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Public Administration: Formal and Informal Organizations

McGregor’s Theory X and Theory Y had been the cornerstone of organizational theories at one time. Theory X believes that the workforce is innately lazy and unwilling to do work. Therefore, management needs to goad, persuade, discipline and even, coerce them to work – the carrot and stick policy needs to be very much in vogue that could reward hardworking and sincere workmen and punish unwilling, or insincere workers.

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On the other hand, Theory Y believes that all members of the workforce are willing and cooperative workers. They wish to earn an honest living through their efforts and dedicated service but need to be trained and motivated by management to work according to the needs of the organization. Theory Y believes that there is nothing fundamentally wrong with the workforce, their perceptions need to be brought in line with that of management and they need to be explained about the importance of their work and how it impacts the total work environment.

Thus, in early organizational theories, the aspect of human nature and behavior was preponderant since the workforce was more militant and aggressive and would not obey orders directly. Thus, the need for coercion and threats became necessary, which exasperated tense situations, resulting in drifts in management-employee relations. However, it would not be judicious to present organizational theories only in terms of McGregor’s Theories of X and Y.

Frederick Winslow Taylor enunciated Taylor’s principle, which principally aimed at standardizing and simplifying jobs so that each worker was responsible for a certain segment of work, which he needed to perform to the best of his abilities. Thus, Taylorism was meant to increase efficiencies while reducing costs and efforts. The aspect of “time and motion study” was also an adjunct of scientific management propounded by Taylor and has been the edifice of modern management throughout the industrial world. (Crowther & Green, 2004, p.10).

The fact that we have learned from research on human behavior is that the motivation angle that is so strongly encased in these theories – monetary and non-monetary benefits, etc. have gone a sea change. Maslow’s 5 need pyramid delineates the physiological, safety, social, esteem, and self-actualization needs. He believes that once one stage has been crossed, the people go for the next, and so on. However, in recent times, this pyramid has been under challenge because, in certain cultures, certain values take precedence over others. “Additionally, little evidence suggests that people satisfy exclusively one motivating need at a time, other than situations where needs conflict.” (Maslow’s theory of motivation- Hierarchy of needs, 2009, Limitations and Criticism, para.1).

Thus, over some time, organizational hierarchies and importance may change. While at one time, productivity had been a key factor, nowadays it is an information technology and its usage that has gained center stage. The entire organizational skyline seems to have changed, and greater emphasis is now on managing systems rather than personnel. Thus, organizations need to take stock of their needs and reinvent themselves to play a major role in achieving efficiencies, both within and outside the organization.

Formal organizations are hierarchy-bound rigid structures powered by a regulatory mechanism that exists in organizations. However, informal organizations are sub-groups that are created informally through interaction among personnel and activities and do not have any regulatory boundaries or predefined parameters, as such. Though not formally recognized, they could at times be powerful mouthpieces for the staff, or workforce that needs to be heeded by management. Racial or gender cliques, for instance, are examples of informal organizations within the formal organization as may be formed by management, labor, certain segments of the workforce, etc. The main functions of formal organizations are to pursue management policies and work towards achieving the aims and objectives of the firm. They are officially recognized and enforceable levels of accountability and responsibility flowing downwards from the highest echelon – the board of directors. Adherence and membership informal organizations are mandatory and they continue, albeit with changes through the lifetime of the organization, in one form or the other. Informal organizations thrive on formal ones, and to a large extent are nourished by them. Since membership in informal organizations is not compulsory, it normally has more temporary memberships arising out of needs. The life span of informal organizations depends upon the work to be completed and shall cease to exist once the work is over. Informal organizations strive to serve group interests and /or individual interests of their members. “These personal statuses, relationships, network, and organizational ties may also be a disadvantage in the informal organization as it may mean that an individual is excluded from the informal organization due to differing beliefs than the rest of the informal organization members.” (Formal and informal organizations, 2009, para.2).

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The main idea of formal organizations is to increase the profitability of the business while that of informal ones is to protect the interests and welfare of their members. Formal organizations are permanent while informal ones cease to operate once their objectives have been served. There are possibilities that informal organizations could develop norms or values that conflict with formal values. This could be when there are conflicts of interests or erosion of understanding between formal and informal structures. The fundamental values of the organization’s formal system or structure are to increase shareholder value and meet the goals and objectives of the business, even by using informal methods whenever needed. But sometimes, the informal means may not concur with the formal. For instance, trade unions may refuse to accept lesser salary revision or may insist upon reinstatement of a suspended workman. In all such cases, there are instances when the hierarchical and bureaucratic formal system may not see Eye-to-eye with informal groups and there are chances of misunderstandings and areas of conflict. However, these issues could be resolved through mediation, or dialogues, among the feuding parties to their mutual satisfaction. It is often seen that “The formal systems alone are not able to satisfy the enormous information needs necessary to coordinate such a complex configuration.“ (Managing people in organizations, 2009, para.5).

Under such circumstances, the roles of management also change conspicuously and management would be wrong not to differentiate between the existence of various cultures and sub-cultures. “Often the shared understanding of the role of management becomes an instrument of integration that is more powerful than formal structures and systems.” (Managing people in organizations, 2009, para.5).

The two stages of the policymaking process that are being taken up are first, regarding the identification of the issue, and, secondly, implementation of the policies. The identification of the issues needs to be in terms of what the problem is and what its impacts are in material terms.

Policies need to be distinguished from laws in the sense that they are not mandatory and enforceable and guide action towards those that provide the maximum response to goals. In more senses than one, policies could guide serve as tools that show the right way for public policies. Moreover, it is also seen that policies are normally initiated and approved to avoid negative or detrimental action and enforce positive ones. This could also be in terms of initiating right action to correct wrong or to channelize action in its proper path. The implementation of the policy is done after a lot of deliberations and debates with all concerned officials and authorities, including the public also, who have a major say in the carrying out of policies in a democratic framework of the country. During the implementation part, it is necessary to work out a plausible and realistic model by which the policies could be implemented. It is, however, necessary to follow a planned procedure for the implementation of the policy, including the purpose statement, which delineates the need for the policy issuances and its prime objectives.

The next statement would be in terms of applicability and scope statement that takes into account the inclusion or exclusion of people from the requirements. Next, it would need to cover the date on which it should come into effect. The next aspect would be the body or individuals who would be responsible for the implementation of the policies. Next, it is also necessary that clear-cut directions need to be given regarding how these are to be implemented.

The administrative agency which would be responsible for the identification of commercial policies would be the United States Department of Commerce. This is a federal agency that is responsible for developing standards, benchmarks, validation programs to publish standards and general laws and to increase IT planning, implementation, and management operations. The Department of Commerce may be a viable agency for the identification of various issues that need to be communicated to the government.

Next, coming to the implementation of policies, the Director of National Intelligence acts as the head of the Intelligence services. The aspects of national security of which the President, NSC, and Homeland Security Council are principal incumbents, are advised by the DNI. It also undertakes the responsibility of overseeing and enforcing of National Intelligence Program. “The DNI coordinates intelligence matters related to the Department of Defense (DoD) with the Under Secretary of Defense for Intelligence – the USD (I). This individual serves as the Principal Staff Assistant and advisor to the Secretary of Defense and the Deputy Secretary of Defense on all intelligence, counterintelligence and security, and other intelligence-related matters. The USD (I) provides oversight and policy guidance for all DOD intelligence activities. “ (Members of the intelligence community (IC), n.d., para.3).

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The budget process is called a political process since the influence of political powers is found in these exercises. In the USA, there are primarily two parties, Republicans and Democrats and they try to win over the largest number of voters and try to nominate their candidates to fight and win Presidential elections in the country. Besides, there are also other kinds of pressure groups that try to influence budget processes for protecting, or furthering their vested interests. For instance, owners of business corporations would try to lobby for the lower incidence of corporate taxes or restrictions on the right of workmen to resort to strikes. Similarly, trade union leaders would advocate enforcement of minimum wages or working hours aimed at strengthening the collective bargaining system. The efforts of various political pressure groups within the country and outside it would seek to protect and promote their vested interests, especially in matters of subsidies, taxation rates, tax exemptions, and other financial benefits and concessions that are announced during the budget process. These are the reasons why the budget process is called the political process.

The Program Planning Budgeting System (PPBS) and performance budgeting help in rationalizing the budget process in a limited way. The PPBS is a kind of planning-centered and specific kind of budget preparation that takes into account the programs that are chalked out and the funds that would be necessary to meet them. In a sense, PPBS is a cross between the traditional kinds of subjective budgets based on proposals on the one hand and performance budgets on the other. The main aspect of PPBS and performance budgeting is that of the planning process, the drawing up of specific proposals to meet budget requirements and precise budgets, and explicit multi-year plans. The main objective behind PPBS, initiated in 1965, was to ensure a better affiliation between objectives and goals, programs, and activities. Various kinds of activities were merged into multi-year programs, appraised, and compared over the years. During the budgetary stage, the programs are transferred to annual budgets for implementation. These rational approaches to budgeting have been so difficult to implement effectively in the American government because of the bureaucratic nature of American financial systems. Demarcation of accountability and responsibility is yet another area in which the budgetary exercises could not be strictly enforced, and this led to many internal conflicts and squabbles. Besides, given the kind of budget deficits that are in vogue in Government accounting, it would be perhaps illusionary to produce and implement a perfectly well-balanced list of objectives and pursue it in right earnest. The lacunae in the present systems did not perhaps allow sound accounting systems and budgets to be enforced, which have led to the failures of much innovative and development-oriented budget planning. Besides, the degree of consistency and enforceability that are key elements of any budget exercise has been conspicuous in its absence in the case of both PPBS and only to a limited extent in the case of performance budgeting. These could be some of the reasons why these rational budgetary planning failed to take off.

The salient differences between social regulation and economic regulation lie very much in the objectives they seek to fulfill. The former is aimed at restricting conduct that could pose a threat to public health and safety, welfare, and well-being of citizens. It could be in terms of alleviating the risks of pollution to the environment, unsafe or unhygienic working, or living conditions, and social segregation. Economic segregation, on the other hand, is meant to ensure competitiveness in the marketing of goods, services, and utilities and the avoidance of harm to consumers through aggressive and profit-oriented marketing efforts on the part of unscrupulous manufacturers and traders. How externalities could be used to support the argument for regulation could be that externalities may be capable of causing benefits or detriments to society in general, or individuals in particular. A manufacturer that produces industrial products also pollutes the neighboring areas through effluents, smoke, etc. This is a case of detrimental externality. Since the economic value gained through manufacturing is higher than the losses caused by pollution, regulatory measures cannot stop such manufacture. When a house owner uses coatings of fireproof materials in his house, he is, in a way, protecting the neighborhood also in terms of externality, since chances of a fire emanating from his home are considerably reduced. The occurrences of fire, pollution, chances of an industrial accident or mishaps are also externalities that need to be predetermined and guarded against. However, there is another factor that needs to be kept in mind. External benefits may accrue, without the knowledge of people. For instance, if a person cleans and beautifies his garden properly, it may increase the value of property in the neighborhood, but this fact may not be known by all. Similarly, the fact that one business is stocking dangerous chemicals in its godown in an open and unprotected manner, gives rise to risks of accidents, which is an external danger that may not be known by others. Thus, regulatory measures are needed to be enforced for known, as well as unknown sources of risks and dangers. Coming to the next part of the question, it is believed that too much regulation in terms of direct interference by the Government in economic and individual matters could spell discouragement and disincentive to invest. Similarly, too little interference could be seen in terms of the lowered degree of controls that could cause disaster for the economy. Therefore, a balanced approach needs to be taken, wherein both the detriment of high or low regulatory measures and the benefits of the same could be gained. In critical areas of public administration and governance, like education, finance, defense, health care, and consumer protection, an overdose of regulation would not do any harm, whereas not so critical items could even do well with a lesser degree of controls and regulatory measures.

Reference List

Crowther, D., & Green, M. (2004). Organizational theory. CIPD Publishing.

Formal and informal organizations. (2009). Mega Essays.com. 2009. Web.

Managing people in organizations. (2009). Lots of Essays.com. 2009. Web.

Maslow’s theory of motivation- Hierarchy of needs: Maslow’s theory-Limitations and criticism. (2009). Envision Software, Incorporated.  2009. Web.

Members of the intelligence community (IC). (n.d.). Information, Intelligence. 2009. Web.

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StudyCorgi. (2021, October 30). Public Administration: Formal and Informal Organizations. Retrieved from https://studycorgi.com/public-administration-formal-and-informal-organizations/

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StudyCorgi. (2021, October 30). Public Administration: Formal and Informal Organizations. https://studycorgi.com/public-administration-formal-and-informal-organizations/

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1. StudyCorgi. "Public Administration: Formal and Informal Organizations." October 30, 2021. https://studycorgi.com/public-administration-formal-and-informal-organizations/.


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