The effect of formalization in the enterprise

Abstract

Formalization is one of the pillars of a bureaucratic company. It is manifested by a high number of formally given rules, procedures and written guidelines. These documents guide the way of employees’ conducting and their activities. Precisely defined rules determine the way of work and based on rules the activities are divided among the employees of the company. They feel that the rules are readable, clear and valid for everyone. Research shows a positive correlation between the effectiveness of business activities and the degree of formalization. On the other hand too detailed rules prevent creativity, initiative and self-development. Employees require rules and written materials from the sovereign’ supervisor to solve every problem, often one that the employees themselves can easily solve. Our contribution is dedicated to formalization and its impact on employee initiative to make changes in the organization. In a sample of 190 companies, we confirmed that with the increasing formalization, the initiative of employees to change has been decreasing.