Essay Example on Formal vs. Informal Organizations

Published: 2022-11-17
Essay Example on Formal vs. Informal Organizations
Type of paper:  Essay
Categories:  Company Management Strategic management Business management
Pages: 6
Wordcount: 1644 words
14 min read

Formal and informal organizations play a pivotal role in advancing the overall goals of stakeholders. Formal organizations are structured collaborations between management and employees to pursue a common goal (Roberts 1984). In for-profit companies, the objective is usually wealth maximization for shareholders. These organizations are governed by rules and policies that guide the conduct of stakeholders. However, informal organizations are usually based on social relationships that emanate from employee interactions within formal organizations. These organizations have a primary goal of addressing social needs of workers and they are governed by the belief systems and norms held by employees.

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Scientific management theory was developed by Taylor, and it strives to implement scientific principles to optimize output by workers. The theory applies concepts such as collaboration between employees and management, and outlining clear tasks that workers should accomplish within specific timelines. The human relations theory was developed by Mayo and its key goal is to enhance employee productivity through satisfying their social needs such as making employees feel appreciated by management. It entails implementing motivational techniques such as acknowledgment and praise, to enhance employee motivation levels.

This paper will address formal and informal organizations, and human relations, and scientific management theories. It will discuss the main principles of these organizations and theories. The paper will then focus on the similarities and differences between the application of the human resource and scientific management theories, in informal and formal organizations. Analysis of thee concepts and theories will generate knowledge on how employers can enhance employee motivation and productivity to attain the overall goals of their organizations.

Formal Organization vs Informal Organization

Formal organizations are formed where two or more people collaborate to pursue a common goal, and they work under formal relationships which are governed by pre-established policies and rules (Stewart 2019). Such organizations have a hierarchical structure and a system of authority. They are created by top management with the aim of accomplishing the objectives set by stakeholders. Formal organizations usually give responsibilities to members, and they are held accountable for their actions. They are usually large and stable in nature, since they exist for a relatively long time. The primary focus of formal organizations is work performance.

Informal organizations are created under formal organizations, and they take the form of social relationships. They exist when people within organizations interact, meet, and associate with others. When employees work together, they usually develop interpersonal relationships where they use informal communication. Informal organizations are controlled by the values, norms, and beliefs that members possess (Stewart 2019). They are usually created spontaneously to satisfy the psychological and social needs of people, which make them unstable in nature.

There are several differences between formal and informal organizations. Formal organizations are formed by management with the goal of accomplishing job-related tasks while non-formal organizations are spontaneously formed by employees to satisfy their psychological and social needs. Formal organizations rely on official communication channels and are controlled by organizational regulations and rules, while non-formal organizations rely on grapevine and are controlled by beliefs and norms held by members. Finally, formal organizations have a hierarchy while informal organizations thrive on equality of all members.

Similarities and Differences between Scientific Management and Human Relations Theory in Terms of Formal and Informal Organizations

Scientific Management Theory

Scientific management is a theory that stresses the need for employers to use monetary rewards to motivate employees and enhance their productivity. It was developed by Taylor, whose goal was optimizing operational procedures to enhance employee productivity (Roberts 1984). He developed a model that was based on four key principles. The first was developing a scientific way of doing each element of a task, and this entailed creating norms and rules based on accumulated knowledge by the company and workers. The second was creating incentives for employees who worked harder than the rest for the organization to increase productivity. The third was cooperation between workers and management to adhere to the scientific way of doing work, and this involves collaboration between management and employees to increase effectiveness and ensure rules were followed. The fourth was work sharing and it entails ensuring employees are aware of specific tasks they should perform, within a target deadline.

Human Relations Theory

The human relations approach emphasizes the use of social factors such as a sense of belonging, praise, and feelings of accomplishment, in addition to application of financial rewards in motivating employees. The theory was developed by Elton Mayo who studied the productivity of employees in various companies in North America (Roberts 1984). His experiment sought to determine how a change in working conditions would influence employee productivity. The findings revealed that employee output did not vary with changes in working conditions, which meant that workers were motivated by attention they received from management. This observation led Mayo to theorize that employees possess certain social needs, such as recognition and praise, which influence their productivity. Employers should therefore combine financial motivational techniques with effective strategies that satisfy employees' social needs.

Similarities in Application to Formal and Informal Organizations

The two theories are applicable to both formal and informal organizations. Moreover, there are certain similarities and differences, relating to their applicability to these organizations. The first similarity is that both the scientific management and human relations theory advocate for financial incentives in motivating employees. Employees in informal and formal organizations require financial incentives to enhance their productivity. In formal organizations, workers experience higher levels of motivation if they have access to financial incentives (Roberts 1984). Enhanced motivation translates into higher output and productivity. In informal organizations, employees are also likely to develop stronger relationships if they are motivated financially. This is because such workers will likely have a positive outlook towards the organization, since they feel appreciated by the management, and the positivity will be carried forward to fellow employees through stronger and more genuine informal relationships.

Another similarity between the two theories is they both support cooperation between management and employees in improving the working conditions in organizations. Formal and informal organizations require management support to attain the broader organizational goals. In formal organizations, management can cooperate with employees to allocate appropriate resources for tasks, guiding employees on what they should perform, and addressing challenges workers face at the workplace. Moreover, in informal organizations, management should collaborate with employees to create an environment that is conducive for informal relationships (Roberts 1984). Some steps that managers can take include allocating space where employees can interact informally, and developing recreational facilities where workers can relax and socialize.

Differences in Application to Formal and Informal Organizations

There are however certain differences in the human relations and scientific management theory in their application within informal and formal organizations. The first difference is that the scientific management theory places more emphasis on financial rewards for employees, while the human relations theory stresses the need to address social needs of employees. Formal organizations require the application of the human relations theory for them to be successful, since employees need both financial rewards and appreciation from management for them to thrive. The scientific management theory overlooks the role of social relations in organizations as it does not factor in social needs of workers in motivation and productivity. The theory may therefore undermine management efforts to motivate employees when applied to formal organizations.

In informal organizations, the human relations theory is also more important than the scientific management theory. The main reason is that informal organizations primarily exist to satisfy the psychological and social needs of workers. These include feelings of appreciation and acknowledgment, a sense of community, and the need to advance interpersonal relationships (Roberts 1984). The human relations theory plays a major role in addressing these needs since it emphasizes the role that management plays in appreciating employees through satisfying their social needs, as a means of enhancing their productivity. However, the scientific management theory does not play a key role in advancing the interests of informal organizations since its focus is on using financial rewards to motivate employees. Workers in informal organizations are more concerned with their social welfare as compared to their financial situation. Hence, the scientific management theory may not address their unique desires with respect to their social needs.

The second difference in the application of both theories to informal and formal organizations relates to the objectives of these organizations. The formal organization's primary objective is to enhance productivity and efficiency from employees. However, the informal organization's primary goal is to satisfy the psychological and social needs of employees. Based on these objectives, the scientific theory is most effective in formal organizations, since its key principles centre on improving efficiency within organizational processes. When employers implement the scientific management principles within their organizations, this will result in optimal output, which is consistent with the goal of formal organizations of enhancing organizational processes and productivity within the workforce.

However, the objectives of the informal organization are best served by the human relations theory. Informal organizations are not centred on work-related tasks, but rather, addressing employees' social needs. Since the human relations theory also strives to enhance motivation through ensuring that employees feel appreciated by management, then the theory is best aligned with the goals of informal organizations. When management acknowledges and praises employees in line with the human relations theory, then they will be inspired to develop stronger interpersonal relationships and camaraderie, within their day to day tasks, which is the primary goal of informal organizations.


In summary, both formal and informal organizations are essential for the success of any corporation. Formal organizations are structured against rules and policies that guide the broader goals of the company. Informal organizations serve to satisfy the unique social needs of workers. Human relations and scientific management theory play diverse roles in enhancing worker productivity. Whereas the scientific management theory addresses systematic management methods, the human relations theory emphasizes the need to make employees feel appreciated by management.

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