A Complete Guide to Making an Organizational Chart

How to Create Organizational Charts for Business

Most companies use organizational charts; these are diagrams that exhibit the links between its employees from top management to regular staff. Organizational charts are primarily used by small and big scale companies, governments, and other organizations - both local and international.

Creating an organizational chart without a plan can be challenging. Make plans and strategies whenever you create org charts, as this will guide you to find the most suitable and appropriate chart for your needs. The main idea of organizational charts is to show the layout of the internal structure of a company. Charts like these can help employees to know which high positioned employees they should report or contact. It can also function to give the staff information on job vacancies for promotion.

Role of the Organizational Chart in Modern Business

Specified as a graphical representation of the employees’ roles, responsibilities, functions, and connections, an organizational chart is the most simple way to exhibit the flow of the company. 

Organizational charts can help most employees, especially the Human Resource department, because they can quickly show the composition of the company staff and how they will adjust its functions to have a better development. The finance department can also use org charts to budget the activities that may take place within the year and avoid non-essential expenses.

In addition to this, org charts can enhance communication because connections in each department can be seen immediately. Since the organizational charts have basic information such as the name, position, and contact details, communication will be easier and more convenient. Furthermore, specifying the roles in the organizational chart will help the employees know their responsibilities and make them accomplish high-quality work output.

Brief History of Organizational Charts

The first-ever modern organizational chart was designed by a railway general superintendent named Daniel McCallum in 1855. With the help of a draftsman and civil engineer named George Holt Henshaw, McCallum created a diagram exhibiting the org chart of the New York and Erie Railwayone. 

After more than 50 years, the term “organizational chart” became common. One of the famous consulting engineers named Willard C. Brinton used it in his textbook way back in 1914 entitled “Graphic Methods for Presenting Facts.” He presented how organizational charts are valuable and should be utilized more. In the 1920s, the org charts became useful and widely used by engineering circles when they started to make their way in the world of business.

In the 1960s, org charts were called “Organigram” and “Organogram.” One related or org chart diagram is called “Organigraph,” which is less linear and has a different purpose from the organizational chart. 

Benefits of Having an Organizational Chart

The human resource department has been known as the org chart creator in the company because it’s the department that keeps track of all the personnel. It’s essential that every employee and member of the company has a copy of the updated org chart, and it’s usually distributed in the onboarding process for new hires. Having an organizational chart will help your employees know their roles and responsibilities to function productively and efficiently.

The strength of the company can be easily seen in an organizational chart. The chart can also indicate the job vacancies and if someone from the company can be promoted to a higher position to have more entry-level positions available for the business growth.

1. Potential Investors

Companies that have corporate organizational charts can have more potential investors or shareholders. It is helpful to have org charts because investors can easily see who makes up your company. Introducing them to the leadership team using your organizational chart is one way to help them know the composition of talents, skills, and experience that leads in your organization. Having charts will ensure them that their investments and shares in your business are in good hands.

2. Commands

Making a functional and productive company is the key to its success. Ensuring that your employees understand the flow of command through organizational charts is efficient. The function of org charts in companies is very important because it helps the whole company process properly from planning, approval, and decision-making. 

3. New Hires

Having an organizational chart included in your onboarding process is also needed. Helping your new hire employees to get to know the people in your company from top management, senior employees, various departments, and other staff within the organization is important to make them feel welcome. The org chart will also make them understand their role and function to the company and how they will behave themselves to fit their role.

4. New Changes

Companies can change quickly, and they can either grow or sink. Having organizational charts will help your employees understand the changes within the company. The composition of your employees may change at any time because of various reasons such as promotion, team or department transfers, newly appointed executives, and more. Changes like these can be seen immediately in an organizational chart from leadership, responsibility, and managers.

5. Communication

Utilizing organizational charts in your company can improve communication significantly. Nowadays, the org charts are designed and structured depending on the values and philosophies that the company upholds. The hierarchy, connection, inclusiveness, and many other concepts can be seen easily by using an organizational chart.

Five Elements of Organization Charts

Business organizational charts are diagrams that show the layout of a company - whether it’s big or small. Most companies are using charts like these to tell the connection between the employees. Using organizational charts is useful, and it can be more convenient if appropriately utilized. Here are the five elements that you need to know before choosing which structure fits your organization.

1. Specialization of Work

Organizational charts will depend on the work specialization of your employees. Having to know the specialization of work of your employees will measure the assigned tasks to each person since the entire work cannot be done by only one. The element of work specialization is significantly important for the workload distribution in an organization.

2. Division of Departments

Categorizing work activities are common in most companies. The division of departments is efficient and helps the development of the company. That’s why choosing the most suitable structure for your organization is vital.

3. Command Flow

Due to large companies that have a top-down line of power, the layout of its function is important. There are three concepts of the command flow.

• Authority - It is the right of the top management to instruct its employees to produce high-quality works.
• Responsibility - It is the low-level employees’ obligation and duty.
• Centralized Command - Avoiding confusion and disorder is important in an organization; that’s why the management should make every employee report to only one manager.

4. Control Range

The element of control range specifies the number of employees that managers can handle and how many divisions can be made up in the organization. Having this element will determine the whole layout of the org chart.

5. Formalization

The formalization element in organizational charts refers to the standardized function of the employee and behavioral guide.

Areas of an Organizational Chart

The organizational chart is composed of different managers and employees who make up the organization. The org chart also functions to show the connection between various staff and departments in the company. Connection, communication, and collaboration will be easier with the use of the organizational chart. Having an org chart in the company will help the continuous growth and betterment of it.

1. Line

The line is the direct connection between the superior and employees. Considered one of the ideal charts and has been used for quite a while now, it exhibits the link of employees and which person they will be reporting. The line identifies the authority clearly and its responsibility at each tier. Communication is easy, and things will be done faster; that’s why it’s the most ideal.

2. Lateral

The lateral is the relation between various departments on the same level of management. It shows the link between several employees in various departments with the same job description. The flow of communication in lateral is by its department.

3. Staff

The staff is the link between a line manager and assistants. Organizations like this are usually used by large-scale companies. The line manager functions are the one responsible for the accomplishment of projects, and the assistants are the one that helps them to accomplish the objectives of the projects effectively. There are three divisions of staff, and these are:

• Personal - A personal staff can be a personal assistant or an adviser. The main function of personal staff is to help the line manager in all aspects of the project to achieve it. They are usually the ones who make executive appointments, arrange schedules, and manage any personal or business matters.
• Specialized - A specialized staff is the one who is knowledgeable in specific fields. They are the ones who are responsible for the betterment of the company, and using their expertise in the specific field should benefit the organization.
• General Staff - A general staff functions as the helping hand of the chief executives. They often serve as a planner, adviser, coordinator, strategist, and coach. The general staff is important, especially when there’s a change in the top management or having the two departments handled by only one manager.

4. Functional

The functional is the relation between specialized positions and other staff. Normally, the specialists have the authority to direct the line manager so that they will implement various instructions. Functional makes each worker receive instructions from multiple specialists, and the scope of their job is limited, but the authority is unlimited. 

5. Project

The project is the connection between employees who work temporarily on a specific project. Various departments can be included in the project, such as engineering, quality analyst, marketing, research, and production. These specialists will eventually go back to their respective departments after the project. 

Types Of Organizational Charts

An organizational chart structure is important. You can use various structures depending on the scale of your company and how functional it can be for your organization. Here are some of the structures that are being used by various industries nowadays.

1. Hierarchical Structure

The most popular organizational chart structure is hierarchical, where employees are being grouped up and have only one supervisor. There are three factors that make up the hierarchical grouping. 

• Employee’s Function - Various roles can be present, especially in large companies. Making the group depending on their function is one of the factors of the hierarchical structure.
• Location - Employees in big scale companies often group their employees depending on their geography. If the company is local, they can be based on the region, and if international, they are based on countries.
• Products - If the company holds various products or services, employees are often grouped depending on the product or service.

2. Matrix

The matrix structure of an organizational chart is way too different from the hierarchical one because the connection in the chart is set up in a grid. Structures like this make the organization employees who have similar skills team up with their projects, which causes a lot of managers to report. 

One example of a matrix structure is where engineers may be under engineering and directly report to their manager. Still, they can also be appointed to work on other projects and may report projecting managers. Having this type of org chart will make the engineers report to multiple managers.

3. Horizontal

Start-up and small-scale companies often use horizontal or flat structures for their organizational charts. The main point of the flat structure is to eliminate most of the roles in middle management and make the employees more independent in making decisions. Structures like this one only work well with small businesses and can’t be used in large companies with many employees and projects. 

4. Network

The network structure in organizational charts can be helpful in a way that it can visualize internal and external relationships between the middle management and the top-level ones. Structures like this are not hierarchical, but they can be more decentralized and flexible than the other ones.

Network structures can be more complex than other structures. However, if you want some advanced type of structure with open communication that connects with your partners and has more control over the flow of decision-making, you can use it. 

5. Divisional

Companies with a divisional structure in their organization have an independent operational flow, which makes it the main advantage because other divisions won’t be affected if one division has failed. However, separating the specialized functions in an organization can cause operational inefficiencies, and taxes in accounting can be high on this type of structure.

Organizational structure such as this one has its division corresponding to their category, whether in their products or location. Each one contains the important resources and functions to support the organization’s product line and location.

6. Line Organizational

One of the simplest structures of an organizational chart is the line organizational structure because of its top to bottom flow. Organization structures like this have no services in terms of specialization and support. An organization that uses the line organizational structure can be more independent in its decisions, and the line officers control the chain of command in each department. Structures like this one are very well-known to bring stability to the organization because they have effective communication.

7. Team-Based

The team-based organization structure is made up of various teams that are working hard with a common goal of the company at the same time with their tasks. Teams like the team-based ones have lessened the hierarchical status and are more flexible because of their structure in terms of few things such as decision making, teamwork, and problem-solving aspects.

Using structures like the team-based on your org charts is the modern way of running a business. They became effective and helped to change a lot of industries in many ways. The companies' acceptance of globalization has allowed all industries to produce high-quality goods and services worldwide cooperatively.

What Tasks Cannot Be Solved With The Organizational Chart?

Even though organizational charts have been useful in a lot of aspects for work accomplishment and company development, org charts can’t be used by everybody. Problems may arise after your creation of organizational charts, and here are few things to take note of.

Out of Date

Organizational charts tend to become out of date quickly because of the constant change happening in the company. Large-scale companies often experience this limitation. That’s why online org charts are being utilized in the modern approach of businesses. However, online charts can also be outdated if not updated regularly. Finding the best organization chart software is the first thing to do if you want to create an up to date fully functional chart. 

Formal

Formal relationships are the only connection that the organizational chart shows. Any informal relationships or social ones that are happening in the company are not included. Informal channels in the company are a vital part of any organization that’s why failure to acknowledge them can be a problem in the aspect of communication. Limitations to these can be a problem for the future development of the organization.

Sudden Change in Management

Senior employees in the company tend to settle down with their long-term habits in the company. However, sudden changes in the top-level management can be a hindrance and may bring problems to the organization. Unfamiliarity with the structure and new faces of managers, supervisors, and executives can make senior employees uncomfortable. Nonetheless, adapting to sudden changes like these should be one of the skills of your employees. However, the adjustment period can be a little longer. 

No Management Style

Management styles are not reflected in any organizational charts. The function of the org chart limits to show how the top management exercises their authority, and only their roles are being shown. Management styles are important in the company for the productivity of the employees. Various people in high positions use multiple management styles to lead efficiently. However, these styles, unfortunately, cannot be seen in an organizational chart.

Department Loyalty

Employees tend to be loyal to their departments, and creating various divisions in the company may result in conflict. One example of this is the accounting department not approving credit terms of the new customers, and the sales department may have a problem with this matter. Departments in the company can be a little competitive, and it might cause communication problems that may affect the overall function and productivity of the departments involved.

The Common Algorithm in Organizational Chart Creation

Knowing the common algorithm in creating the most suitable organizational chart for your company is important. Laying out org charts is useful in many aspects because it shows the connection between your departments and employee’s function. Making an organizational chart will help the communication in your company be more efficient, and employees will be more productive.

Main Purpose and Goal

Knowing your purpose for making an organizational chart is important. You can ask a few questions about how you will make it and how big your organizational chart will be. At the same time, you also have to know which information and details you should include in the chart. Furthermore, you can also include photos of the employees and their contact info and emails. 

Important Information of Employees

Having a starting point is an important part of making an updated organizational chart. You may want to check out the past organizational charts of the company and use them as your guide for making the new one. Always remember to gather all the important information to make your org chart more functional. You may also need to find resources to ensure the lines of authority and use them in your chart.

Best Platform to Use for Your Org Chart

When making an organizational chart, it’s also important to know which platform you’ll use. You need to specify which platform you’ll use to make it and which platform you’ll display it. It can be used on your company’s website or even in a company profile for recruitment sites.

Updating the Chart

It is always important to use the updated organizational chart. You may update this once a year, or you can even plan for its update. Things in an organization can be fast, and changes may happen quickly; that’s why keeping your org chart up to date is important so you can utilize it properly. 

Breaking Down the Organizational Chart

Using the elements of organizational charts discussed above, you can break down the functions in your chart so you’ll be able to start in small pieces. Making this move will make the information you have gathered consistent and lead to a high level of organizational efficiency. Sectioning your chart is helpful in many ways, and you can use various categories to break it down.

Specification of Important Details

You may include various details about the employees in the organizational chart. Adding some photos, contact information, location, and other important details will make your organization more useful. Having specified details about your employees will eliminate the confusion of their job description, and it will make your employees work more efficiently depending on their main roles.

Utilizing Colors and Shapes

The usage of colors or shapes in making an organizational chart is also helpful. You will be making it easier to specify certain groups, divisions, functions, and levels of the employee, whether they belong to the top, middle, or bottom management.

Summing Up: Why You Need an Org Chart

It’s important that you have an organizational chart in your company. A detailed one will play an important role in many ways for the function of your company. Charts will help you to maintain the smooth flow of work among your employees and making sure that their communication between their superiors and subordinates is important. Look for the best online software for organizational charts that are reliable and efficient, so they can be a useful tool in organizing your company.

Choosing Lanteria to streamline all your HR processes will be the best decision you’ll ever make. With our org chart features, you can filter by unit type, location, country, and more. Include inactive or terminate employees, if needed, and export the chart to a PDF. We’ll help you create an organized system designed for your HR needs.