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Formalization in Organizations

management, business, formalization, rules, procedures, administration, directing, controlling, staffing, motivating, compensating

Formalization is the extent to which rules and procedures are followed in an organization. This element varies greatly across organizations. For example, in some organizations arrival and departure times to and from work are specified to the minute, with time clocks used to control deviant behavior. In other organizations it is understood that employees will spend sufficient time on the job to get the work done. In some organizations rules and procedures cover most activities, while in others people are allowed to exercise their own judgment.

In assessing the degree of formalization, one needs to use care. In some organizations many rules are codified in huge manuals, but no one pays attention to them. In others little is written down, but rules are informally understood and followed. Thus the most useful definition of formalization is that it represents the use of rules in an organization. The degree to which rules are followed—not the degree to which they are codified—is the key factor.

Organizations use formalization to increase their rationality. In one sense formalization is an attempt to make behavior more predictable by standardizing it. Standard procedures for production workers or quality control checklists that must be used and submitted before a product can be shipped are examples of this kind of formalization.
Formalization may also be an attempt to make explicit and visible the structure of relationships among organizational participants. It can establish status differences among organizational members in a way that is objective and external to the participants themselves.

Formalization makes the process of succession routine and regular so that people can be replaced when necessary with minimal disturbance to an organization's functioning. The orderly selection of cardinals and popes in the Roman Catholic Church and the succession plan for the U.S. presidency are good examples of this function of formalization.
Alongside formal structures are aspects of organizations that are not formally planned but that more or less spontaneously evolve from the needs of the people. Thus, formal structures are the norms and behaviors that exist regardless of individuals; informal structures are interactions based on the personal characteristics or resources of the individuals involved. Informal structures are not without form; those forms are not determined simply by the organization but grow out of the relationships of the participants. Informal life is structured and orderly; it simply reflects the hearts and minds of an organization's members.

Formalization in One area of an organization brings about pressures for less formalization in other areas. For example, one set of researchers studying employment security agencies found that strict conformity with civil service standards fostered decentralization, which permitted greater flexibility. Perhaps there has to be some give and take if organizations are to function well.

Formalization is influenced by technology, size, and organizational traditions. One can categorize technologies as routine and non routine. Organizations or work units in which work is routine are more likely to be highly formalized than those in which technologies are less routine.

Obviously, size influences formalization. Large organizations have greater needs to formalize their activities than do small organizations. The mom and pop corner store that grows into a chain will experience a greater need for formalization, as rules will need to be created—and probably codified—to accommodate the increased relationships and interactions involved.

Tradition also influences formalization. If an early top executive believed that rules and procedures should he followed to the letter, this set of beliefs was codified into the organization's procedures manuals. The organization would then remain more formalized over time than existing conditions might have predicted.

What happens to members of rigidly formalized organizations or work groups? In these organizations strict rules limited the functioning of all individuals in the organization. Workers came to follow rules for the sake of the rules themselves since that determined how they were rewarded. More and more rules were created, with the result that the organizations became very unresponsive to customers and their environments. People failed to strive for autonomy and sought to decrease the amount of uncodified activity they performed. The consequences were declining competitiveness, lost worker productivity, higher operating costs, higher prices, and degradation of labor. These negative consequences of rigid formalization have long been recognized.

A number of studies show that professionalization is incompatible with formalization. The greater the degree of formalization in organizations, the higher the alienation of members who are professionals. But formalization and professionalization are meant to do the same thing. Formalization is the internal process through which an organization sets rules, standards, and procedures to ensure that things get done correctly. Professionalization is an external means for accomplishing the same result: business schools teach future managers behaviors that will be expected of them in their work organizations. From an organization's viewpoint, both processes are effective. If it acquires a professional work force, the organization itself simply is not paying the costs of inculcating standardized practices. Nevertheless, there could be tension between the standards learned by the professionals and the demands of the organization.
Published: 2007-04-15
Author: Martin Hahn

About the author or the publisher
Martin Hahn PhD has received his education and degrees in Europe in organizational/industrial sociology. He grew up in South-East Asia and moved to Europe to get his tertiary education and gain experience in the fields of scientific research, radio journalism, and management consulting.

After living in Europe for 12 years, he moved to South-East again and has worked for the last 12 years as a management consultant, university lecturer, corporate trainer, and international school administrator

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