A formal organization, in essence, is an entity that has a structure of command and responsibilities in place. Therefore, this type of organization includes tiered or ranked reporting relationships. This concerns how members of the company associate with each other as pertains to their work relationships, duties, activities, and such. A formal organization also involves a company organization plan as well as work procedures or methods.
An informal organization is not so highly structured. This is the underlying working relationships and associations that develop, and co-exist – almost as a sub-text to the formal structure of the company. This informal organization is unique to each organization. It defines the customs and ‘way’ of the entity, with different personalities and levels of expertise interacting casually with each other under the auspices of their defined formal roles.
As a result, in an organization, the company mandated formal structure is what gets the work done because it defines roles and operating relationships between superiors and subordinates. It also defines roles and operating relationships between departments.
Nevertheless, the informal organization, which develops organically between people in the organization, is not really company mandated. The informal organization develops on its own, naturally, as people interact with each other during the performance of their duties, and even at off-work times, such as breaks, and company away-from-work functions.