Principles of Management B.Com.

– Part II

Formal Organization and Informal Organization

Formal Organization

Every organization, regardless of its size, is based on a formal and clearly defined set of relationships among the members
who make it up. This structure is represented, in companies large enough to have one, by an organization chart describing
the organization as formal. Such a chart conveys certain basic information about the organization’s structure and the
nature of its work.
ƒ It shows the management hierarchy from president down: who reports to whom and who is responsible for what
ƒ It shows the major division of work: how the company organized in department and other subunits
ƒ It shows the kind of work each division performs and how that work fits into the overall corporate mission
Informal Organization

It is an organization, with interpersonal relationships associated with people, which do not appeared on an organization
chart. In such an organization, people do not work in terms of management hierarchy, division of work and kind of work but
they seek out those with whom they feel comfortable.

Formal Organization and Informal Organization Compiled by: NOOR UL HUDA Page 1 of 1