formal vs informal

Navigating the Formal and Informal Organization within Your Company

In every company, there are two types of organizations that operate simultaneously: formal and informal. One is officially recognized, while the other is more organic and often difficult to detect.

Understanding the differences between these two organizations is crucial for managers and CEOs, as it can help them navigate complex social structures, increase communication and collaboration, and ultimately, achieve their organization’s goals.

In this blog post, we will compare and contrast the formal vs. informal organization within a company so that you can better understand how to manage both effectively.

First, The Paradox

Formal organization refers to the official structure within a company. It incorporates the company’s policies, procedures, and responsibilities. Formal organization is often spelled out in an organizational chart, and it follows a hierarchical structure.

Employees understand what is expected of them and who their superiors are. Formal organizations have clear lines of communication and decision-making, which help to maintain order and prevent confusion.

On the other hand, the informal organization is not officially recognized but is instead a network of relationships between employees. It’s how employees interact, collaborate and communicate with each other.

The informal organization is based on social structures and shared values, which means it can be very difficult to identify. However, it can be a powerful force and, if it’s harnessed properly, it can promote creativity, collaboration, and innovation.


One of the major differences between formal and informal organization is the way communication happens. In formal organization, communication is straightforward, and information flows from the top down.

In contrast, informal organization is more likely to use informal communication channels like word of mouth or social media.

Decision Making

Another important difference is the way decisions are made. In the formal organization, decisions are made by managers or executives. In contrast, informal organizations can lead to more democratic decision-making, with employees having a greater say in the decisions that are made.

But despite the benefits of the informal organization, it can also cause problems for managers who may overlook it or struggle to navigate the informal structures within their organization.

Indeed, when the informal organization clashes with the formal organization, it can create conflict, confusion and impact the overall productivity of the company.

Career Growth

Creating a true career path for yourself involves operating within both parts of an organization; the formal and the informal.

Following policies and procedures invoked by the formal organization is a requirement. Making change happen within these boundaries can be difficult, but is doable for the person who properly learns the expectations within the formal organization.

But leveraging the informal organization is an undeniable force that many people fail to use. Becoming a networker who can meet with and embrace the powers of the informal organization has benefit. Being a “good team player” is often recognized as a strength, particularly in the informal organization.


In conclusion, understanding the differences between formal and informal organization can help managers and CEOs navigate the complex social structures in their company.

Both organizations are essential to the smooth running of any company, and harnessing them effectively can lead to better communication, innovation, and collaboration.

While the formal organization is official and provides order and structure, the informal organization enables employees to communicate and collaborate more freely and can lead to greater creativity. Effective management means harnessing both to create a strong and productive organization.

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