NAME: JAMAL ABDINASIR ABDISAMED

FACULTY: MASTER OF BUSINESS ADMINISTRATION IN ISLAMIC BANKING

COURSE: ORGANIZATIONAL BEHAVIOUR

STUDENT ID: LU202403200004

DATE: 23/4/2024

ASSIGNMENT:

QUESTION 1

Vividly demonstrate your understanding of informal and formal organization?

A formal organization is characterized by established rules and regulations, featuring a clear

hierarchical structure. Its formation is geared towards accomplishing long-term objectives.
Examples encompass entities such as Government agencies, hospitals, schools, and corporations.
Within such organizations, tasks are executed efficiently, with both employers and employees
collaborating towards shared goals. Distinguishing traits include structured rules, hierarchical
arrangements, established policies, and defined objectives. Working within a formal organization
offers numerous advantages, including systematic completion of short-term goals due to the
organized efforts of employees.

An informal organization is defined as an organization that majorly focuses on building social

relationships. The main aim of the informal organization is to create a positive work environment
so that the goals of the company are achieved efficiently. Informal organization is a set of social
relationships, communities, networks, etc. The employees remain motivated as there is a positive
work environment, and the employees are provided with incentives/ promotions, etc. One of the
major examples of an informal organization is the clubs or social networks. An informal
organization aims to generate harmony among people and work together to achieve the goals.
Well, there are three significant kinds of informal organization, namely vertical organization,
horizontal organization, and mixed organization. Some of the informal organization features are
that it does not have policies, rules, or regulations; it is formed on the basis of personal
 interactions, does not have any structured hierarchy, and is spontaneously built. An informal
organization promotes cultural values, social satisfaction and promotes creativity. But on the
other hand, it resists change, and more pressure is given on the norms.

Some of the significant differences between formal and informal organizations are:

S.NO INFORMAL ORGANIZATION INFORMAL ORGANIZATION

.

1. A formal organization is defined as an On the other hand, an informal organization is

organization that has set rules and defined as an organization that focuses on
regulations to be followed by the employees. building social relationships and networks.

2. The main aim of a formal organization is to The main purpose of the informal organization
achieve the long-term and short-term goals is to build social networks and create a positive
of the organization. work environment.

3. The formal organization has a hierarchical An informal organization does not have a
structure. hierarchical structure.

4. The formal organization is created by the Informal organization is created spontaneously

management. by the members. The organization is made
based on personal interactions.

5. Achievement of goal is the priority of a Fulfilling the psychological and social needs of
formal organization. the employees is the priority of the informal
organization.

6. A formal organization is stable, i.e., it An informal organization is spontaneously

continues for a long time. made and is not stable.

7. Formal organization follows official An informal organization has a grapevine

 communication. communication.

8. The employees are controlled by rules, The employees are controlled by values,
regulations, and protocols. morals, norms, and beliefs.

9. In a formal organization, the main focus is In an informal organization, the main focus is
on work performance. on building interpersonal relationships.

10. There are different levels of authority in a All the members in the informal organization
formal organization. The employees are are equal.
bounded by the hierarchical structure.

11. The size of the formal organization is large. The size of an informal organization is small.

12. The group leadership of a formal The group leadership of an informal

organization is explicit. organization is implicit.

13. Vertical hierarchy is seen in a formal Lateral hierarchy is seen in an informal

organization. organization.

14. In a formal organization, the emphasis is In an informal organization, the emphasis is

made on efficiency, discipline, consistency, made on spontaneity, freedom, and building
etc. relationships.

QUESTION 2

What are the disadvantages and advantages of informal and formal groups
respectively?

Advantages of Formal Organization:

1. Systematic Operations - Formal organizational structure ensures the systematic and efficient
functioning of an organization.
 2. Achievement of Goals - It is established with the aim of fulfilling organizational objectives.

3. Work Division without Overlap - Work is methodically distributed among departments and
employees, preventing duplication or overlap.

4. Coordination - Formal organization facilitates coordination among various departments'

activities.

5. Clear Chain of Command - It defines clear superior-subordinate relationships, clarifying

reporting hierarchies.

6. Focus on Tasks - Emphasizes work over interpersonal relationships within the workplace.

Disadvantages of Formal Organization:

1. Delayed Action - Strict adherence to hierarchical structures can lead to delays in decision-
making and implementation.

2. Neglects Social Needs - Often overlooks the psychological and social needs of employees,
potentially demotivating them.

3. Overemphasis on Work - Prioritizes tasks over human relations, creativity, and individual
talents.

Advantages of Informal Organization:

1. Rapid Communication - Allows for quicker dissemination of information compared to formal

channels.

2. Social Satisfaction - Addresses employees' social and psychological needs, fostering

motivation.

3. Authentic Feedback - Provides top-level management with genuine employee feedback on

policies and plans.

Disadvantages of Informal Organization:

 1. Rumor Propagation - A significant portion of information circulated informally may be
inaccurate, leading to misunderstandings.

2. Lack of Structure - Absence of a formal framework may hinder organizational efficiency.

3. Resistance to Change - Informal groups opposing management decisions can impede

implementation efforts.

4. Focus on Individual Interests - May prioritize individual satisfaction over organizational goals
within the informal structure.

QUESTION 3

As a public and/or business administrator, which of the two types of

organizations do you think will enhance organizational productivity and why?

As a public or business administrator, both formal and informal organizations offer unique
advantages and challenges that can impact organizational productivity. The choice between the two
depends on various factors such as the organizational culture, nature of tasks, and the preferences of
the workforce. However, in terms of enhancing organizational productivity, a balanced approach that
incorporates elements of both formal and informal organizations may be most effective.

Formal organizations provide structure, clarity, and accountability, which are essential for ensuring
tasks are carried out efficiently and goals are achieved. Clear hierarchies and defined roles help
minimize confusion, reduce duplication of efforts, and promote coordination among different
departments. Moreover, formal structures are often necessary for compliance with regulations and
standard operating procedures, particularly in highly regulated industries or government agencies.

On the other hand, informal organizations can foster innovation, creativity, and employee
satisfaction. They provide avenues for informal communication, idea sharing, and mutual support
among employees, which can lead to the generation of new ideas and solutions to organizational
challenges. Informal networks also enable quick dissemination of information, which can be crucial
for adapting to changing circumstances and seizing opportunities in dynamic environments.
In conclusion, a hybrid approach that integrates aspects of both formal and informal organizations
is likely to enhance organizational productivity. By striking a balance between structure and
flexibility, administrators can create an environment that fosters efficiency, innovation, and employee
engagement.