Formal organization is a fixed set of rules of intra-organization procedures and structures. As such, it is usually set out in writing, with a language of rules that ostensibly leave little discretion for interpretation. In some societies and in some organization, such rules may be strictly followed; in others, they may be little more than an empty formalism.

Informal organization is the interlocking social structure that governs how people work together in practice. It is the aggregate of behaviors, interactions, norms, personal and professional connections through which work gets done and relationships are built among people who share a common organizational affiliation or cluster of affiliations. It consists of a dynamic set of personal relationships, social networks, communities of common interest, and emotional sources of motivation. The informal organization evolves organically and spontaneously in response to changes in the work environment, the flux of people through its porous boundaries, and the complex social dynamics of its members.

Tended effectively, the informal organization complements the more explicit structures, plans, and processes of the formal organization: it can accelerate and enhance responses to unanticipated events, foster innovation, enable people to solve problems that require collaboration across boundaries, and create footpaths showing where the formal organization may someday need to pave a way

Functions of Informal Organization:

1. They perpetuate the cultural and social values that the group holds dear,2. They provide social status and satisfaction that may not be obtained from the formal

organization,3. They promote communication among members,4. They provide social control by infjuencing and regulating behavior inside and outside the

group.

Disadvantage of informal Groups:

1. Resistance to change. 2. Role conflict3. Rumor4. Conformity

Benefits to the Formal Organization:

1. Blend with formal system2. Lighten management workload3. Fill gaps in managemnt abilities4. Act as a safety value5. Encourage improved management practice

The informal organization and the formal organization:

The nature of the informal organization becomes more distinct when its key characteristics are juxtaposed with those of the formal organization. Formal rules are often adapted to subjective interests — social structures within an enterprise and the personal goals, desires, sympathies and behaviors of the individual workers — so that the practical everyday life of an organization becomes informal. Practical experience shows no organization is ever completely rule-bound: instead, all real

organizations represent some mix of formal and informal. Consequently, when attempting to legislate for an organization and to create a formal structure, it is necessary to recognize informal organization in order to create workable structures. However, informal organization can fail, or, if already set in order, can work against mismanagement.

Formal organizations are typically understood to be systems of coordinated and controlled activities that arise when work is embedded in complex networks of technical relations and boundary-spanning exchanges. But in modern societies, formal organizational structures arise in highly institutional contexts

Key characteristics of the informal organization:

evolving constantly grass roots dynamic and responsive excellent at motivation requires insider knowledge to be seen treats people as individuals flat and fluid cohered by trust and reciprocity difficult to pin down essential for situations that change quickly or are not yet fully understood

Key characteristics of the formal organization:

enduring, unless deliberately altered top-down static excellent at alignment plain to see equates “person” with “role” hierarchical bound together by codified rules and order easily understood and explained critical for dealing with situations that are known and consistent

Historically, some have regarded the informal organization as the byproduct of insufficient formal organization—arguing, for example, that “it can hardly be questioned that the ideal situation in the business organization would be one where no informal organization existed.” However, the contemporary approach—one suggested as early as 1925 by Mary Parker Follett, the pioneer of community centers and author of influential works on management philosophy—is to integrate the informal organization and the formal organization, recognizing the strengths and limitations of each.

Example:

Dhaka International University MBA 7th MBA and 21st EMBA class have 40 students contain several informal groups that costitute the informal organization within the formal structure of the class. These groups may develop out of fraternity or sorority relationships for Presentation team, Assignment team or Project work teams.