What is an Organizational Chart?

Greg Bennett -

We've all seen them - those diagrams with boxes and lines showing who reports to whom in your company: The humble organizational chart.

But what exactly is an organizational chart and why have companies used them for decades?

An organizational chart is a visual representation of a company's internal structure. It outlines the hierarchy of employees, from top-level executives down to individual contributors, showcasing the relationships and relative ranks of positions within an organization.

In simple terms, an org chart allows both insiders and outsiders to understand, at a glance, how a company operates. It's more than just boxes and lines; it's a blueprint of your organization's working dynamics.

Key Functions of an Org Chart:

  • Reporting Relationships: Clearly shows who reports to whom.
  • Chain of Command: Illustrates the flow of authority from executives to managers to employees.
  • Spans of Control: Indicates how many direct reports each manager has.
  • Departmental Functions: Highlights different departments and their roles within the company.

Why Are Org Charts Important?

Org charts offer numerous benefits that contribute to the efficiency and clarity of an organization:

  • Enhanced Communication: By understanding the structure, employees know the appropriate channels for communication.
  • Efficient Onboarding: New hires can quickly grasp the company's layout, making their integration smoother.
  • Strategic Planning: Leaders can identify gaps, redundancies, and opportunities for growth.
  • Career Development: Employees can visualize potential career paths within the organization.

Who Uses an Org Chart?

Org charts are versatile tools utilized by various stakeholders within an organization. Let's break down how different roles benefit from them:

1. Executives and Leadership

How They Use Org Charts:

  • Corporate Restructuring: Align business units and departments with strategic goals.
  • Budgetary Planning: Allocate resources effectively based on organizational priorities.
  • Growth Readiness: Identify strengths and gaps to prepare for scaling operations.
  • Investor Relations: Present organizational structure to investors and board members for transparency.

Benefits:

  • Streamlined decision-making.
  • Clear visualization of organizational alignment with company objectives.
  • Enhanced communication with stakeholders.

2. Human Resources

How They Use Org Charts:

  • Onboarding: Acquaint new hires with the organizational structure and key leaders.
  • Career Mapping: Show employees potential progression paths.
  • Succession Planning: Identify strategic roles and prepare successors.
  • Compensation Management: Ensure equity in titling and pay based on hierarchy.

Benefits:

  • Improved employee retention through clear career paths.
  • Effective talent management and development.
  • Consistency in compensation and role responsibilities.

3. Managers and Team Leads

How They Use Org Charts:

  • Understanding Span of Control: Manage team size and resources.
  • Cross-Functional Collaboration: Identify peers in other departments for partnerships.
  • Staffing and Recruitment: Determine headcount needs.
  • Onboarding Support: Introduce new team members to the organizational structure.

Benefits:

  • Enhanced team management.
  • Improved cross-departmental collaboration.
  • Efficient resource allocation.

4. Employees

How They Use Org Charts:

  • Understanding Reporting Lines: Know their manager and higher-ups in the chain.
  • Identifying Mentors: Find senior peers for guidance.
  • Career Development: Map out potential promotions and lateral moves.
  • Building Connections: Locate cross-functional partners for collaboration.

Benefits:

  • Greater clarity on their role within the company.
  • Opportunities for professional growth.
  • Improved workplace relationships.

Who is Responsible for Managing the Company Organizational Chart?

At the heart of managing an org chart is the Human Resources (HR) department. They are the custodians of an organization's structural blueprint.

HR professionals are tasked with the ongoing job of ensuring that the org chart is an accurate reflection of the company at any given moment. This includes adding new hires, adjusting for promotions or departures, and reorganizing departments as strategies evolve.

However, creating an organizational chart is not a siloed task. It requires a collaborative approach. Department heads and managers often work closely with HR to provide updates specific to their teams. This collaboration ensures that the org chart remains a living document, one that is responsive to the day-to-day shifts within the company.

Leadership also plays a crucial role in managing and visualizing the organisation's hierarchy. Senior executives must endorse changes and restructuring, ensuring they align with the company's strategic objectives. In some cases, particularly in smaller startups or agile companies, the CEO or founder may take a hands-on approach in crafting the org chart, especially when it comes to defining leadership roles and reporting structures.

FAQs: Common Questions About Org Charts

How Often Should an Org Chart Be Updated?

Org charts should be updated whenever there are significant changes in the organization—such as new hires, promotions, department restructurings, or role changes. Regular reviews, at least quarterly, help maintain accuracy.

What's the Best Software for Creating Org Charts?

There are several tools available, ranging from simple to complex:

  • OneDirectory: Ideal for dynamic and interactive org charts.
  • Microsoft Visio: Offers advanced diagramming capabilities.
  • Lucidchart: A user-friendly, cloud-based option.
  • SmartDraw: Provides templates for quick creation.

Choose a tool that fits your organization's needs and scale.

Can Org Charts Be Used for Succession Planning?

Absolutely! Org charts help identify key roles and potential vacancies, allowing HR and leadership to plan for successors and ensure business continuity.

Should Contractors and Freelancers Be Included in Org Charts?

If contractors and freelancers play significant roles or interact regularly with employees, including them can provide clarity. However, they should be distinguished from full-time staff to avoid confusion.

What's the Difference Between an Org Chart and a Team Chart?

An org chart displays the entire organization's structure, while a team chart focuses on a specific team or department. Team charts provide more detail on roles within that group.

How Do Org Charts Help with Onboarding New Employees?

Org charts give new hires a visual map of the company, helping them understand how their role fits into the bigger picture and who their key contacts will be.

How Do Org Charts Support Company Culture?

They promote transparency and openness, showing employees that the organization values clarity in roles and responsibilities, which can enhance trust and morale.

Can Org Charts Be Shared Publicly?

While some companies share simplified versions publicly to showcase their team, it's important to be cautious. Sensitive information should be kept internal to protect privacy and strategic data.