Formal organization, component of an organization’s social structure designed to guide and constrain the behaviour of the organization’s members.
The label “formal” is used because the concept encompasses the officially sanctioned rules, procedures, and routines of the organization, as well as the role-defined authority relationships among members of the organization. Standard operating procedures and organization charts, which are essentially maps of formal authority relationships, are two of the most important symbols (and products) of formal organization.
Formal organization is, arguably, the concept most often evoked when envisioning any general organization. From a conceptual standpoint, however, formal organization is best described as a type of organizational social structure, rather than a general or specific type of organization. Moreover, formal organization is not simply a collection of rules, procedures, and routines—the concept derives its meaning from how each of these elements is used to guide and constrain the behaviour of the organization’s members. As a result, formal organization often has important implications for anyone, at any level, seeking to control the members of an organization.
As many scholars have observed, however, not all behaviour within an organization can be controlled through formal rules, procedures, and routines. In any organization, rules get bent, procedures are modified to accommodate the task at hand, and nonstandard routines are adopted, often without any formal directive from the organization’s leadership. Additionally, the web of relationships in any organization rarely resembles the formal organization chart, as friendship networks, advice networks, and communication networks inevitably develop across intra-organizational boundaries. These observations of nonformal organizational behaviour have led scholars to argue that where one finds formal organization, one should also expect to observe informal organization. One cannot exist without the other.
Scholars dispute the proper balance between formal and informal organization. All recognize the importance of informal organization in influencing behaviour, but they differ with respect to how much influence it actually has. Thus, scholars who conceptualize organizations as rational systems tend to argue that organizations can be designed in such a way that informal processes can be adequately controlled through formal procedures and routines. Scholars writing in the natural system tradition, on the other hand, tend to argue that informal organization more strongly influences behavioral patterns than formal organization, and, therefore, creating new rules and procedures or establishing well-defined lines of authority may not always have the intended effect.
Regardless of which perspective one adopts, the interplay between formal and informal organization has important implications for the leadership of any organization—both at the design stage and in the day-to-day coordination of organizational activities. This is because the ability to design formal organizations and manipulate them on a regular basis to achieve defined goals depends on the type of organization and the nature of activities being coordinated as well as on the skills of the executives or governing body running the organization.