Formal Organisation: it’s Meaning, Principles  and Drawbacks!


Formal organisation refers to the structure of relationships deliberately built up by the top management to realise the objectives. In this structure, responsibility, authority, accountability, lines of command, and positions and authority are clearly defined and declared.

Each person is aware of his duties and authority. Every subordinate is expected to obey his supervisor in the formal chain of command. Each individual is fitted in the organisation like a cog in the machine. It is designed after careful identification, classification and assignment of business activities.

So, it is conscious creation of relationships. This structure of formal inter-relationships is shown in the organisation chart and manual of the enterprise.


Chester Barnard refers to “an organisation is formal when two or more persons are consciously co-ordinated towards a common objective”.

An organisation is formal when the activities of two or more persons are consciously co-ordinated towards given objective. The essence of formal organisation is conscious/common purpose and that it comes into existence when persons are—

(i) able to communicate with each other

(ii) willing to act


(iii) ready to share the purpose

Thus formal organisation is the structure which has been officially drafted and to which personnel consciously work. It is the structure of well-defined jobs, each bearing a definite measure of authority, responsibility and accountability. By and large it is an arbitrary structure to which the individuals should invariably adjust. It expects him (i) to do certain things in a specified manner; (ii) to obey orders from delegated individuals and (iii) to co-operate with others.

Principles of Formal Organisation:

The basic principles or pillars that govern a formal organisation are as follows:

(1) Division of Labour into a small number of operations to be performed by different persons to ensure maximum specialisation;


(2) Scalar and functional processes which imply growth of the organisation both vertically and horizontally;

(3) Structure of well-defined jobs to ensure proper balance between different parts of the organisation so as to achieve the organisational objectives most effectively through the execution of all operations, and

(4) Span of supervision or control which refers to the number of subordinates directly reporting and accountable to one Superior Executive.

Drawbacks of Formal Organisation

Its special features act as its drawbacks:


1. Since it is deliberately impersonal, emotions and commitments of individuals are mostly ignored while determining the interactions, communications and accountability.

2. The ideal relationship among the members of the organisation on which it is based and the assumption that there should be no unofficial channel of communication may hardly exist in actual life.

3. The rabble hypothesis of the human nature (i.e. the assumption that the reaction of human-beings will be similar whenever they are either rewarded or punished) may not hold good since individuals are not always motivated by rewards or punishments in the same manner.

4. The rules and regulations will be so rigid as to make the achievement of goals too difficult or impracticable.


It is because of these drawbacks that formal organisation generally gives birth to informal groups. The management may not be able to separate or ignore such informal organisation (consisting of informal group/leader/communication etc.) Instead, it is better to use it for, achieving the organisational goals.