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Formalization in Organization Structure, Its Advantages and Disadvantages

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Table of contents

  1. Advantages
  2. Disadvantages
  3. Toyota
  4. Rules and Regulations:
  5. Huawei
  6. Rules and Regulations:
  7. Similarities

Dimensions of the organization structure give a perspective of how the different components interact. There are four dimensions, namely, differentiation, integration, formalization, and centralization.

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Formalization applies to the degree to which an organization’s rules, procedures, and methods of job completion are structured. More precisely, highly formalized entities are those under which the laws governing desired actions are well defined and adhered to. On the other hand, organizations with a minimal degree of formalization have a limited number of uniform procedures and laws. While formalization is often communicated by formal means and documentation such as work requirements, this should not have to be the case. Informal behaviours, such as procedures reinforced by community norms or informal conversations with other association participants, often contribute to the degree of formalization.

Formalization is the rules and procedures followed by an organization to a degree which includes trainings. It standardizes or regulates the behavior and determines the relationship between the organization such as the relationship between the leader and the followers. In terms of designs, formalization makes use of high specialization of labour and usually have a wide span of control. The main objective of formalization is to reduce differences in the behaviors of the employees. This can be done by both formal and informal means. Formal is standardized based on written rules.


  1. Makes employee behavior more predictable since they respond to problems in similar ways.
  2. When there is a problem the employee can turn to a handbook or procedure guidelines.
  3. Allows people in the same sector to communicate and share resources easier.
  4. Have the same goals and the divisional structure coordinate well.


  1. Since employees are behaving in the same manner, this can lead to innovativeness in a high degree of formalized company. (A high degree of formalization can lead to innovativeness because employees are used to behave in a certain manner).
  2. Since the employees are behaving in the same manner this leads to a reduced motivation and job satisfaction which also reduces the pace of decision making.
  3. Not all answers are specified in the rulebook or guideline book since customers have various questions.
  4. Reduced information flow in the organization due to always referring to the guidelines so they have less understanding of how other departments affects the company.
  5. Cooperation and coordination suffers.
  6. Motivated employees tend to solve problems in their own ways when they can’t find the solution in the handbook.


Formalization in Toyota is really important due to the Toyota Production System (TPS) having a unique principle called the “just-in-time” production.

Rules and Regulations:

  1. Raw materials are delivered to the assemble line exactly at the time they are to be used.
  2. Front-line employees are given the power to stop the production when they see a problem.
  3. Requires all the employees to be an expert in what they do.
  4. Do not accept flaws in the manufactured line.

This principle reduces wastage of resources and emphasizes the importance of efficiency for the employees. In TPS they want their customers to have a perfect product even though stopping the production may be costly. This increases their image in the market.


Huawei has a high formalization and is highly influenced by the company. If the higher ups make a rules the employees have to follow them without questioning the authority.

Rules and Regulations:

  1. Employees cannot simply use their logic and their creativeness to perform their tasks.
  2. One of their goals is to keep improving their products continuously.
  3. As the market shifts and changes they have to try and adapt with the market.
  4. As they adapt Huawei uses a step-by-step approach which minimizes risks.

Due to Huawei having high formalization it is said that it has the ability to shape and transform the market with innovative products. The step-by-step approach includes the preparation of the change, adjustments and process optimization, and the completion of transformation.


Both Toyota and Huawei make use of formalization and have always been by the book. As the technology improves and as their companies gets better and larger the use of formalization in the companies get higher. All the employees have to follow the guidelines and they can’t do what they want. Both the companies give their employees authority to stop the manufacturing when they see a fault in the system.

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To conclude, formalization in an organization is using systematic rules and procedures which control the employee’s activities and actions. Like every other organizational structure, formalization has its own advantages and disadvantages. One of the advantages in having a formal organization is that when there is a problem employees know where to look for answers. One of the disadvantages is that due to them behaving in the same manner they lose their motivation to work. In the above companies, both Huawei and Toyota have a high formalization which is good in terms of their business structure. But for some business the use of formalization is not suited especially in huge companies where there are many sectors and many employees.

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