What is an Organizational Chart? Definition, Types and Functionality - Peter Boolkah

An organizational chart, or org chart, shows the company structure visually. It outlines the internal framework, showing how departments, positions, and individuals connect within the company. These charts are valuable for both current employees and new hires. They help understand the company’s hierarchy and reporting relationships, improving communication and workflow efficiency.

What is an Organizational Chart - Peter Boolkah

What Is an Organizational Chart?

An organizational chart is a diagram that showcases a reporting or relationship hierarchy. It shows the relationships between different parts of the organisation. This chart helps explain who is in charge and how the organisation works.

There are many types of charts. They can be made in different ways. The main goal of an organisational chart is to make it easy to see how the company is organised and how it operates.

The Purpose of Organization Charts

An organisational chart visualizes an organisation’s structure. It helps people understand who is in charge and how different parts connect. These charts can be made in many styles and using other methods. They are helpful for managers and employees to clarify roles and duties and show how different departments and teams work together. Organisational charts also help with planning and making decisions.

5 Types of Organizational Charts

Exploring different organisational charts shows how organisations show their structure and relationships. Each chart meets specific needs and shows various parts of the organisation’s structure.

1. Vertical organisational chart (hierarchical org chart)

A hierarchy chart is a popular chart type where one person or group is at the top, and others with less power are below. For example, a monarchy has a king or queen at the top. Or, in a company, the CEO is at the top. In a hierarchy, people usually talk to the person they report to and those who report to them.

2. Horizontal organisational chart (flat org chart)

This type is also known as a horizontal org chart. This type of organizational structure chart has few or no middle management levels, usually top administrators and workers. Workers in these companies take on more responsibility and help make decisions.

This setup is typical in small companies or start-ups where quick decisions and flexibility are key. A flat organisation encourages open communication and teamwork, increasing employee engagement and satisfaction.

3. Matrix organisational chart

The matrix org chart format  is complex, mixing both vertical and horizontal structures. It’s used when people have more than one manager. For example, a team of graphic designers might report to the head graphic designer. But, if they work on other projects, they might also report to a different project manager.

So, a graphic designer could have two managers. This setup allows for flexible and dynamic teamwork, making using resources on different projects easy. However, it can also cause confusion and conflicts over who is in charge if it needs to be handled better.

4. Divisional organisational structure

A divisional structure groups activities by product, service, location, or market. Each division acts independently with its resources. This structure focuses on specific areas for better efficiency and agility. It suits companies with many products and markets, allowing quick response to market changes. However, it can lead to resource duplication and less efficiency.

5. Network Organizational Structure

The network’s organisational structure is flexible and dynamic. It’s different from traditional models because it uses small, multidisciplinary teams. These teams work independently on specific goals or projects without much direct oversight. This allows them to adapt to new challenges or changes in the market quickly.

This approach is suitable for industries needing fast innovation and agility. It helps with collaboration and speed by reducing bureaucratic hurdles. Network organisations can use technology and a shared vision to use resources quickly, share knowledge, and meet their goals with flexibility and quick responses.

Different Organization Types

Pros and Cons of Different Organization Types

Vertical organisational chart (hierarchical org chart)

Pros:

  • Clear lines of authority and responsibility.
  • Easy to implement and understand.
  • Provides a sense of stability and order.
  • The decision-making process is streamlined.

Cons:

  • Communication between different levels of the hierarchy can be slow.
  • Creativity and innovation may be stifled.
  • Employees at lower levels may feel disengaged or undervalued.
  • This may lead to a rigid and inflexible work environment.

Horizontal organisational chart (flat org chart)

Pros:

  • The employees are more independent and responsible.
  • Employees can communicate and interact better.
  • New ideas or practices are implemented faster, with less risk of error.

Cons:

  • Lack of supervision among employees.
  • There could be confusion around reporting procedures.
  • Lack of specialised skills among employees.
  • The system needs to scale better as the company grows.

Matrix Structure

Pros:

  • Allows for cross-functional collaboration and knowledge-sharing.
  • Employees can work on multiple projects and gain a variety of experiences.
  • Increases flexibility in responding to changing business needs and customer demands.
  • Efficient use of resources as employees are shared between different projects.

Cons:

  • This can lead to confusion and conflicts regarding roles and responsibilities.
  • Requires effective communication and collaboration between functional and project managers.
  • It can be time-consuming and complex to manage.
  • This may result in slower decision-making processes as multiple managers must be consulted.

Divisional organisational structure

Pros:

  • Provides more focused attention on product lines or markets.
  • Each division can operate independently and respond quickly to market changes.
  • Encourages innovation and creativity within each division.
  • Easier to measure divisional performance and profitability.

Cons:

  • Duplication of functions across divisions can be costly and inefficient.
  • It is challenging to maintain consistent corporate culture and communication across divisions.
  • This can lead to internal competition and conflicts between divisions.
  • This may result in inefficiencies due to a need for economies of scale.

Network organisational structure

Pros:

  • Helps understand how different types of employees and third parties do their jobs.
  • Makes departments and locations more flexible and quickly adjust to new situations.
  • The network helps with communication, working together, and developing new ideas throughout the organisation.
  • Large companies can still have transparent workflows and hierarchies in this flexible setup.

Cons:

  • It can be hard to manage work outside the office, especially with different teams or people.
  • It might be unclear who makes the final decision, leading to confusion.
  • setup might not fit well with traditional managing and working methods, requiring new ways to lead and solve problems.

Importance of Organizational Chart

Having a visual representation of the organization’s structure also has an impact on a couple of other factors:

  • Reporting: Org charts show who reports to whom in a company. They guide how work should be done and ensure everyone knows who to report to. Having one manager with a few direct reports helps keep things clear. In big companies, employees need to know their manager when they need help with complex problems. It’s better to ask for help early than to wait. A transparent communication chain makes spreading messages easier and avoids misunderstandings.
  • Impact on long-term planning: Charts make it easy to spot if an employee or team might become a bottleneck. Looking at the org chart, you can quickly see if someone has too much responsibility. This allows you to plan for backups in case of a breakdown. Planning for these situations is crucial for keeping the business running smoothly.
  • Restructuring: For small companies or growing startups, growth is inevitable. As they grow, they often need to reorganise. Employees might move between teams or departments based on their skills. The chart with employee skills makes it easy for management to reorganise and create new teams with the right skills.
  • Alignment of goals: For a company to succeed, everyone must be invested in its vision. They should work together to achieve this. The OKR goal-setting method suggests aligning goals across the organisation to meet company objectives. This approach is critical to its success and popularity.

How to Make an Organizational Chart?

Creating an org chart is about a clear layout and design. Follow these best practices to make an effective org chart template that you can use continually:

  1. Keep the chart on a single page: Use a mix of horizontal and vertical arrangements to fit as many boxes on one page. Horizontal-only layouts make the chart too wide.
  2. Group the duplicate titles in one box: Save space by putting individuals with the same job title in one box. It makes the chart easier to read.
  3. Use uniform box sizes and spacing: Making all boxes the same size and spacing them evenly looks neater and more professional. Choose org chart software that does this automatically.
  4. Indicate assistants with a sidebar below the manager: Show assistants’ boxes branching off from their manager’s line. It clarifies their role and reporting structure.
  5. Put job titles before names: Almost all great organizational chart examples position title before the person’s name. This is a good practice because it makes it easier to update personnel changes.
  6. Show managers with two titles in separate boxes: If someone has two roles, use two boxes for clarity.
  7. Use dotted lines for complex relationships only: Dotted lines can show unique relationships, like an assistant working for multiple managers. Use them sparingly to avoid clutter.
  8. Create charts automatically with employee data: Use organizational chart maker to import employee data for quick creation.
  9. Add hyperlinks for more information: In digital charts, link to additional information like email addresses or job descriptions to make the chart interactive and more functional.

FAQs

What is the most popular organisational chart?

The most common chart design is the hierarchical one. It shows relationships in a tree structure. The highest authority is at the top and branches down to subordinate staff organized by their departments or functions. This chart clearly shows the chain of command and is known for its simplicity. It makes roles, responsibilities, and reporting relationships clear.

What is another name for the organisational chart?

The organisational chart, also known as the “org chart” or “organisation chart,” shows the hierarchy and relationships within an organisation. It’s sometimes called the “hierarchy chart” or “structure chart,” showing who reports to whom.

What does an organisational chart not show?

An organisational chart shows the structure of an organisation, including roles, responsibilities, and who reports to whom. However, it doesn’t show informal communication that happens within a company. It misses the complexity of human interactions like mentorship, informal networks, or how well departments work together.

It also needs to reflect how relationships in an organisation can change or show the real power and influence someone might have that doesn’t match their official position. It doesn’t tell you about the company culture or how good employee relationships are.

What should be included in an Organisational chart?

An organisational chart shows the structure of a company. It lists people’s names, titles, and where they stand in the company hierarchy. The chart also shows how these individuals are related to each other. It goes from the highest management levels down to the entry-level workers. The CEO or President is at the top.

After them come the senior executives, then the middle managers, and at the bottom are the team members or staff. The chart includes different departments and divisions along with their leaders. Besides names and titles, the chart can show photos and contact information. If it’s digital, it might have hyperlinks to detailed profiles or professional bios.

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