Formalization
The degree of formalization in an enterprise refers to the degree to which there are standardized rules and procedures governing the activities of employees. A company with a high degree of formalization is characterized by detailed job descriptions and clearly defined policies and procedures covering a wide variety of employee behaviors. Conversely, a company with a low level of formalization is characterized by non-structured jobs and fewer explicit policies and procedures.
As companies grow larger, a certain amount of formalization is inevitable. Employees require some direction in their job responsibilities and in the procedures required for consistency within the organization's production schema. When organizing, however, managers should be aware of the costs of excessive formalization, which may include stifling employee creativity and innovation as well as slowing the organization's responsiveness to critical issues and problems.