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Once your business reaches a certain size, an organizational chart is a must. Even if you have 10 or fewer colleagues, an org chart is essential to documenting your operations and processes.
An organizational chart is crucial for
- Accountability
- Transparency
- Streamlined workflows
- Organized reporting
If your business is new to organizational structure, figuring out how to build an organizational chart for the first time can feel a little overwhelming. When trying to create your company org chart, you may realize you have murky reporting relationships, or people who have more than one manager. Not to worry — through the process of making an organizational chart for your business, not only will you clarify your reporting structure, but you may also find opportunities for efficiency that you hadn’t seen before.
How to make an organizational chart that helps your company’s work flow better
When building your first org chart, it’s a good idea not to rely on preconceived notions based on how your company is currently operating. Oftentimes, companies without a clear organizational chart have inadvertently created ‘unicorn seats’ where one person is responsible for a variety of functions. Other issues could include confusing processes and relationships between departments, and unclear roles in project-focused settings.
When creating your org chart, start with the following considerations.
Relations between divisions
You should clarify the relations between your different departments and the roles you currently have. Does it make sense for your HR roles to report up into your finance function, or is it headed by a role that should be reporting directly to the CEO?
Functional-based roles
Begin by taking a step back and looking at the big picture. A good starting place could be major company functions that filer down into individual roles. To avoid recreating unicorn seats, focus primarily on the function of a role, not the person who currently sits in it. Think about the ideal way for your company to run. Would it make sense for one person to lead and report up to the CEO about both sales and marketing, or do you think you need two people and departments to cover all your bases? Your current business needs and areas of stress should help guide you to building out the roles.
Employee workloads
After you’ve built out the chart without the people, it’s time to analyze it. This is the time to see if employee workloads are too light or too heavy. Review the draft you have of your org chart with your leadership team, and see where the gaps are. If you have someone working multiple roles and/or reporting to multiple managers, or someone floating around that doesn’t slot neatly into the roles you’ve created, figure out the best fit. Don’t let perfect be the enemy of the good — your first go at a company org chart will likely need time, feedback, and revision before you get it perfect.
Career succession and development
One critical component of any organization is employee engagement, and crucial to employee engagement is a sense that an organization offers a possibility of growth. Ambitious employees will want to know that there’s a path to advancement, as the company grows or as people move on. An organizational chart helps visualize for people what their career future could be.
What type of org chart should your company use?
The structure of your org chart depends on factors like your company’s size and the kind of work you usually take on.
Hierarchical org chart
This is one of the most commonly recognizable org charts. A hierarchical org chart mostly makes sense for larger organizations that have multiple layers of management. It shows a chain of command cascading down from the CEO to individual contributors.
Flat org chart (aka a horizontal org chart)
A flat org chart makes sense in smaller companies that have fewer departments and fewer layers of management. Horizontal org charts (and the smaller companies that use them) are typically composed of roles that require highly experienced employees who can serve as an entire ‘department’ that reports up to the CEO, with one or two individual contributors or contractors below them.
Matrix org chart
Matrix org charts are good for companies that have a need for multiple project managers. For example, consider a marketing agency that serves SMB clients. Other than business development, which the CEO heads, most of the work is client and project-based. Each project would have a project manager, and individual contributors from a variety of departments, like account managers from the sales department, writers from the branding department, and video editors and graphic designers from the creative department. The individual contributors would report up to their head of department, and also to the project manager spearheading their project.
Matrix org charts can be balanced, where individual contributors report equally to their department head and their project manager, or a strong matrix chart, where the project managers are the primary drivers.
How to use an org chart
Once you have your org chart, get it into circulation with your organization and solicit feedback. An org chart shouldn’t feel set in stone, but like a living document that evolves with your company and your people. It is a vital part of your ongoing business operating system.
Once your org chart is complete, you can put it to use right away.
You can use it to manage:
- Employee onboarding: a good org chart will help you create accurate job descriptions, qualify candidates, and get new employees up to speed on their responsibilities and team structure.
- Company evolution: when business grows or contracts, an accurate org chart will help you quickly identify the gaps you should prioritize filling, or the places where you can streamline for efficiency.
- Communication and collaboration: an org chart gives each person on your team clarity on their go-to person for issues and ideas.
Build an org chart that grows with your business
Ready to build an org chart that streamlines your business operations? We have a free google sheet template for organizational charts.
It includes a:
- Hierarchical org chart template
- Flat org chart template (aka horizontal org chart template)
- Matrix org chart template
Enter your email below to grab the free template!
