An organizational chart is to a company what a skeleton is to a person. Instead of bones providing the structure and ligaments connecting the bones, boxes denote different job titles and simple lines show the direct and indirect reporting relationships that connect them. Even though org charts vary widely in form, the function remains the same: to show the lines of authority within an organization.
While an organizational chart illustrates company structure, it also reflects the business’s core values and management philosophy. Whether it’s a flat line or a tall pyramid, your org chart can say a lot about how a company responds to challenges and creates opportunities.
Here’s what an organizational chart is, how to use one, its main benefits, and the different types you might adopt.
What is an organizational chart?
An organizational chart, or org chart, is a diagram that outlines the internal structure of your company. It identifies various roles and departments and illustrates the reporting relationships that link them together.
The chart serves as a reference for employees to understand the hierarchy and how different parts of the company fit together, providing a clear, visual guide to supervisory relationships and team organization. It visually represents the chain of command, typically with C-suite executives at the top, upper management directly below, and entry-level positions at the bottom.
How are organizational charts used?
- Improving communication
- Clarifying roles and responsibilities
- Planning
- Managing growth
- Restructuring
Organization charts are graphic methods for an organization to illustrate its internal architecture and define formal relationships. Here are some practical reasons to use org charts:
Improving communication
An organizational chart can improve communication within and across your different departments. It clearly delineates the reporting structure so employees—from your marketing team to middle management—know precisely who to contact for specific information. This is especially important in larger organizations where individuals may report to more than one manager, making clear lines of communication vital.
Clarifying roles and responsibilities
Your organizational chart—whether a traditional hierarchical org chart or a modern flat org chart—ensures that each company member knows their duties and how to relate to others. This awareness helps prevent task overlap and confusion, byproducts of employees being unsure of their position within the company structure.
Org charts are especially useful for new employees during onboarding, helping them understand their roles, who they report to, and how they fit into the larger org structure. Knowing who to consult for specific questions helps new hires quickly integrate into their teams.
Planning
Org charts are critical in planning and decision making—particularly in traditional company structures where decisions are made in a top-down fashion. Charts help project managers and other key decision-makers visualize their organization’s hierarchy, promoting strategic decisions that consider the necessary stakeholders’ input.
Managing growth
As your employee roster expands, so does the need for an organizational structure. Org charts help larger organizations manage growth by clearly mapping the existing org structure and highlighting potential for new roles or team groupings. This enables strategic planning for expansion that aligns with the organization’s goals and preserves operational efficiency.
Restructuring
Organizational charts are invaluable during restructuring, providing a visual representation of the current and future company structure. They facilitate communication of new formal relationships and reporting lines, ensuring smooth transitions and that personnel at the same level or in different teams understand new dynamics. These charts can also help maintain order and morale as the organization undergoes change.
Types of organizational charts
- Hierarchical organizational chart
- Flat organizational chart
- Matrix organizational chart
- Divisional organizational chart
There are several types of organizational charts, each with unique advantages and challenges. Choosing the right chart can influence management style, employee engagement, and the overall efficiency of your organization:
Hierarchical organizational chart
Hierarchical org charts resemble a family tree, with the highest authority at the top—usually the CEO or another executive—branching down into successive levels of management and employees. Each individual or department reports to the one directly above it, creating a clear, tiered structure.
Pros of this chart include:
- Clear chain of command. Each employee knows to whom they report, simplifying communication processes.
- Defined structure. It’s a structured and straightforward layout that’s easy to understand, making it the most common type among many organizations.
- Scalability. It can be easily scaled as the organization adds new layers or departments.
Cons include:
- Potentially slow decision making. A hierarchical organizational chart can slow decision making, as it often requires multiple levels of approval, leading to potential bottlenecks and increased bureaucracy.
- Risk of siloing. Departments may become insulated and focused exclusively on their goals, limiting opportunities for collaboration.
- Less autonomy for employees. Those lower down the hierarchy may feel they have less power and autonomy in their roles. Additionally, the upward mobility of innovative ideas to decision-makers can be notably slower.
Flat organizational chart
A flat organizational chart, sometimes known as a horizontal organizational chart, depicts an organization with few or no levels of middle management between staff and executives. It’s characterized by a wide span of control, with employees enjoying a high degree of autonomy.
Pros of this system are that it:
- Encourages employee involvement. Employees often have more responsibility and are involved in decision making, which can lead to increased job satisfaction and employee retention.
- Increases speed of decisions. With fewer levels, decisions can be made quickly and with less bureaucracy.
- Encourages teamwork. The lack of hierarchy can encourage a more collaborative environment with more lateral relationships.
Cons may involve:
- Overwhelming managers. With a broader span of control, managers may become overburdened with the supervision of too many employees.
- Confusion. Without clear hierarchies, employees may be unclear about their roles and responsibilities.
- Limited growth opportunities. Employees may find fewer opportunities for upward career progression.
Matrix organizational chart
A matrix organizational chart displays an organization where individuals report to more than one manager, typically to both a functional manager and a product or project manager. This dual-reporting structure combines the benefits of hierarchical and divisional org chart models.
Pros of this system are:
- Dynamic team allocation. A matrix organizational structure allows for efficient resource allocations, enabling employees to be flexibly assigned to various projects based on changing needs and priorities.
- Emphasis on project success. Businesses that focus on short-term projects or services can benefit from the adaptability that a matrix structure affords.
Cons include:
- Complex reporting lines. Employees may struggle with reporting to multiple managers, which can create conflict or confusion. The dual authority can also lead to power struggles between project and functional managers.
- Resource competition. Projects may compete for the same resources, which can be challenging to manage.
Divisional organizational chart
The divisional organizational chart is structured around separate divisions or units that operate semi-autonomously—often based on product lines, geographic markets, or other distinct operations. Each division generally has its own resources and functions like a self-contained company.
Pros of the divisional structure include:
- Focus on specific markets or products. Divisions can concentrate on specific areas without being affected by others, allowing for specialized strategies.
- Responsiveness to change. Divisions can be more agile and responsive to specific market changes.
- Potential for greater creativity. The more autonomous nature of divisions can foster innovation and creativity, enabling them to focus intensely on their specific products or services, and encouraging innovative approaches tailored to unique market needs.
Cons may involve:
- Duplication of resources. Each division may require its own support functions, leading to inefficiencies.
- Risk of internal competition. Divisions may compete against each other for resources and corporate attention.
- Challenges in maintaining cohesion. Ensuring all divisions align with the company’s overall strategy can be difficult.
Organizational chart FAQ
What are the four types of organizational charts?
The four main organizational structures include hierarchical org charts, flat org charts (or horizontal org charts), matrix org charts, and divisional org charts.
What is the most effective organizational chart?
The effectiveness of an organizational chart varies based on your business’s needs and size. You might opt for a hierarchical organization chart if your business is new and requires a clear chain of command. As your company grows to encompass multiple retail locations, you may benefit more from a divisional structure.
How do you create an organizational chart?
You can create an organizational chart by using online org chart tools, which provide organizational chart examples and templates to help visualize your company’s top administrators and lower-level employees.