Communication is everything in the field of business and management. Actually, communication is everything in every field. However, not all communication should be used for the same purpose.
Communication meant to provide data, or information needed to accomplish the goals of the organization, is done formally and following a proper protocol, a chain of command (or directive), and using a specific format. This information is known as "formal" organizational communication.
Formal communication is very important because its uniformity in style and purpose allows for zero subjectivity and 100% engagement with the most important aspects of the business. All information remains on topic, and the result will be more accuracy in productivity.
An example of formal communication is the announcement of someone getting a promotion. What often happens is that someone over at human resources will send the information concerning this promotion in a memorandum format. This is because the importance of this information is not that "so and so got a raise"...but that Mr. X is now the person in charge of department Y in the organization.
Then we have informal communication.
When things that are off the business topic are to be discussed, employees can use informal communication in the form of flyers, newsletters, e-mails, texts or padlock notes (when collaborating remotely). The information contained in these formats should be as light in nature as its delivery. Let's go back to the case of the employee that got promoted. While the formal communication announced the promotion through the perspective of how it affects the organization, the INFORMAL communication will actually look into the more personable aspect of the news.
With informal communication, employees can plan a party for the employee, send their congratulations via e-cards, or express themselves about anything else in a non-binding and personal way. Keep in mind that all information that is written down is still documentation, whether formal or informal. Therefore, therefore, anything that will be read by others must still abide by the quality and performance standards as stated by the organization's mission and vision.
Formal communications follow standard procedures and are usually part of regular reporting cycles. In general, they are "on the record" and done officially within the context of the work environment. Reports, memos, planning documents, and other document or electronic communications that are archived and work through normal business channels are considered formal communications.
Informal communications are often unofficial and spontaneous. Gossip over the water cooler, talking with a colleague at lunch or happy hour, discussions before or after meetings that are not recorded in minutes, and other such unofficial and spontaneous interactions count as informal communications.
Formal communication is the process of disseminating official information to the parties concerned. This type of communication follows a formal structure as outlined by an organization and may move vertically or horizontally. In vertical communication, information may flow upwards to top level management for purposes such as approval or decision making. The information may also move downwards to lower organization levels. Formal communication can also move horizontally between similar level departments or employees unlike the vertical type that flows hierarchically.
Informal communication on the other hand is the type of communication that occurs between employees within an organization but away from the formal structures of communication. Important to note is that the nature of the information exchanged during informal communication may or may not be business related. Informal communication is an important component of organizational communication because it allows for the exchange of ideas, interaction between employees, and effective planning among others.
Formal organizational communication has to abide by standard organizational protocols (format, chain of command, precision, accuracy, etc.) and is kept on record for further action. These include business letters, memos, complaints, minutes of meetings, work orders, official reports, shared documents, etc.
Informal organizational communication typically does not relate to business (per say) and may or may not be recorded. Any verbal communication (off the record) including in meetings (but not recorded in minutes of meeting), over tea or coffee or drinks (but in office or with office colleagues), personal e-mails, messages (written or as sms or online messages such as on WhatsApp, etc.) are all examples of informal organizational communication. These are typically not related to business and are (generally) personal in nature. There is no specific format for such communication, unlike formal communication and content depends upon acquaintance level of participants. Additionally this may be subjective in nature, whereas efforts are made to eliminate subjectivity from official organizational communication.