Question

(a) State any three points of difference between Formal organisation and Informal organisation.

Accepted Answer

Difference between Formal organisation and Informal organisation: Basis Formal organisation Informal organisation Meaning Formal organisation refers to structure of authority relationships Informal organisation refers to network of social relationships arising out of created by the management interaction among employees Origin It arises as a result of company rules and policies It arises as a result of social interaction Authority It arises by virtue of position in management It arises out of personal qualities Behaviour It is directed by rules There is no set behaviour pattern Flow of Communication Communication takes place through the scalar chain Flow of communication is not through a planned route. It can take place in any direction Nature Formal organisation is rigid Informal organisation is flexible Leadership Managers are leaders. Leaders may or may not be managers. They are chosen by the group.

Basis	Divisional Structure	Functional Structure
Formation	Formation of divisional structure is based on product lines and is supported by functions.	Formation of functional structure is based on functions.
Specialisation	There is product specialisation.	There is functional specialisation.
Responsibility	It is easy to fix responsibility for performance.	It is difficult to fix responsibility on a department.
Managerial Development	Managerial development is easier, because autonomy as well as the chance to perform multiple functions helps in managerial development.	Managerial development is difficult, as each functional manager has to report to the top management.
Cost	There is duplication of resources in various departments, hence it is costly.	Functions are not duplicated hence it is economical.
Coordination	Coordination is easy, because all functions related to a particular product are integrated in one department.	Coordination is difficult for a multi- product company.

Marking-scheme solution

More from Organising

Basis	Formal organisation	Informal organisation
Meaning	Formal organisation refers to structure of authority relationships	Informal organisation refers to network of social relationships arising out of
	created by the management	interaction among employees
Origin	It arises as a result of company rules and policies	It arises as a result of social interaction
Authority	It arises by virtue of position in management	It arises out of personal qualities
Behaviour	It is directed by rules	There is no set behaviour pattern
Flow of Communication	Communication takes place through the scalar chain	Flow of communication is not through a planned route. It can take place in any direction
Nature	Formal organisation is rigid	Informal organisation is flexible
Leadership	Managers are leaders.	Leaders may or may not be managers. They are chosen by the group.