What are organizational charts?

An organization chart of a company is the visual representation of it’s reporting structure. It defines the employee relationship hierarchy of an organization and the alignment matrix of teams.

Org charts illustrates employee designations, reporting managers and more. Visually, they are a bunch of boxes and lines: boxes represent people, lines represent reporting relationships and operating levels.

In this page, we will cover the different types of organizational charts, their purpose, and software that can be used to create them.

what are organizational charts what are organizational charts

What is the purpose of an organizational chart?

Org charts come with a host of benefits. While they are good for succession planning and onboarding new hires, they also serve as a simple, reliable people directory for an employees’ reference. Organizational charts are used for:

Workforce planning

Org charts give you the ability to anticipate skill and talent gaps, future staffing needs, leadership/ management needs, teams or functions that require training, etc. Your recruitment and management teams can hence be proactive and plan hiring or training with much better planning.

Communicating reorgs

Any growing company will face structural reorganization from time to time. During such times your org charts can be the single common point of structural reference for all your employees. What’s even better is if your org chart software automatically recontructs the team organizational structures when you update reporting relationships in your employee database.

People relationships

The ability to add people profiles to your organizational charts puts faces and sometimes even a personality to names. So your people can learn about each other, find friends with similar interests, find conversation-starters and more.

It also strengthens and optimises collaboration because people can quickly look up who’s responsible for what and their contact information. Meaning, they can reach out to the right people the very first time without having to ask around or shoot random emails.

New hire onboarding

Organizational charts are a great way to show your new hires what your company’s reporting structure looks like, who the leaders are and what they do, who’s who, who to reach out to for what, who their colleagues will be and more. They are really helpful in quickly assimilating the new hire into the organization.

Budgeting

Org charts give an eagle eye view of the whole company. It shows all the business functions juxtaposed against each other, thus giving the management a better understanding of expenses. This gives flexibility to find avenues to save costs and identify budget optimization opportunities. It also helps in planning appraisals, team outings, healthcare costs, etc.

Inspiring employees

An organizational chart gives a clear picture to all employees - starting from new joinees to experienced managers - where they are placed on the organizational ladder. Once they know what path they can take to get a few steps higher, they will have a better idea of what they need to do to get there. Additionally, org charts help employees change their career paths within the organization. For instance, if a graphic designer is interested in proejct management, she can see who from the team can guide her to the goal.

What are the types of organizational charts?

Very few organizations rethink their organizational design or structure as often as they rethink or realign their strategy or ways of operation. Organizational structure is vital to execute company goals and achieve company targets and have to be thought about intentionally and holistically. It’s not enough to just shift a few teams and realign just them.
As needs, processes and market demands change it becomes the company’s responsibility to support their employees by rethinking organization design.
The structure is what holds everything else together just like in any other case. Org design, 

Based on the company structure, here are the different types of organizational charts:

1. Functional

2. Hierarchical

3. Matrix

4. Horizontal

5. Vertical

6. Network

7. Geographical

8. Product

9. Customer

1. Functional org chart

A functional organizational chart is the visual representation of a top-down company structure that splits the teams into various departments. It groups together employees with similar skill sets under a separate umbrella. Essentially, the C-suite is at the top, followed by organizational functions such as Finance, Sales, Marketing, HR, etc.

Each unit has a functional head. For example, all marketers are grouped under the marketing head. The leads of each function then report to a common manager who manages and integrates the efforts of these functions to create value for the customers.

2. Hierarchical org chart

An hierarchical org chart is a representation of a company structure where every employee, except for the CEO, is a subordinate to one other employee. It shows the organization in slabs of power with the top row having the highest decision making authority which wanes down the hierarchy. 

Most large organizations - biggest corporations and governments - can be represented through this chart type. They follow vertical chain of command. In this type of organizational structure every employee has a clearly assigned supervisor or manager. People are grouped based on function, location, or the product/service they work on. Hierarchical organizational charts will have multiple levels of management.

3. Matrix organizational chart 

A matrix org chart is the diagrammatic representation of an organizational alignment in which reporting relationships are setup as a grid - a matrix in which employees can report to more than one department head.

It highlights the fact that flow of information is not only vertical, like in a hierarchical structure, but horizontal too. Essentially, reporting is aligned both under the project and functional verticals.

Matrix chart is especially useful when there are two lines of command - both vital and equally important to the organization’s way of functioning. For example, a software engineer may be reporting to the engineering head and the product manager.

People with similar skills working on a same project/assignment are grouped together in teams. Most often teams in a matrix have people reporting to multiple managers which can lead to more thought through and discussed decisions. At the same time, the chart can get complex if people report to more than two managers.

4. Horizontal organizational chart

A horizontal organizational chart shows the alignment of an organization which is structured based on a process. As per this chart, each employee is associated with individual steps of a process that leads the company to a common goal in a sequential manner. It is also known as the flat organizational chart. Each process is owned by a process manager to whom the team reports.

This chart type eliminates multiple middle management levels. It’s adopted by small companies or startups and cannot be embraced by bigger organizations as they have multiple processes that interact with each other.

5. Network organizational chart 

Network org chart represents a slightly a chaotic yet flexible structure that accommodates informal relationships and social networks within the workplace. Organizations that are focused on growing rapidly, evolving exponentially in a constantly changing environment can be mapped through this chart.

This chart focuses on a system where people are empowered with autonomy, leaders manage, facilitate and coordinate all internal and external relationships. These structures rely heavily on rapid communication and mutual trust in relationships.

7. Geographical organizational chart

When organizations span across multiple geographies they need localised teams that function independently. Such organizations embrace geographical organizational structures. In this type, each location will have it’s own marketing team, research team, sales team, HR team, etc.
Food chains are a classic example of this structure. They spread their franchises across countries and need local teams to understand and customize their recipes to the local market, they need marketing teams to understand what makes the locals tick and align their strategies alongside those trends and emotions.
A central global team lays out policies, values and principles to which everyone else aligns. The global management team directs teams and helps lead decisions and align with the vision.

8. Product organizational chart

When a company has multiple product lines, people working on the same product line are usually grouped together as a team or a department. They report to an executive who heads the product line. This structure allows the freedom to create a more specific team based on the product line’s specific needs. For example if a certain team needs 5 people with skill A they can go ahead and hire them or move them in from other teams. Each product line can perform independently and the failure of one does not affect another.
This structure becomes even more useful and vital if the product lines of a company are very different from each other and require exclusive or highly-specific skills, and expertise. Most often the product teams are supported by a few common central teams such as the legal team, HR team, finance team, business development team, etc. 

9. Customer organization chart 

Some organizations like healthcare, banks or governments, structure themselves around the customers they serve. This helps them tailor their service for specific customer needs. For example,  A bank can have different teams which handle loans, credit cards, wealth management or insurance.
This structure helps group specialists to deliver the best customer service.

FAQs 

How to create an organizational chart?

There are ways to make org charts manually but they take too long and it's difficult to design charts as per your taste. Additionally, manually created charts do not allow for easy edits. The best way to create org charts is by using a cutting-edge software that calibrates charts as per your need. One that  allows for easy addition, deletion, and modification.

What should an org chart contain?

Aloong with accurate representation of the company structure, org chart should contain employee photos, designation, function details, and contact details. It should also illutsrate hierarchy and the list of employees under each manager. It is also helpful if the chart comes with a hover feature that shows a snapshot of employee details without having to click on their profile link.

Should an org chart have names?

The purpose of the organization chart is to display the company hierarchy. Including the name will help employees find the individuals easier on the company's email system and messenger.

Are org charts necessary?

As your organization grows in size, you need to make it easy for employees to find the right contact. Without an organizational chart, there will be confusion with the right informational being available with a few. An org chart will bring transparency to the company and accountability for your employees. 

What will happen if the organizational chart is not made correctly?

An incorrect organizational chart will result in incorrect flow of information and poor communication. It will also waste time in finding the right contact responsible to do a job.

Who can use organizational charts?

Recruiters /Hiring managers

Foreseeing staffing needs, leadership needs, training needs, identifying ready-for-promotion employees, skill gaps, talent gaps, etc and acting on them to achieve or align with company’s goal and vision are some of the ways in which recruiters and hiring managers can use organizational charts. This empowers   to proactively plan and respond to the  upcoming workforce needs.

New hires

During employee onboarding, new hires can get a quick peek into what the organization’s structure looks like, who reports to who, where they fit in the whole organizational tree, their colleagues or team, their reporting manager and more.

They can look up the contact information of any colleague if necessary until they get familiar with the place and the team.

Employees

For your employees, it is where they turn to when they quickly need a colleague’s contact or any other information. Self-service is a great add in org charts - if employees can update their own profiles, employee database management would be less tedious for the HR.

Org charts are  also a quick way to learn about how the organization is fleshing out, the colleagues who joined them recently and what they do.

Choosing an organizational design

Before choosing an organizational design, here are a few questions to ask yourself.

1. What’s you USP, or competitive advantage?

The answer to this question will give you the base on which your design should be built - for example it will highlight your competitive advantage which could be technological innovation, diversification, low cost production, niche solution for highly-targeted market and so on. When you understand what it is that will help compete in the market, it will be easier for you to understand who to hire, what processes are critical, what your team objectives should be, etc.

2. Which business processes are significant to achieving it?

Once you have stated your strategy to compete, the next thing to do is identify what business process will be critical or directly affect it. This will help you create teams and prioritize resources for them and sometimes even help you decide what should be built in-house and what can be outsourced.

3. External environment

What does the external environment look like for your business? Do you procure materials from external vendors, outsource services? How thick is the competition for your product or services in the market? Does the nature of your business involve any uncertainties?
The answer to these questions will lead you to understand how to structure your teams to manage costs, beat the competition, handle procurement and contracts and more. It will also clearly show if you should go for a rigid or flexible organizational design.

4. Organization size

The size of the company is detrimental in choosing an organizational structure. For example, a rapidly evolving startup can choose a flatarchy but the same would turn chaotic for an enterprise. Bigger companies lean to functional, divisional or matrix structures. That’s because as the company size increases, the need for more complex teams and divisions increases. Without which it might be difficult to achieve synergy. 

5. What technology are you considering?

Technology affects how resources are transferred, stored or shared. It affects everyday communication, quality of workplace, etc. For example, a company with robust communication tools or technology can boldy choose a network organizational structure. Understanding where you stand in terms of technology is important before you choose an organizational structure.

What makes your org charts powerful?

Being backed by a layer of data

Simply names and titles won’t do. Your org charts can do better than that - add photos, a small employee bio, fun facts, common interests, professional history, certifications etc. When a name and face is backed by a strong in-depth profile, it turns more rich and valuable both to employees and the HR team.

Being available on the go 

When someone needs to contact a colleague quickly, say from a remote location, or assume they are on the go, imagine having to open their laptop, connect to the internet to look a teammate up. It would be frustrating. It’s one thing to have all the powerful information and another to make it available to your employees at the right place, on the right device.

Search 

Skimming through the company’s organizational chart can be quite interesting especially if you are collecting fun facts about your employees. However, it's important to remember that in most situations people are trying to find someone or their contact information, and to make that easy your org chart needs to have an excellent in-built search function and not have them scroll through an entire database  of files.

Being shareable 

Static org charts made on spreadsheets and lost under a pile of files are long gone. The changing organization needs and the modern workforce demand a more dynamic org chart. One that can be updated frequently or automatically based on other systems, charts which can be updated with ease and shared with all.

 

Want to Create Organizational Charts? Try Freshteam  

Freshteam is a powerful HRMS software for growing businesses which helps them create an organizational charts. It covers everything in between when your HR first contacts a candidate to when an employee decides to quit and pursue a different venture - applicant tracking, candidate management, interview scheduling, offer management, new hire onboarding, organizational charts and employee database, and paid time off management. For a complete list of our plans and features head to our pricing page.