Measuring Formalization

Formalization is one of the most important yet misunderstood dimensions of organizational design. It  describes how much work is governed by explicit rules, documented processes, or standardized  routines rather than individual discretion. Nearly every organization talks about being “bureaucratic” or  “entrepreneurial,” but few measure how formalization actually operates inside their jobs and structures. 

The Problem with Assumptions 

Formalization is often judged by perception rather than evidence. A company with thick policy manuals  is assumed to be highly formalized, while a start-up with little documentation is assumed to be flexible.  Yet appearances can deceive. A large company may have extensive procedures that few people follow,  while a young firm may strictly enforce routine behaviors around customer experience even as it claims agility. When leaders do attempt to measure formalization, they often rely on indirect proxies such as  the number of policies written, the size of compliance functions, or the volume of process diagrams.  These measures describe intent, not reality. They say little about how much discretion employees truly  have in executing their work. 

What Should Be Measured Instead 

The real unit of analysis for formalization is the activity, the building block of every job. Formalization is  reflected in the degree to which each activity is defined and controlled (or prescribed). A fully formalized  activity follows explicit steps or policies and allows little room for individual judgment. A discretionary  activity allows greater variation in how it is executed. When activity-level formalization data is  aggregated to the position, job, or structural level, organizations gain a clear, evidence-based view of  where standardization supports efficiency and where it may constrain innovation. This approach  replaces impression with measurement, turning formalization into a tangible variable that can be  calibrated across functions, job groups, or entire structures. 

Why This Matters 

Formalization is a double-edged design element. High formalization creates consistency, reliability, and  scalability, it reduces variance and ensures compliance. But too much formalization can stifle  adaptability and slow response times. Low formalization, meanwhile, encourages flexibility and creative  problem-solving but can lead to inconsistency, higher risk, and difficulty scaling. Measuring  formalization allows leaders to find the most appropriate balance. Highly formalized roles may be  essential in regulatory, financial, or safety-critical work. Low formalization may be better suited to  innovation or exploration. The goal is alignment, matching the degree of formalization to the purpose of  the role and the strategic requirements of the business. 

How Orgsure Measures Formalization 

Orgsure provides an unprecedented level of precision by measuring formalization directly through  activity-level controls. Each activity is assessed for the presence of: 

• Formal Controls, which enforce compliance or trigger adjustments when deviations occur.
• Policies and documented procedures, which define how the activity should be performed.
• Approvals, which govern whether execution of the activity requires authorization. 

While some may view controls as diagnostic rather than prescriptive, their purpose remains prescriptive  because they compel compliance or correction to ensure the system conforms to its formal rules. In this  sense, controls operationalize formalization. They don’t just assess whether behavior aligns with  expectations; they institutionalize those expectations over time. By coupling activity-level controls,  policies, and approvals, Orgsure produces the most complete and reliable measure of formalization  available. These attributes are rolled up into a position-level index that reflects how much of a role’s  work is governed by formal mechanisms versus individual discretion. The same data can then be  aggregated to reveal the degree of formalization across job groups, functions, or entire structures. 

The Core Insight 

Formalization is not a cultural condition, it is a measurable design variable rooted in the presence and  strength of controls on work execution. Various types of controls operationalize formalization, ensuring  that expected behaviors become institutionalized rather than optional. By measuring these at the  activity-level, Orgsure converts formalization from a perception into a precise index that can be  analyzed across every layer of the organization. This allows leaders to see where formality strengthens  performance, where it hinders adaptability, and how to calibrate structure for the right balance between  consistency and freedom.