Formal organization

economic-dictionary

The formal organization is one that is planned and that establishes a set of rules, structures and procedures that allow ordering the activities of the organization.

The formal organization is based on the division of labor, the definition of the different levels of authority and the creation of communication channels between workers.

Its structure and guidelines are planned by the administrators of the organization and are usually reflected in documents, standards, processes and organization charts.

Relationships outside of the formal organization are considered informal organization, arising spontaneously between co-workers.

Components of the formal organization

  • A set of well-defined rules and procedures: Which are previously designed in order to achieve some goal or objective.
  • Objectives and strategies: Short and long-term goals are defined along with strategies to achieve them.
  • Symbolic status: The structure gives a certain status to the members according to their position and relative power.
  • Defined activities: The organization defines the activities of each member of the organization. Obligations and limits are established.
  • Communication channels: There are defined communication channels that must be in accordance with the hierarchy and procedures of the organization.
  • Coordination procedures: Procedures and mechanisms are defined for the coordination of activities of the different members of the organization.

Origin of the formal organization

The origin of this type of organization is the design created by owners and managers who seek to define strategies to successfully achieve their objectives.

There are at least three key elements that define this organization:

  • Division of work: It consists of dividing a job into several elementary activities so that workers can specialize and thus be more productive.
  • Departmentalization: It consists of creating different departments in the same organization so that each of them is responsible for a certain activity or objective. So for example: marketing department or public relations department. As the organization grows, the departments become more complex and south-departments or sub-divisions are usually created.
  • Control: It consists of creating mechanisms to control and measure the development of the organization's activities.

Relationship between informal and formal organization

The informal organization can complement or strengthen the formal organization through a good relationship and cooperation between the members of the organization. However, the informal organization can also weaken the formal one. This occurs when envy, antagonism or when the informal role is stronger than the formal one.

An example in which the formal does not coincide with the informal is when, according to the established organic structure, there is a department head but in practice, everyone follows the ideas and directives of another person who, although he does not have a position of boss, has a very strong personality and leadership.

Formal organization example

In the following image we can see the organization chart designed as part of the formal organization of a company:

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