We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is a Formal Organization?

By Mark Wollacott
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

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.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
By Melonlity — On Feb 27, 2014

One of the main problems with formal organizations is they tend to stagnate should they not make allowances for individual creativity. Those companies tend to stick to rigid rules and do things certain ways because "that's the way it's alway been done" and no one dares question the status quo.

There's "formal" and then there's "rigid." Rigid companies are no fun to work for and have trouble adapting to changing market places, social norms, etc.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.