Formal vs. Informal Leadership: Definitions and Differences

Updated March 10, 2023

Strong leadership in the workplace can improve performance, morale and the potential for success. Both formal leaders and informal leaders can lead an organization to these improvements. If you're aspiring to take on a higher-level position at your job or just wish to develop leadership qualities, it's important to understand these types of leadership and how they differ from each other. In this article, we explain what a leader is, define formal and informal leadership and examine some points of difference between the two forms of leadership.

What is a leader?

A leader is a person who can influence the actions of others. Leaders exist in the context of groups, including teams, companies and other such organizations. The other members of the group rely on the leader to make decisions and determine actions that allow them to achieve their goals. For example, the coach of a basketball team is a leader who dictates the group's strategy and how much playing time each player gets, and these choices can directly affect the outcome of a game.

There are several styles of leadership. When making key decisions, some leaders invite input from involved parties, others take an autocratic approach to decision-making and still others prefer an intermediate style that combines elements of democracy and autocracy. However, regardless of specific style, effective leaders often have certain characteristics in common. These include:

  • Decisiveness: Decisiveness is the ability to make decisions or take action quickly and effectively. This skill often stems from extensive experience, which allows a person to predict potential outcomes based on past results.

  • Communication: Communication is the ability to convey information and increase understanding. Strong communication skills are essential because they allow leaders to effectively share their vision of success and how to achieve it.

  • Problem-solving: Problem-solving refers to the ability to understand why problems arise and how to overcome them. If a leader has excellent problem-solving skills, others within the organization are more likely to trust them to traverse any obstacles the group faces.

  • Coaching: Coaching is the quality of being supportive and nurturing of others' abilities and helping them to realize their potential. Leaders can coach others by providing honest, actionable feedback and guidance toward development opportunities.

  • Responsibility: When a leader has a sense of responsibility, they feel they're accountable for any mistakes or downturns that occur. They believe that success hinges on doing their job well, so they are personally invested in working toward positive outcomes.

Related: 10 Common Leadership Styles (Plus How To Find Your Own)

What is formal leadership?

Formal leadership is a circumstance in which an individual is the officially recognized head of a group or organization. This type of leadership relates to a job title, so it's the professional responsibility of formal leaders to motivate their juniors and take charge of the factors that may lead to the success of the organization, such as resource allocation and decision-making.

The CEO of a corporation is an example of a formal leader. They're responsible for directing all resources and operations and making decisions that lead the company to profitability. Also, as the highest-ranking executive of the organization, they officially have more authority than others within the company.

Related: Leadership Titles: Definition and Examples

What is informal leadership?

Informal leadership is when an individual does not have official status as a group's leader, but other group members see them as and consider them to be a leading force. Informal leaders tend to be experienced and knowledgeable, so they're the ones people seek for answers and guidance. Often, they've earned the status of informal leader by developing strong relationships with the people around them and proving themselves, through actions, to be reliable and trustworthy.

An example of an informal leader is a colleague who's well known for their intelligence, wisdom and interpersonal qualities. This person isn't necessarily a high-ranking member of the organization, but others respect them and typically go to them for advice and knowledge about procedures. In meetings, they might frequently offer actionable insights that lead to the resolution of problems. If they provide instruction, others often heed it willingly.

Read more: Informal Leadership: Definition and How To Become an Informal Leader

Formal vs. Informal leadership

There are several points of difference between formal and informal leadership. These include:

Authority vs. influence

Formal and informal leaders derive their authority from different sources. For formal leaders, their authority stems from the hierarchy in which they operate. A person assigned a leadership position has the power to make decisions and delegate tasks because their title bestows them that authority, and the members within the hierarchy acknowledge it.

In contrast, informal leaders have less authority than they do influence. Their power is based on trust, friendliness and shared interests with their colleagues and the reputation they've earned through their work. The members within the organization recognize the qualities, rather than the title, of the informal leader.

Related: How To Have Influence in the Workplace

Limited vs. expansive relationships

Both formal and informal leaders maintain professional relationships, but those of one are often necessarily narrower than those of the other. Normally, formal leaders work most closely with other high-level members of their organization, such as executives and people who occupy a level on the hierarchy directly below them. Their authority allows them to delegate the transmission of information to their juniors, thereby limiting the professional associations they usually have.

The professional relationships of informal leaders often cover a broader range of organizational members. They directly work alongside their team members but also work interdepartmentally. It's common for other teams to know and acknowledge their status as informal leader and thus communicate with them about important matters, trusting them to disseminate information to the appropriate parties.

Related: Relationship-Building Skills: Definitions and Examples

Individual vs. collaborative decision-making

Under formal leadership, decisions usually issue directly from the leaders themselves. There may be some input from advisers, but the directive to proceed on a particular course comes from one person. For example, a CEO might decide to raise their company's minimum salary, closing the gap between the organization's lowest and highest earners. Other executives in the company might disagree with this decision, but the deciding power belongs to the CEO.

However, under informal leadership, decision-making often invites other members to contribute to the process. Rather than direct the actions of others, an informal leader is likely to ask for their input and encourage them to ask questions. Then, before making a decision, the informal leader might first confirm that others agree with it. In this way, non-leader members of the organization can influence the course the group takes.

Organization vs. members

When formal leaders make decisions, it's usually with the goals of the organization foremost in mind, and the impact had on members may be a secondary consideration. For example, if a CEO decides to focus most of the company's marketing efforts on a specific product, this decision likely stems from the belief that this product can generate the most profit. If this effort succeeds, it improves the company first and potentially benefits the employees afterward.

Informal leaders, however, normally make decisions with the well-being and interests of their colleagues being the primary concern. For example, an informal leader working with others on a project might ask the others what they each believe they can contribute before assigning tasks accordingly. This system, in which everyone feels they can put in their best effort, directly benefits the members first and can potentially lead to a result that benefits the organization as a whole.


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