Business Category Business: career motivation and tips to move ahead

Formal vs. informal organizational structures

The formal organizational structure is a structure in which all roles are specifically defined. Formal structures are typically detailed in writing, leaving little room for interpretation. The informal organizational structure consists of the social structure of the organisation, including the corporate culture, behaviours, interactions and social connections that occur within an organisation. Many organisations have both a formal, written structure and a more informal, cultural structure.

Formal Characteristics

The formal structure consists of the official governance configuration in which workers at all levels interact. Formal structures are commonly outlined in the form of an organizational chart. The "org chart," as it is frequently referred to, specifies the hierarchy of the organisation, including who reports to whom. Formal organizational structures typically consist of one or more leaders at the highest echelon with department heads, managers and supervisors layered between the leaders and workers at the operational level. Typically, the formal organizational structure also spells out how information flows throughout the organisation to ensure workers at all levels have access to the information necessary to do their jobs.

Advantages and Disadvantages

A major advantage of the formal organizational structure is that there is no question of who is in charge of whom. Formal structures are easily understood and are held together by specific rules and regulations. The formal organizational structure leaves little room for misinterpretation processes and procedures. However, one of the greatest disadvantages of the formal organizational structure is that the layers of bureaucracy may hinder the decision-making process.

Informal Characteristics

The Cliffs Notes website says informal organizational structure is "defined by the patterns, behaviours, and interactions that stem from personal rather than official relationships." The informal organizational structure focuses on people and how they work together to get things done rather than focusing on the roles that exists within an org chart. "The grapevine" is an example of an informal organizational structure in which information flows without regard to reporting structures.

Advantages and Disadvantages

A great advantage of the informal organizational structure is that it evolves constantly and may easily respond to quickly changing situations. Jon Katzenbach, a former director at McKinsey and co-founder of Katzenbach Partners, says, "Forget about org charts and direct reports, and identify the critical go-to people in your network." Informal organizational structures also have their disadvantages. For example, communications which take place within the "grapevine" structure are often misinterpreted. The "grapevine" mentality may also promote gossip and the spread of misinformation within the organisation. Finally, an informal organizational structure which exists within a negative corporate culture can create an atmosphere in which workers feel comfortable resisting necessary changes.