What is an Organizational Chart?

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?

Well, an organizational chart (org 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. Org charts show the relationships and relative ranks of positions within an organization.

In short, an org chart allows both insiders and outsiders to understand, at a glance, how a company operates. Businesses have leveraged org charts for decades because they offer many benefits.

The primary function of an org chart is to provide clarity on a company's organizational structure. It's an intuitive, high-level overview of the workforce.

Organizational charts reveal:

• Reporting relationships – Who reports to whom
• Chain of command – The flow of authority from executives to managers to employees
• Spans of control – How many direct reports do managers have

With a quick scan of an org chart, you can grasp the basic framework of a business. This helps employees navigate the workplace and coordinate cross-departmentally.

Who Uses an Org Chart?

Org charts have a diverse range of users within an organization. Here is a breakdown of the key stakeholders that utilize org charts and how they specifically benefit from them:

Executives and Leadership

Executive leaders analyze organizational charts to support high-level decision-making:

• Corporate Restructuring: Executives rearrange business units and departments to align with growth plans.
• Budgetary Planning: Funding gets allocated to functions and teams based on strategic priorities shown in the org chart.
• Growth Readiness: Executives assess strengths and gaps in the org chart to prepare for scaling up.
• Investor Relations: Leadership presents org charts to investors, shareholders, and the board when seeking capital for expansion.

Human Resources

Human Resources utilizes org charts in a variety of ways:

• Onboarding: HR provides new hires with org charts to help acquaint them with the organizational structure and key leaders.
• Career Mapping: HR reviews org charts with employees to show potential career progression paths within the company.
• Succession Planning: By analyzing gaps in the org chart, HR can identify strategic roles to prepare successors for.
• Title and Compensation: HR uses org chart hierarchies to benchmark jobs and ensure internal equity in titling and pay.

Managers and Team Leads

For managers, org charts offer valuable insights:

• Understanding Span of Control: Managers can review their team size and budget resources using the org chart.
• Identifying Partners: Cross-functional partnerships get formed more easily when managers can spot peer roles in other groups.
• Staffing and Recruitment: Org charts help managers identify headcount needs on their teams.
• Onboarding: Managers use org charts to introduce direct and indirect reports to new employees.

Employees

For individual contributors, org charts provide valuable perspective on the organization:

• Understanding Reporting Lines: Employees can see their manager, skip-level manager, and executive leadership in the hierarchy.
• Identifying Mentors: Employees might connect with a more senior peer in their department to find a mentor.
• Seeing Career Paths: By viewing vertical and lateral moves, employees can map out potential promotions.
• Building Connections: Org charts help employees identify cross-functional partners to collaborate with.
• Learning Terminology: Employees get familiar with internal names for teams, functions, and departments.
• Addressing Issues: By spotting their manager in the org chart, employees know who to approach with questions and concerns.
• Onboarding: New hires use org charts to put names to faces and navigate the organizational landscape.
• Watercooler Talk: Org charts feed the workplace grapevine in terms of gossip and perceptions around favoritism.

In essence, if you have any stake, large or small, in the organization, there is likely some benefit you can glean from an org chart. It crosses functional barriers and can serve the needs of diverse interest groups. From the mailroom clerk to the board director, organizational charts offer insight into the company's operating structure.

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.

Read Next: The Benefits of Organizational Charts