Business Studies

Six Mark Question:
What is meant by 'Formal Organisation'? State any three advantages and any two limitations of 'Formal Organisation'. 


SOLUTION
Formal organisation is “a system of well-defined jobs, each bearing a definite measure of authority, responsibility and accountability, the whole consciously designed to enable the people of the enterprise to work most effectively together in accomplishing their objectives.”

Formal organisation has the following merits:
1. It clearly defines objectives of the organisation and authority- responsibility relationships amongst people to attain those objectives.
2. It results in optimum utilisation of scarce organisational resources.
3. Division of work and relationships amongst people develops effective system of communication in the organisation.

Disadvantages of Formal Organisation:
1. Delay in Action: While following scalar chain and chain of command actions get delayed in formal structure.
2. Ignores Social Needs of Employees: Formal organisational structure does not give importance to psychological and social need of employees which may lead to demotivation of employees.
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Subjective Medium Published on 18th 09, 2020
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