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Types of Organisation

Assume you’re an employee in a company of your choice. Now, you will interact with a certain set of people, out of your duty. Additionally, as you spend time here, you might make friends out of your work relationships, because humans are social animals. It is important to realise how both of these relationships give rise to types of organisation.

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Types of Organisation

As you might have guessed by now, there exist two types of organisation:

  • Formal Organisation
  • Informal Organisation

Types of Organisation

(Source: accountlearning)

Formal Organisation

In every enterprise, there are certain rules and procedures that establish work relationships among the employees. These facilitate the smooth functioning of the enterprise. Further, they introduce a systematic flow of interactions among the employees. Effectively, all of this is done through a formal organisation.

Notably, the management is responsible for designing the formal organisation in such a way that it specifies a clear boundary of authority and responsibility. Coupled with systematic coordination among various activities, it ensures achievement of organisational goals.

Again, the management builds the formal organisation. It ensures smooth functioning of the enterprise as it defines the nature of interrelationships among the diverse job positions. Additionally, these ensure that the organisational goals are collectively achieved. Also, formal organisation facilitates coordination, interlinking and integration of the diverse departments within an enterprise. Lastly, it lays more emphasis on the work to be done without stressing much on interpersonal relationships.

Advantages

  • The formal organisation clearly outlines the relationships among employees. Hence, it becomes easier to rack responsibilities.
  • An established chain of commands maintains the unity of command.
  • As the duties of each member is clearly defined, there is no ambiguity or confusion in individual roles whatsoever. Further, there is no duplication of efforts which eliminates any wastage.
  • In a formal organisation, there is a clear definition of rules and procedures. This means that behaviours and relationships among the members are predictable. Consequently, there is stability and no chaos existing in the enterprise.
  • Finally, it leads to the achievement of organisational goals and objectives. This is because there exist systematic and well thought out work cultures and relationships.

Disadvantages

  • Decision making is slow in a formal organisation. It is important to realise that any organisational need has to flow through the respective chain of commands before being addressed.
  • Formal organisation is very rigid in nature. This means that there prevails perfect discipline coupled with no deviations from the procedures. Hence, this can lead to low recognition of talent.
  • Lastly, the formal organisation does not take into account the social nature of humans as it talks about only structure and work. Interestingly, we cannot eliminate this integral part of our nature. Hence, it does not entirely display the functioning of the organisation.

Informal Organisation

It’s easy to understand that if we interact with certain people regularly we tend to get more informal with them. This is because we develop interpersonal relationships with them which are not based solely on work purposes. Rather, these relationships might arise because of shared interests, like if you get to know that your colleague likes the same football club of which you’re a fan of.

As a matter of fact, informal organisation arises out of the formal organisation. This is because when people frequently contact each other we cannot force them into a rigid and completely formal structure. Instead, they bond over common interests and form groups, based upon friendship and social interactions.

Unlike formal organisation, informal organisation is fluid and there are no written or predefined rules for it. Essentially, it is a complex web of social relationships among members which are born spontaneously. Further, unlike the formal organisation, it cannot be forced or controlled by the management.

Also, the standards of behaviour evolve from group norms and not predefined rules and norms. Lastly, as there are no defined structures or lines of communication, the interactions can be completely random and independent lines of communication tend to emerge in informal organisation.

Advantages

  • In this type of organisation, communication does not need to follow the defined chain. Instead, it can flow through various routes. This implies that communication in an informal organisation is much faster relative to formal organisation.
  • Again, humans are social animals. The needs to socialize exists deep within our existence. The informal organisation ensures that there is socialization within the enterprise. Consequently, members experience the sense of belongingness and job satisfaction.
  • Informal organisation, getting true feedbacks and reactions is not easy. Hence, in informal organisation, various limitations of formal organisation is covered up.

Disadvantages

  • The informal organisation is random and can result in the spread of rumours. Again, we cannot manage and control informal organisation. Consequently, this may result in chaos within the enterprise.
  • It is important to realise that it is not possible to effect changes and grow without the support of the informal organisation. This can work in both ways, for growth or decline of the enterprise.
  • To point out again, informal organisation conforms to group standards and behaviours. If such behaviours are against the organisational interests, they can eventually lead to disruption of the organisation.

A Solved Example for You

Question: Define the two types of organisation.

Answer: The two types of organisation are:

  • Formal Organisation: The management builds this type of organisation in order to induce certain rules and procedures within the enterprise with regard to work relationships. Effectively, it focuses on the achievement of organisational goals by clearly defining relationships among the members.
  • Informal Organisation: This type of organisation arises out of the social nature of humans. Further, the management cannot control the informal organisation. It allows different routes for the flow of communications which are a result of frequent interactions based on interpersonal relationships and common interests.
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