What is an Organization Chart?

An organizational chart (also known as an org chart) is a document that visually represents the internal structure of a company. How the chart is arranged depends on the specific structure of the business.

However, most charts use labeled boxes, straight lines, and 90-degree angles to show relationships or chains of command. In some cases, the boxes may include names, photos, or contact information.

4 Types of Organization Charts Used by Businesses

Not every business has the same internal structure. Because of this, there are different types of organizational charts to represent these diverse business structures. Here are the four most common types of organizational charts that businesses use to show how an organization works.

1. Hierarchical

The hierarchical organization is still one of the most common internal structures companies use. Generally, the highest-ranking roles are at the top of the chart, while entry-level roles are at the bottom. Each role in between is at a different level based on seniority.

For example, the CEO of a corporation would likely be placed in the top box, followed by C-suite executives who report to the person in that role. They would then be senior vice presidents, directors, managers, full-time employees, and part-time employees.

2. Flat

Sometimes referred to as a horizontal organization chart, flat charts are mostly used in companies where middle management is minimal or nonexistent. Some organizations, including companies like Facebook,  are moving toward a flat structure to decentralize decision making and empower employees  .

This type of organization treats employees as equal contributors who have a great deal of autonomy and responsibility. This means that the organization chart will usually only have one or two levels.

3. The Matrix

This structure is much more complex than the other and usually applies to businesses with cross-functional teams with multiple managers or employees working on multiple projects. The CEO and senior management officials will still appear at the top of the chart.

Managers will appear below them, and team members will appear below those managers. Vertical lines will then connect those team members to the other managers they report to.

4. Departmental

As its name suggests, this type of organization chart is used for organizations that operate with separate corporate divisions. These divisions may be geographical or based on separate businesses under the same legal entity.

Some organizations also divide teams based on the product they are responsible for. In the departmental organization chart, the CEO will still appear at the top. Again, each department will be arranged hierarchically in its own separate column.

How to Create an Organization Chart in 5 Steps

Creating an organizational chart is not difficult. However, it does require a little preparation. Here are five steps you should take to create a useful organizational chart for your company.

1. Set objectives

The purpose (or who) you want to use the organization chart for will determine how it will be structured and what will be included in it.

Here are some questions to ask:

• Is this something you want to give new employees when they’re onboarded, so they know who to contact with questions?
• After the reorganization, do you want each department to know how the new internal structure works?
• Who will be responsible for maintaining and updating the organization chart?

The answers to such questions will determine the type and number of charts you need.

2. Find out who's who

Before you can create a workable organization chart, you need to know who will be included in it and what their role will be in the organization. If you have old organization chart examples from previous years (and there have been no major changes to the internal structure since they were published), you can use them as a starting point.

If not, you will need to check all employees in the system and include their roles or ask someone for help. If you plan to include specific names, photos, and contact information, you should collect that information in this step.

Make sure all names are spelled correctly and contact information is up to date, especially if a particular employee has recently changed roles or departments.

3. Choose a platform

Creating an organization chart using an app is much easier than creating one by hand. If you  use an HRIS application like HRMantra  , it's best to use a platform that allows you to import and synchronize your HR data.

These types of software integrations will ensure that creating your chart is easy and accurate. They also make it very easy to include photos and contact information in each box.

4. Consider a template

Using an organization chart template can be a great way to help you figure out how to structure your document. When looking for the best template to use, make sure you choose a template that aligns with the way your organization operates. For example, you wouldn't want to use a flat organization chart template for a company with a hierarchical structure.

5. Update as needed

All organizations change. Sometimes, the entire internal structure changes due to the changing sentiment of employees or the CEO. Other times, it's simply a matter of people getting promoted, making lateral moves, or retiring from the company. Whatever the reason, you need an easy way to keep the organizational chart updated.

Creating an organization chart on a digital platform can help you do this easily. If the software integrates with your  HR management software  , you may be able to create automatically updated charts that you can then share with your employees when things change.

Using Organization Charts Effectively

Organizational charts aren't just nice to look at - they have a variety of functional uses in almost every company. Here's what they can do for you:

•  Assist with  internal communications , especially when charts include contact information.
• Help new employees get acquainted with their team and where to go for assistance.
• Improve operational efficiency by showing employees how teams work together.
• Provide a visual representation of roles to  assess  skills gaps and hiring needs.
• Show how changes (such as promotions) will affect the organization.
• Providing information on roles and chains of command to regulatory bodies.
•  Assist with  succession planning to identify who is ready to take over leadership.
• Identify opportunities for collaboration or cross-training.

You shouldn't keep your organization charts locked away in a binder, never to see the light of day. Put them to good use to help your employees connect with each other, get support, and better understand your organization.

Limitations of Organizational Chart

Organizational charts are excellent for facilitating communication and helping people understand how all the different parts of an organization work (or should work) together. However, they do have some limitations. There are several issues you should be aware of when creating your organization chart:

• Accuracy over time:  Org charts will quickly become outdated if employees frequently change roles. Org charts need to be updated frequently or find an automated solution that provides automatic updates based on your HR data.
• Context missing:  Informal reporting structures will not be captured on a data-driven organization chart.
• Social nuances: Employees   must develop a nuanced understanding of  team and company culture so they know how to communicate and collaborate well.

Although you should keep these limitations of organization charts in mind, they are still excellent tools for communication and organization, no matter the structure of your company or chart.

Why Organization Charts Are Important for Businesses

Organization charts are important because they provide a visual snapshot of the organization that holds real value for many employees. They help new employees get used to the environment and find help when needed. They also help experienced employees collaborate and connect their roles to the larger mission of the company.

For HR professionals, organization charts are an indispensable tool for understanding what resources you have, what you'll need later, and how even the smallest changes can impact your strategic goals. In this way, organization charts are more than lines, boxes, and job titles - they're a window into how your organization works and a way to help you plan for how it might work in the future.