration the

senetments of organisational members.
4. Poor organization practices may not provide adequate recognition
to creative talent since it does not allow any deviations from
rigidly laid down policies.
5. It is difficult to understand all human relationship in an
enterprise as it places more emphasis on structure and work.

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 Hence, the formal organization does not provide a complete
picture of how an organization work.

INFORMAL ORGANIZATION:
A network of social relationships among employees that arise
spontaneously due to interaction among people at work is called
informal organsiation.

Meaning of Informal Organisation:

Informal organization refers to the relationship between people in the
organisation based on personal attitudes, emotions, prjudices, likes,
dislikes etc.

Features:
1. Formation of informal organisation is a natural process. It is not
based on rules, regulations, and procedures.
2. Informal organization is not established by any formal authority. It
is unplanned and arises spontaneously.
3. Informal organization reflect human relationships. It arises from the
personal and social relations amongst the people working in the
organisation.
4. In the case of Informal organization, the people cut across formal
channels of communications and communicate amongst
themselves.
5. Informal organizations are based on common taste, language,
religion, culture etc, it is influenced by the personal attitudes,
emotions, likes and dislikes etc. of the people in the organisation.

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Importanmce of Informal Organization:
1. Facilitates faster and more efficient communication.
2. It enhances team cohesion and build trust and confidence among
team members.
3. Informal organization foster a free exchange of ideas and creative
problem solving.
4. Informal organization can help resolve conflicts and
misunderstandings quickly through personal connections and
mediation.
5. Informal norms and practices shape the organisational culture and
employee behaviour.
6. Improves employee morale through social interactions and informal
supports networks.
Merits:
1. It encorages delegation, decentralization, and greater support of
the manager.
2. Informal system provides a means for reliving employees from
frustration, tension and emotional problems with management and
other employees.
3. Members of the informal group confining to ceratin norms of
behaviour brings discipline and order among the employees of the
organisation.
4. Informal leaders will have high talents and skills can be picked up
by the management and giving them required trainig can develop
future executives.

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Demerits:
1. Informal groups may have tendency to resist changing because of
perpetuation of values and life styles.
2. Nagtive attitude of informla leaders may become a source of cnflict
between the management and worker.
3. Social control promotes and encourages confirmity among
informal group members, this can harm the formal organisation
by shifting initiative, creativity, and diversity of performance.
4. Very often ill-informed employees communicate unverified and
untrue information which may create conflict and
misunderstanding and a devaststing effect on employees.

Differences between Formal and Informal Organisation

BASIS FORMAL INFORMAL
ORGANISATION OGANISATION
1. Meaning It is prescribed It is natural and
structure of roles spontaneous structure
and relationships arising out of the
conciously social tendency of
coordinated towards people to associate
a common objective interact.
2.Aims Its goals and tasks are Its goals and tasks are
oriented towards predominately
productivity, centered around
profitability, growth and individual and group
so on. satisfaction, affiliation,
friendship etc.
3. Nature It is hierarchical It is shapeless and
pyramid shaped and unchritable.
bureaucratic in
structure.
4. Flow of Communication Communication is
communication takes place through not through a
scalar chain. planned route. It can
take place
in any direction.
5. Flow of Authority flows from Authority flows
authority top to bottom. vertically as well as
horizontally.

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 DELEGATION
Delegation refers to the downward transfer of authority from a
superior to a subordinate. It is a pre-requisite to the efficient
functioning of an organization because it enables a manager to use
his time or high priority activities.
According to theo haimann, “Delegation of authority merely means
the granting of authority to subordinates to operate within
prescribed limits.”

ELEMENTS OF DELEGATION:
1. Authority
2. Responsibility
3. Accountability

1. Authority: Authority refers to right of an individual to command

his subordinates and to take action within the scope of his
position. It arises from the established scalar chain which links the
various job position and levels of an organization. It always moves
downward from a superior to a subordinate.

2. Responsibility: It means the obligation of a subordinate to

properly perform the assigned duty. It arises from superior
subordinate relationship. Therefore, the subordinate is bound to
perform the duty assigned to him by his superior. It always flows
upward from a subordinate to a superior.

3. Accountability: It means answerability for the final output of the

assigned work. Once authority has been delegated and
responsibility accepted, one cannot deny accountability. It cannot
be delegated and flows upward i.e.; subordinate will be
accountable to a superior for satisfactory performance of work.

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Differences between Authority, Responsibility, and
Accountability
Basis Authority Responsibility Accountability
1. Meaning Right to Obligation to Answerability for
command perform an outcome of the
assigned task. assigned task.
2. Delegation Can be Cannot be Cannot be
delegated entirely delegated at all.
delegated.
3. Origin Arises from Arises from Arises from
formal delegated responsibility.
position. authority
4. Flow Flows Flows upward Flow upward
downward from from from
superior to subordinate to subordinate to
subordinates. superior. superior.

Importance of Delegation:

Effective delegation leads to the following benefits:

1. Effective Management: Delegation of authority enables the

manager to assign the routine work to his subordinates and thus
relieves him from heavy load of work. This helps the manager to
function more efficiently and to concentrate on more important
functions.

2. Employee Development: Delegation contributes to employee

development. Employees get more opportunities to utilize their talent.
It makes them better leaders and decision makers. It motivates them
to develop themselves for higher positions.

3. Motivation of Employees: Delegation helps in developing the

talents of the employees. It makes employees feel encouraged and
tries to improve their performance further.

4. Facilitates Growth: Delegation facilitates growth and expansion of

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 an organization by providing trained and experienced personnel for
taking up leading positions in new projects.
5. Quick Decision Making: The subordinates need not go to their
superiors on routine matters. They are given authority to take
decisions. This increase the speed of decision making.

6. Better Coordination: By clearly defining powers, duties and

answerability related to various departments, delegation helps in
achieving coordination among various department and functioning of
management.

7. Basis of Management Hierarchy: Delegation of authority

determines who must report to whom. It establishes superior
subordinate relationship which is the base for hierarchy of
management.

Decentralisation and Centralisation:

Centralisation means concentration of decision-making authority with
the top management.

Decentralisation of authority means dispersal of decision-making

authority among more persons in the lower levels of management.

Importance of Decentralisation:

1. Develops Initiative among Subordinates: Decentralisation

encourages subordinates to develop initiative to take their own
decisions and to develop solutions for the various problems they
encounter. It helps to promoter self- reliance and confidence among
subordinates. It also helps to identify those executives who have the
necessary potential to become dynamic leaders.

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2. Develop Managerial Talent for the Future: Decentralisation gives
the subordinates a chance to prove their ability, return it helps to
develop a qualified team of subordinates who can be considered to fill
up more challenging managerial positions through promotion.

3. Quick Decision Making: By giving authority for decision making to

the lower levels, decentralization facilitates quick decision. Thus, it
enables an enterprise to adopt to dynamic operating conditions.

4. Relief to Top Management: Decentralisation relieves the top

executives from routine work and enables them to concentrate on
more important function like control, coordination, corporate
planning.

5. Facilitates Growth: Decentralisation provides grater freedom to the

lower levels of management as well as divisional or departmental
managers. To prove their abilities everyone of these managers try to
do better than the other. This results in higher productivity and
growth of an organization.

6. Better Control: Decentralisation makes it possible to evaluate

performance at each level and the departments can be individually
held accountable for their results. As a result of decentralization
better control system like management information systems are being
evolved.

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 Differences between Delegation and Decentralisation
Basis Delegation Decentralisation
1. Nature Delegation is a Decentralisation is an
compulsory act because optional policy decision. It
no individual can perform is done at the discretion of
all tasks on his top
own. management.
2.Freedom More control by superior Less control over
of action hence less freedom to executives hence greater
take own freedom of
decisions. action.
3. Status It is a process followed to It is the result of policy
share tasks. decision of top
management.
4. Scope It has narrow scope as it It has wide scope as it
is limited to superior and implies extension of
his immediate delegation to the lowest
subordinate. level of management.
5. Purpose To lessen the burden of the To increase the role of
manager. subordinate in the
organization by giving
them more autonomy.

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