---
title: "Difference between formal and informal organization"
subject: "Organization and Management"
chapter: 1
key: "semester_7/organization_and_management:formal-informal-difference"
source: https://www.bctengineer.com/q/semester_7/organization_and_management/formal-informal-difference
site: BCT Engineering
---

# Difference between formal and informal organization

Organization and Management · Chapter 1: Organization

- Asked in: 2073 Shrawan, 3+5 marks; year not given
- Video: [Difference Between Formal and Informal Organization](https://www.youtube.com/watch?v=h-g8JGf1bOE) — Key Differences
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/organization_and_management/formal-informal-difference
- Whole chapter: https://www.bctengineer.com/md/semester_7/organization_and_management/chapter-1

## Question

Explain the term organization. Explain the difference between formal and informal organization.

## Short answer

An organization is a structured social unit of people working together with defined roles and resources to achieve common goals. Formal organization is deliberately planned with written rules, official authority, and a fixed structure; informal organization arises naturally through personal relationships, has unwritten norms, flexible leadership, and communicates through the grapevine.

## Answer

#### Organization
An organization is a structured social unit of people who work together, using resources and defined roles, to achieve common goals. Its main elements are people, common objectives, structure (division of work and authority), resources and coordination. Examples: Nepal Telecom, Nabil Bank, a college.

#### Difference between formal and informal organization
| Basis | Formal organization | Informal organization |
|---|---|---|
| Meaning | Planned structure of authority and responsibility | Network of social relations formed naturally |
| Origin | Created deliberately by management | Spontaneous, from interaction |
| Purpose | Achieve organizational goals | Satisfy social and personal needs |
| Authority | From position, flows downward | From personal influence and acceptance |
| Structure | Fixed, shown in the chart | Flexible, not shown in the chart |
| Communication | Through official channels (scalar chain) | Grapevine, informal and fast |
| Rules | Written rules, policies | Unwritten norms |
| Leaders | Appointed managers | Emerge from the group |
| Size | Can be large | Small groups |
| Control | Rewards and punishments by management | Group pressure, social approval |
| Stability | Stable and permanent | Unstable, changes with relationships |

Both exist together in every real organization. Informal groups can raise morale and support teamwork, but they can also spread rumours and resist change, so managers should recognise and guide them.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. Which of these is NOT listed as a main element of an organization?
   A. Common objectives
   B. Coordination
   C. Structure (division of work and authority)
   D. Profit guarantee
   Answer: D. Elements are people, objectives, structure, resources and coordination; profit guarantee is not one. (Key point: Elements of organization)

2. How do formal and informal organizations differ in origin?
   A. Formal is created deliberately by management; informal arises spontaneously from interaction
   B. Formal arises spontaneously; informal is created by management
   C. Both are created by law
   D. Both arise from interaction only
   Answer: A. Formal is planned; informal develops naturally. (Key point: Origin)

3. Which statement about stability is correct?
   A. Informal is more permanent than formal
   B. Formal organization is stable and permanent; informal is unstable and changes with relationships
   C. Both are equally stable
   D. Formal changes with personal relationships
   Answer: B. Informal groups depend on relationships, which change. (Key point: Stability)

4. What is a risk of informal groups mentioned in the answer?
   A. They always reduce morale
   B. They make written rules unnecessary
   C. They can spread rumours and resist change
   D. They cannot affect teamwork
   Answer: C. Informal groups can raise morale but may also spread rumours and resist change. (Key point: Informal group effects)

## Related in Organization and Management

- [Formal, informal organization and principles](https://www.bctengineer.com/question.md?key=semester_7%2Forganization_and_management%3Aformal-informal-principles) — Organization and Management, chapter 1, asked 3×

## Related in other subjects

- [Central ideas of formal and informal proofs](https://www.bctengineer.com/question.md?key=semester_4%2Fdiscrete_structure%3Aformal-informal-proofs-central-ideas) — Discrete Structure, chapter 1