Formalization

What formalization means

Formalization (الرسمية التنظيمية) is the extent to which work in an organisation is run by written rules and procedures, as against what is left to people’s judgement at the moment a situation arises.

Formalization is a matter of degree, not a choice between two states. No organisation is simply formal while another is simply informal; each sits somewhere on a scale that runs from work done entirely by custom to work in which every step has a document. The management question is not “Do we write things down?” but “What do we write down, and how far do we go?”

The degree that suits an organisation varies with its size and the nature of its work. The definition does not set an appropriate degree of formalization, and we have found no published value for one.

What formalization puts in writing, and what each part changes

• The procedure: how the work is done, step by step. It affects how consistently the work is performed from one person to another and from one location to another.
• The decision rule: what is done in a given situation, and who decides it. A decision rule affects how quickly decisions are made and how often matters are referred upwards.
• The record: which events are recorded, and with what data. It affects the ability to review what happened after it has happened.

Confusing the three is common. An organisation that has written its procedures but not its decision rules finds matters referred upwards as often as before, because a procedure explains how a decision is carried out, not how the decision is reached. Where both have been written but nobody has settled what gets documented, the organisation is unable to show what happened when asked months later.

How formalization is measured in practice

The nearest measure is the share of recurring tasks that have a written procedure. Take an organisation with 40 recurring tasks, 26 of which have a written procedure. The share is 65 percent.

That figure flatters the position, because it counts documents without asking whether they are still in force. Suppose 9 of the 26 were written and have not been reviewed for more than two years, and the tool or the step they describe has changed since. The procedures actually in use are then 17, or 42.5 percent of the 40 tasks.

The gap between 65 percent and 42.5 percent is a difference of question, not of arithmetic. The first figure measures what has been written; the second measures what is followed. An organisation that takes pride in the first while working by the second believes it is well ordered, when in more than half of its tasks it is working by custom, and it has meanwhile produced documents that contradict what happens.

A second measure sits alongside the first and is more telling: the share of cases handled outside the procedure. A high share means that what has been written does not cover what occurs, and that the document describes an ideal case that seldom arises.

What formalization buys

• Consistency: similar cases are dealt with in a similar way, whichever employee handles them and in whichever branch. This is the most important thing formalization buys, because differences in how people are dealt with are the origin of most complaints.
• Transferability: a newcomer can do the work from the document rather than by shadowing a colleague. That is what shortens employee onboarding.
• The ability to review: after a mistake, the organisation can establish where it occurred, and whether it lay in the rule or in how the rule was applied. Without anything in writing, a review becomes a comparison between two memories.

The effect of transferability can be put in figures. Take an organisation in which a new employee reaches full productivity in 5 weeks without a written procedure and in 3 weeks with one. The saving is two weeks per employee, and with 20 hires a year it comes to 40 weeks of work.

Those weeks are assumed for the example, as are the task counts in the measurement above. The figures in both are there to show the calculation; they are not a benchmark, and they are not taken from any source. What is not assumed is the direction of the effect: a document moves what is in people’s heads to a place where others can reach it.

What formalization costs

The first cost is slowness in cases nobody anticipated. A procedure is written for what recurs, and a rare case falls outside it, so the person dealing with that case waits for an exception instead of deciding it. The more narrowly a procedure is worded, the more cases fall outside it.

The second cost is more serious: a gap between what is written and what is done. A document that nobody follows is worse than no document, because it creates a false record that decisions and reviews rely on. The source of that gap is usually not defiance but a procedure that was not reviewed after the work changed, so that following it to the letter now holds the work up.

The third cost is that the more is written, the less effect the writing has. An employee faced with two hundred pages of procedures reads none of them and goes back to asking a colleague, which is the same situation the writing was meant to end.

When formalization becomes necessary: size and multiple sites

What can be run by custom in a team of five sitting in one room cannot be run that way across three branches in three cities. The reason is not that people have changed but that the means of passing on a rule has. In a single room a rule travels by watching and by a passing question; between cities it travels only in writing.

That is why the need for formalization shows up at three particular moments: when a second site opens, because differences between the two sites become visible to customers; when the person who knows the whole job leaves, because the knowledge that was not written down is exposed; and when the number of employees doubles, because the team grows past the point at which everyone knows what everyone else is doing.

An organisation that puts off writing until after these moments writes at the worst time: under the pressure of an incident, from incomplete memory, and after each site has settled on its own way of working, from which its people are hard to bring back.

Formalization is not bureaucracy, and the difference can be tested

Bureaucracy is the word applied to formalization when its cost exceeds what it buys. The difference between the two is not judged by impression but by a question put to every written rule: does this rule change a decision?

A rule that could be removed with everything staying as it was buys nothing and costs time, and that is the rule the word bureaucracy fairly describes. A rule whose removal would mean one person being dealt with differently from another is doing its job, even if it looks heavy.

The test is applied to existing procedures, not only to new ones. Most of the formalization that accumulates began as a rule made in response to one particular incident, and it stayed after the reason for it had gone.

Where formalization is not optional

Matters of violations and penalties are never left to custom. They have their own rules and conditions, which are covered separately under disciplinary penalties. The definition of formalization creates no rule on them and does not summarise those rules.

What concerns formalization here is that the written method in this area does more than organise the work: it is the record referred to when a dispute arises. An organisation that deals with violations through conversation alone, even in good faith, has nothing months later, in the employee file or anywhere else, to show how two similar cases were handled. The steps that can come before any penalty are a related subject, positive discipline.

Formalization beside culture, the HR operating model and quality

• Organisational culture. This is what people do when there is no rule, while formalization is what they do because there is one. An organisation with many documents and a weak culture finds its rules followed to the letter and broken in spirit.
• The HR operating model. An HR operating model covers how the HR service is organised and how the roles within it are divided. Formalization covers how much of the work across the whole organisation is governed by written rules.
• Quality. Having a written procedure says nothing about the quality of what it contains. A bad written procedure produces a consistent, repeated error, which is worse than a scattered one because it happens every time.

What undermines formalization

• Writing only after incidents. Each rule arrives as a response to a single event, and what accumulates describes not the work but the history of its mistakes.
• Omitting an owner and a review date. A document without either ages without anyone noticing; the effect of that was shown above in the gap between 65 percent and 42.5 percent.
• Leaving out the exception. A rule that does not say who can authorise a departure from it is broken quietly the first time a case does not fit it.
• Measuring compliance by the number of documents. This is the easiest figure to produce and the least informative, because it rises with writing and not with the work.
• Writing a procedure away from the people who carry it out. When someone who has not done the work drafts the document, it describes an arrangement that makes sense in theory and cannot be carried out in practice, so people depart from it on the first day and the departure is put down to poor compliance.
• Copying another organisation’s procedures. A procedure describes a particular piece of work, with its own tools and the names of its own locations, and one carried over without changes is consulted once and then abandoned.

Before any procedures are written

Start by counting recurring tasks, not by writing. For each recurring task, note two things: how many times a month it occurs, and how many people carry it out. Then rank the tasks by the product of the two numbers and write from the top of the list, not from the easiest. A task that occurs once a year and is done by one person does not need a document; one that occurs daily and is done by ten people does, even if it seems obvious.

Next, give each document a named owner and a binding review date. Formalization does not fail through neglect in the writing but through neglect in the review: documents written once with great effort drift away from the work year after year, until following them becomes a sign that the person doing so does not know how to get the job done.

This is an explanation of the concept, not legal advice.

Related terms

• Employee File
• Employee Onboarding
• Succession Planning
• Performance Standards
• Internal Control