Formal organisation: meaning, features, advantages and disadvantages

Meaning of formal organisation

The formal organisation is the structure of authority, responsibility and relationships deliberately designed by management to achieve the organisation's objectives. It defines the positions, the grouping of activities into departments, the lines of authority and the official channels of communication. It is concerned with positions, and with the work to be done, rather than with the personalities of the people who hold them. In practice it is usually written down, in an organisation chart, job descriptions and rule books. Chester Barnard defined it as "a system of consciously coordinated activities of two or more persons toward a common objective"; the classical writers saw it as the structure built by applying principles such as division of work, unity of command and scalar chain.

Features

1. Deliberately created by top management.
2. Goal-oriented: designed to achieve organisational objectives.
3. Based on division of work and specialisation.
4. Defined authority and responsibility for every position, linked in a hierarchy (scalar chain).
5. Official channels of communication, usually through the chain of command.
6. Rules, policies and procedures govern behaviour and are applied impersonally.
7. Shown on an organisation chart and in written documents.
8. Relatively stable: changes only by management decision.
9. Coordination by design: relationships between departments are prescribed.

Advantages

1. Growth. A clear structure can be expanded systematically as the organisation grows.
2. Specialisation and efficiency. Division of work develops expertise and raises productivity.
3. Discipline and control. Rules and the chain of command support order and the evaluation of performance.
4. Answerability. When something goes wrong, the post responsible can be found.
5. Continuity. The structure does not depend on particular people, so work carries on when someone leaves or is replaced.
6. Everyone knows where they stand. Each person's duties and boss are known, so two people do not end up doing the same job.
7. Linking departments. Because the relationships are laid down, getting departments to work together is easier.

Disadvantages

1. People reduced to posts. The chart shows positions, not the friendships, rivalries and loyalties that also decide how work gets done.
2. Red tape. Paperwork and procedure can become ends in themselves.
3. Rigidity. Fixed rules make it slow to adapt and give people little reason to take initiative.
4. Messages bent on the way. What passes through many levels may be filtered or distorted.
5. Slow decisions. Every matter has to climb the chain of command and come back down.
6. Little room for new ideas. Narrow jobs leave few chances to learn or to try something different.

Example. A public-sector bank has a clearly defined hierarchy from clerk to chairman, written procedures for every transaction and official reporting lines; this ensures control and accountability, but approval of an unusual loan may take weeks.

Conclusion

The formal organisation provides the skeleton of order, responsibility and coordination that every organisation needs. Its rigidity and neglect of the human side are offset when management also recognises the informal organisation and keeps the structure flexible.