For most organizations, it’s useful to create a graphical representation of the hierarchy of the organization. It helps employees get a clear understanding of where they sit within the company. Apart from that, an organization chart is a valuable tool that serves many other purposes, which we will discuss later in this article. Several organizational chart types are available, depending on the nature of the organization.
Through this article, you will gain a thorough understanding of organizational charts, including the types of charts, their use cases and limitations.
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What Is An Organizational Chart?
An organization chart is a visual representation of the internal structure of a company in the form of a diagram. This diagram showcases employees and their positions using boxes or other shapes. It can also include images of employees, their contact information, emails, and web page links. Some charts use symbols or other illustrations to represent employees and their roles. Employee levels are linked using straight or elbowed lines.
Org charts can be drawn for various purposes and structured in different ways. One major purpose of an organizational chart is to showcase the reporting relationships and the flow of command within the company. It can also be used for planning purposes or as a personnel directory.
When talking about the structure of organization charts, the most common structure is the hierarchical model. It displays the employees of management and other high-level positions on top while showing the low-level employees at the bottom. A glance at the org chart will give anyone a better understanding of the layout of the organization, including the number of levels and the position of each employee there.
Types of Organizational Charts
There are several organizational chart types that a company can use. Following are the most popular types of organizational chart types available these days.
Hierarchical Org Chart
As mentioned earlier, this is the most common organizational structure, arranged in a pyramid shape. The top level employees like the CEO are on top while the low-level or entry level employees remain at the bottom. The command chain flows from top to bottom. We can gain a clear understanding of the level of authority and responsibility by looking at this type of chart. Moreover, hierarchical organizational structure offers a specialty to each employee and shows to whom each employee should report to.
Divisional Organizational Chart
A divisional organizational structure allows each division to manage its own resources. Thus, those divisions can function independently as separate companies under the main organization. Each division can maintain their own marketing team, sales team or IT team.
This structure is well-suited for large organizations as it allows those departments to make decisions without always depending on the top management.
Matrix Organizational Chart
The matrix organizational chart is one of the popular organizational chart types that looks like a grid, deviating from the traditional hierarchy and providing a more dynamic view of the organization. The special thing about these charts is that they depict the multi-functional teams that work on specific projects. While each team will have a project manager, the employees will also report to a functional manager.
For instance, an engineer will always work under the engineering department managed by the engineering manager. Yet, sometimes he might be assigned to a certain project led by a project manager. So he will have to report to multiple managers at the same time.
This way, matrix organizational charts highlight both the vertical as well as the horizontal communication flow in an organization. This structure creates a more dynamic and flexible work environment by breaking down the vertical silos. It allows shifting resources to positions they are needed and encourages more open communication.
Flat Organizational Chart
The flat org chart, which is also known as the horizontal org chart, are well-suited for organizations with fewer levels between the senior management and staff. This kind of structure offers a great decision making power for each employee and allows implementing new ideas faster. It also empowers employees for self management without much supervision.
This type of structure eliminates the need for middle management levels. Many small or start-up companies tend to use this organizational structure until they expand enough to divide into different departments. However, some organizations have adopted a flat organizational structure as it brings up more involvement and open communication between employees at various levels.
Functional Organizational Chart
A functional organizational chart represents the top-down structure of a company, dividing it into various departments. This type of org charts groups employees with similar skills under a single unit. For instance, there can be marketing, sales, finance, HR, and IT departments.
Each unit will have a department head. All these department heads will report to a common manager who will integrate the functionality of all these departments.
Uses Of Organizational Charts
Org charts can do much more than simply display different roles and how they relate to each other. Following are some common uses of organizational charts.
Organizational and Managerial Communication
Since organizational charts clearly illustrate employee relationships, each employee will know whom they should contact for assistance. A good org chart will depict the responsibilities of each employee and who is involved in specific projects. It will clear up the lines of communication and improve the efficiency of the employee by reducing time waste.
Org charts give managers a bird’s eye view of their workforce. It helps them to identify which departments need more employees and which ones are overstaffed. Thus they can reorganize the duties of employees to balance-out the teams. Additionally, managers can delegate tasks properly to best-suit the talents of each employee.
Organizing the Workforce
Organizational charts help managers organize the workforce within the company. They can know which positions need new hires and which current employees require training, increments, appraisals, and promotions. This way, the management will be able to anticipate the skill and talent gaps and address the management needs. They can also be more proactive in recruiting and conduct training with better planning.
Planning for Resources
Org charts help to allocate resources in an effective way. You can rearrange their responsibilities and workload to improve efficiency. Moreover, org charts point out opportunities for career advancement of employees. They help to identify the potential shifts and the necessary skills to reach those positions. Since org acts as visual ladders depicting all these facts, you can move employees vertically to match their career goals.
Some org charts offer a mythological representation of employees, including their pictures, designation, contact numbers and other links. It helps new employees and other stakeholders to recognize those personal even before meeting them. Family tree is also a kind of organizational chart which makes use of mythology to illustrate family members.
Limitations Of Organizational Charts
Despite many benefits org charts offer, they can also have some limitations.
While an outdated org chart is useless, keeping them often up-to-date is a burden, especially for large organizations. Many changes can happen inside an organization within a short period of time. For instance, employees can resign, shift departments or allocated new roles. Thus, it is difficult and time-consuming to reflect all these changes in an org chart and keep them continuously up-to-date.
This is one of the significant limitations of an org chart. Not all connections within an organization are formal and there are informal connections as well. Org charts only capture the official and well-defined connections and fail to showcase the informal connections. However, these informal communication channels are essential for the operations of the company and the inability to reflect them will create communication gaps.
While org charts display the flow of authority within an organization, they fail to display how that authority will be applied. Thus, the managerial philosophy behind that authority structure is hidden in an organizational chart.
Organizational charts focus more on the lines of authority, and the responsibilities of different employees. Thus, it’s more like a reflection of a job structure in the company. However, if you want to know more about the links between individuals and departments of a company, you will find an organigraph really helpful.
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Whatever the structure of an organization, an organizational chart is extremely useful for streamlining the communication within the company, organizing the workforce and as a planning tool. They also provide employees with transparency on where they fall in the overall company structure. Through this article, we could explore charts in greater detail, assisting you in using org charts for the betterment of your company.
What are the ways for creating an organizational chart?
While you can create org charts manually, it is time intensive and does not allow for easy edits. There are many new modern software in the market to draw org charts as easily as you wish. So the best way is to utilize such a tool that enables easy modifications of charts.
What are the common types of organizational charts?
Hierarchical, flat, divisional, matrix, and functional are the most commonly used types of org charts.
What should be the content of an org chart?
An org chart should include the images, positions, and contact details of employees while presenting the organizational structure correctly. It should also represent the hierarchy along with the number of employees under each manager.
Is it necessary to include names of employees on Org charts?
No. It is not necessary to mention names, as the main purpose of an org chart is to present the company structure. However, adding names will help anyone recognize those individuals easily.