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A formal organization is a group where the members' activities are coordinated and controlled. Such groups have a minimum of two people involved, but there is no upper limit. Such organizations incorporate common practices and systems. They are complicated networks. Businesses are a good example of formal organizations, but charities, government departments and non-governmental organizations are also formal organizations.
They differ from informal organizations in their structure. Informal organizations are more fluid and evolve naturally, whereas formal organizations are more rigid. Members of informal organizations are brought together through common goals, beliefs or needs. All formal organizations to some extent contain informal elements such as social groups and the personal desires and ambitions of their members.
The purpose of a formal organization is to ensure its survival. By organizing the company, leaders or owners expect the company or group to achieve its targets and objectives. Through this, they hope the organization becomes a success. On a lower level, it allows for staff to know their place, for there to be a division of labor and for activities to be coordinated within the organization.
Structures within a formal organization tend to be arbitrary. This means the upper management of the company has decided what the structure will be. The form and mechanisms employed by the company depend on how the company developed and management philosophy. Some companies naturally evolve as they grow, whereas others are planned from the start. Planned companies tend to have better structures than those that evolve.
The main advantage of a formalized structure is the safety and security it provides to employees and management. Everybody within the organization knows their place, their role and whom to report to. The organization creates a chain of command for upper management then divides the company into departments. These departments, in turn, have their own chains of command.
Formal rules and regulations protect subjective interests. Firstly, they align the organization with national and local rules and regulations. They then set out a company’s code of conduct and formal expectations. They define procedures for all conceivable elements of the company’s practices. They also set out the consequences should procedures not be followed.
The formal organization structure also defines the company’s internal communication system. This regulates how each tier of the organization interacts with the one above and the one below. They are designed to allow information to flow both up and down the company’s chain of command. Companies often allow special communication channels to directly link upper management with the bottom rungs of the company.
This type of organization also seeks to regulate itself. Known as oversight, the organization sets out how members and activities are examined and analyzed to improve performance. This includes business practices such as supervising, training and risk management.