Formal planning is an articulated, written form of planning that states particular objectives and methods. Informal planning is closer to the reality of day-to-day execution.
In business, professionals often engage in planning for such complex tasks as marketing and organization. Planning can take a formal or informal approach. No one approach is better or works for every business, although some evidence suggests that informal planning may be better for small businesses.
Formal planning begins with stating particular business objectives, and devises a strategy for achieving those objectives. A marketing plan, for example, may define the targeted customer base, the advertising budget, and the proposed methods of advertising or research. Formal planning tends to be linear, allowing for little flexibility once the plan is set in motion. The benefit of formal planning is that objectives and methods are clearly stated, allowing little room for confusion; it dictates uniform procedure on a large number of groups or individuals, which may be why it is more beneficial for large businesses.
The benefit of informal planning, however, is that it allows for innovation and adaptation in response to changing circumstances. Informal planning often occurs under the umbrella of formal planning, when human nature and daily realities begin to change the formal plan. In time, individuals or teams may discover more efficient ways of performing tasks or of meeting a particular objective. In the modern business climate, this kind of innovation and creative problem solving is valuable, and informal planning is more accepted than it once was.