Formal and informal organization of work.

Formal and informal organization of work

Organization is a group with an identifiable membership that engages in concerted collective action to achieve a common purpose.

Formal Organization:

Formal organization is one that is rationally designed to achieve its objectives, governed by rules, regulations, and procedures. It has certain distinct characteristics. They are - Legal Status, Division of Work, Primacy of Structure, Permanence, and Rules and Regulations.

Formal organization is a social collectivity, the goals of which are formally defined. It has authorities vested with power. The authorities are expected to mobilize the power vested in them for achieving the goals of the formal organization.

Formal organizations operate through impersonal, universalistic rules and procedures, which are expected to be mobilized across the board impersonally.

David Silverman has three distinguishing features:

• They arise at an ascertainable moment in time.
• They exhibit patterns of social relations which are less taken for granted than those in non-formal organizations (such as family) and which organizational participants often seek to coordinate and control.
• Considerable attention is paid to these social relations and to plan changes in them.

Early formal organizations were discussed in 2 contexts - factory and state. Frederick W. Taylor studied the factory, and Weber, in his study of bureaucracy, studied the formal structure of a state.

Arguments against formal (rational) organization:

• Ritzer - McDonaldization. Increasing rationality leads to irrational outcomes, and it is dehumanizing.
• Weber gave importance to formal relations within an organization. Peter Blau, on the other hand, studied informal relations within formal organizations and found that they actually tend to increase the efficiency of workers instead of pulling it down. Informal networks bring life into the organizations.
• Elton Mayo - Study of Hawthorne works of GE in Chicago: It came as a response to classical theory which laid emphasis on formal structure. Mayo believed the classical school underemphasized socio-psychological aspects of informal organization. He found that work satisfaction depended largely upon the informal social pattern of the work group. Norms of higher cooperation were established because of them. Work is a group activity, and group collaboration is not by accident. Informal groups within the work plant exercise strong social controls.

He performed some experiments like the illumination experiment (which studied the impact of physiological aspects), relay assembly test room experiment (which studied what impact did changes in working conditions - financial, rest periods etc. have on morale), mass interviewing program - found that hearing grievances alone may increase their morale. He did not reject the classical theory completely but tried to close its gaps, and thus his theory is called neo-classical theory.

Critique of Mayo: lacks scientific validity, Marxists find it just another way to exploit by de-emphasizing economic factors, it ignored environmental factors (found that working conditions, rest hours etc. did not boost morale), behavior of workers in experiments was not natural, over-concerned with happiness, Goldthorpe and Lockwood had pointed towards instrumental orientation of work.

Arguments against Bureaucracy:

• Merton - Bureaucracy is rule ritualism which provides no space for creativity or own judgment. It leads to the displacement of goals as rules become an end in itself. He talks about administrative bureaucracy as functional, dysfunctional, and non-functional to society.
• Cozier, through his empirical study of bureaucracy, argues that it has failed to fulfill the expectations of people and has refused to learn from its mistakes. It is a system that can destroy itself from within and hence, not entirely rational.
• Alvin Gouldner sees, in his study of industrial mines, that bureaucracy is not present and required everywhere in a modern society. He observes that inside a mine, supervisor and workers share an informal relation to overcome hazards and maximize efficiency but in industry, they follow a more rule-bound and hierarchical relationship.
• Similarly, Stacker favors de-bureaucratization of many industries like the software industry, creative industry, etc.
• Burns and Stalker argue that a system should not be mechanistic like bureaucracy but organic. Organic systems are more efficient, responsive, flexible, yet most efficient when healthily nurtured.
• Robert Michels, in his political theory and democracy, says that the flow of power towards the top is an inevitable part of an increasingly bureaucratized world. Bureaucracy is a sworn enemy of individual liberty. Thus, he equates organizations with oligarchy.
• Philip Selznick, in his book the Grass Root, argues that the basic need is that of survival and if bureaucracy affects that need, then that leads to a crisis in society. Organizations need to be flexible and restructure power to create a more participatory and adaptive structure.
• Pourwell argued that there is a possibility of certain influential people capturing bureaucracy and dominating those who work for bureaucracy. Latif Chaudhary, in his study on corruption in SE Asia, establishes that there are two kinds of bureaucracies - lower-level bureaucracy which is full of rent-seekers and higher-level bureaucracy which is made of policymakers and there lacks coordination between the two.
• Michael Foucault says that the architecture of any organization depends on its social makeup and authority system. In his prison studies, he shows the darker side of modernity.
• Giddens, in defense of bureaucracy, observes that as organizations expand in size, power relations become looser, and there is increased decentralization in decision-making. It is not possible to have a top-down approach as size increases. Example: Transnational organizations can be ethnocentric - where power resides in the home country, polycentric - where it is shared or geocentric - where it is most flexible.

Informal Organization:

According to Anthony Giddens, the term informal economy refers to transactions made outside the sphere of regular employment, sometimes involving the exchange of cash for services provided, but also often involving the direct exchange of goods or services.

Hence, work is not necessarily paid. Housework, do-it-yourself work, all are forms of work.

In 1970, J. Keith Hart, an anthropologist, was working for a research project of the ILO in Ghana.

Hart noted certain characteristics of the informal sector that make workers in this sector different from the formal sector. These are:

1. Low levels of skill - Workers in this sector have low levels of education and thus they have low skills. This is the reason why they are engaged in jobs involving low technology. Workers in the formal sector have a higher degree of skill and their position in the labor is better.
2. Easy entry - Getting work in the informal sector is comparatively easier than in the formal sector. Any able-bodied person, irrespective of the skills possessed, can become a day laborer. With minimum investment, the same person can become a street vendor and sell their wares at the market. The person need not have money to invest in a shop. In this way, the informal sector is able to absorb more workers who would normally not get any work because they are either not qualified or they do not have capital for investing in business.
3. Low-paid employment - Because of the requirement of low skills and the easy entry, work in the informal sector has low returns. Workers who offer their labor are not paid high wages. In fact, the biggest grievance against this sector is that the wages are many times below sustenance level. In many cases, low wages drive other members of the family into the informal workforce because the main wage earned is not sufficient for sustaining a household. In this sense, children too may be encouraged to join the labor force.
4. The fourth characteristic of the informal sector is that it is largely composed of immigrant labor. Hart found that the informal sector worker in Ghana had come to the city from the rural areas. As mentioned earlier, workers and small traders in the city came from the rural areas in search of a livelihood. He hence included migrant status as a characteristic of the informal sector.

ILO Definition of Informal Sector:

• Easy entry for new enterprises
• Reliance on indigenous resources
• Small-scale operation
• Family ownership
• Unregulated and competitive markets
• Labor-intensive technology
• Informally acquired skill of workers

Sharit Bhowmik says there are two kinds of informal sector:

• Informal Economy - includes street vendors, home-based workers, rickshaw pullers, etc.
• Informal Employment - includes casual and contract laborers in the formal economy as their working conditions and wages are similar to that of the informal sector.

Informal Sector in Urban Economy - Jan Breman (Handbook of Indian Sociology) High rate of urbanization is not marked with equivalent rise in formal sector employment. He describes the informal sector as a colorful arrangement of irregularly working people that scratches around for a living close to or at the bottom of the urban society, where life and work are both precarious.

The informal sector is unregulated, unorganized, and unprotected. Trade unions and other collective organizations are rarely visible in the informal sector.

He proposes a formal-informal continuum:

• Difficult to demarcate between informal and formal as both overlap and are interdependent. Though the top and bottom of an urban economy can be easily distinguished, there is a diffusion zone where formal and informal labor may be together and there is no dividing line.

He rejects the view that the informal sector is being mobilized to become micro-entrepreneurs as upward mobility very less and growth of the informal sector has outpaced the formal sector.

He classifies the majority of the so-called self-employed as camouflaged wage laborers. For example: rickshaw pullers and auto drivers with vehicles on rent or street vendors who get specific products from larger retailers.

Breman identifies certain distinct characteristics of the informal sector:

• Composed of heterogeneously composed categories of working people who have no formal training
• No source of income apart from own labor
• Much higher participation of women and children
• Low status attached to informal self-employment

He divided the informal sector into:

• Petty bourgeoisie - self-employment, brokers, contractors, agents.
• Sub-proletariat - casual and unskilled; move from one place to another for employment; have temporary employments.
• Paupers - lumpen drags of society whose presence nobody values. Totally alienated from consumption and labor itself.

He maintains that there is fluidity among the above class structure though drastic upward/downward mobility is rare.