Explain the difference between a firm's formal organization and its informal organization. Why are both types of organization important to managers? Provide examples
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the difference between a firm's formal organization and its informal organization. Why are both types of organization important to managers?
Answer:- The difference between a firm's formal organization and its informal organization is as following-
When two or more than two persons come together to accomplish a common objective formal organization is formed. Formal organisation has some sort of its own rules and regulations and these rules must be followed by the members of organization. A formal organisation has a system of co-operation and system of authority. In a formal organisation, the objectives are specific and well-defined. All the members of formal organization are given certain specific duties and liabilities. A few instances of formal organisation are such as a company, a school, a college, a bank etc.The communication in the formal organization between two members is only possible through planned channels. Formal organisation is permanent in nature and it perpetuate for a long time. A formal organisation seems to be stable .
Informal organization on the other hand exists within the formal organisation.It is a connection of personal and social relationships. all the people who work in informal organisation meet and interact regularly and they work, travel and have their food together due to which they become close friends and partner. The various groups of friends in a firm's formal organization are called informal organization.
There are no any rules and regulation created by an informal organisation and it does not have any system of co-opration and authority. There is no any superior-subordinate relationship and it doesn't have any specific and well-defined objectives and goals. Communication in the informal organization is done through the grapevine and informal organisation is temporary in nature. An informal organisation seems to be unstable.
-Now let me discuss how both formal and informal onganizations are important for management.
The informal organization lighten management workload for instance managers are less inclined to check up on workers when they know the informal organization is co-ordinating with them and this encourages delegation, huge worker support of the manager, which suggests a probable improvement in overall performance and productivity. Informal organization fills gaps in the management abilities for example if a manager is weak in financial analysis and planning , a subordinate may informally help in preparing various reports through either direct involvement or suggestions. And on the other hand members of the formal organisation get financial benefits and make more like wages or salaries, bonus, travelling allowances, health insurance etc.
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