ACCA BT Syllabus B. Organisational Structure, Culture, Governance and Sustainability - The Formal and Informal Business Organisation - Notes ^{1 / 3}

Definitions

• Formal organisation 

  Explicit structure of the organisation, including reporting lines, job positions, roles, scope, areas of responsibility, and formal communication channels.

  May be illustrated by an organisational chart.

• Informal organisation 

  Relationships and communication links between individuals in the organisation

The formal organisation in a business refers to the structured jobs and management hierarchy represented by a traditional organisational chart.

On the other hand, the informal organisation refers to the ways in which people organise themselves and accomplish tasks outside the formal structure.

For example, information often gets around the organisation through informal channels (e.g., employees chatting over lunch) rather than through formal channels (e.g., memos and emails).

Culture is a significant influence on an informal organisation.

This is established through the structured division, combination, and coordination of labour

Labour

1. Labour Division

   Tasks are given to individuals

2. Labour Combination

   Individuals with similar work tasks are put into groups

3. Labour Coordination

   To help collaboration among individuals

   Eg: Policies, Reporting lines and Communication channels.

An organisational chart (above) can illustrate the formal organisation:

Its characteristics are:

1. No predetermined structure

2. Spontaneous interaction between individuals

3. Exists alongside the formal organisation

4. Always changing as relationships between individuals change

5. Includes everyone

The relationship between the formal and informal

Some key influences include:

• Sources of news and information:

  Certain individuals have access to information before others and they informally share this

• Streamlining work: 

  Informal arrangements where colleagues assist each other without the need for formal approvals.

• Members of the informal organisation: 

  Can include individuals from various formal business teams, even former colleagues or contacts in supplier companies.