Formalization also results in 'specialization of tasks'. Formalization is a process by which organizations try to standardize employee behavior. Larger organizations are generally more formalized due to greater manageability.
The downside of formalizing is well-known. If an organization wants to implement formalization it would be met with resistance. Managing employee resistance will be a big problem for managers who attempt to standardize work procedures. Employees in a formalized organization strictly perform the duties allotted to them and not more which causes a serious effect on the productivity. The lack of initiative by workers and the consequent loss of productivity and increased operating costs imply a loss of competitive advantage. Also, the one sided bureaucracy witnessed in a formal organization may in some instances lead to opportunistic behaviors by leaders resulting in misuse of power. [Geoffrey Johnstone, 2004]
Furthermore, in a formalized environment it would be harder for a leader to motivate his workforce compared to a more open working environment. Closed communication can lead to lack of motivation. Formalization carries of risk of creating a less committed workforce. Also it would be difficult for the management or the leader to initiate change in a formalized environment. Implementing a new process would be met with severe resistance as employees are used to highly codified tasks and are unwilling to adapt to changes. Change management is therefore a significant issue for the leader in an organization that is used to a highly formalized structure. Another potentially important and often overlooked problem is that by doing away with informal communication a formalized structure may totally separate the management from the workforce....
The lack of direct interaction between the manager and the staff would create communication gap, which ultimately affects the morale of the workforce.
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