What is an organisation chart and why are they important?

An organisation chart, also known as an org chart or organisational chart, is a useful tool that businesses can use to display the structure of their company. Presented in the form of a flow diagram, the chart helps to show the relationships between different departments and employees.

Maybe you need a clear visual aid to communicate your business structure to new employees, or there’s some confusion about who is reporting to who. The org chart can be used as a management tool to improve team performance, for planning purposes or simply as a visual personnel directory.

Types of org charts

Each type of organisation chart is designed to match a specific company structure, so it’s important to choose the right type that best suits your own business.

The four types of org charts are:

Hierarchical structure

The most common shape of org chart is a pyramid, which shows a traditional business structure. A single person or group sits at the top, followed by managers and then other employees beneath. Within this structure, the chart is divided by departments (for example IT, marketing, operations etc) and all employees report to a single manager.

Divisional structure

This type of structure is split into separate, semi-autonomous branches according to product lines, geographical area or specific functions.

Matrix structure

Businesses who use this type of org chart are divided into teams according to projects or products and report to a project manager as well as a functional manager. This creates a chart that shows relationships across the whole business and not just vertically.

Flat structure

Most commonly found within small businesses, the flat or horizontal structure consists of few or no middle managers between staff and executives.

Organisation chart benefits

A well-presented org chart can improve clarity and communication for a business, helping to show clear lines of authority and the position of each employee within the company. Here are the main advantages:

Effectively manage growth. When employers have a clear view of where everyone fits in to the organisation and what functions they perform, it will become much easier too see which areas of the business need changing. Whether it’s two teams merging into one or hiring more staff, the movements can be clearly mapped out beforehand using the chart, allowing you to more accurately predict their success or failure.

Improve lines of communication. With working relationships clearly visible in an organisational chart, every employee knows who they can go to when they need assistance, instead of trying to struggle alone. Within the diagram it is easy to see who holds which responsibilities and who is involved within which projects, helping to minimise wasted time and improve efficiency.

Visualise the bigger picture. Sometimes it’s easy to forget that your work is feeding into something far bigger. If the people working for you can see that their role directly contributes to the business running smoothly and efficiently, it will greatly improve staff morale and output.

Organisation chart disadvantages

Constant adjustments. The biggest difficulty surrounding org charts is that they may have to be altered frequently to match the changing structure of a business. If new people are joining the company or current staff are switching teams, the chart will have to be kept up to date to reflect this, which could mean extra admin for managers.

Lack of communication. Another possible problem with a fixed organisational chart is that it could stop employees from going to someone outside their team for help. This could lead to a lack of ideas being shared and a narrower outlook.

However, as a savvy employer you’ll know to anticipate this issue and put processes in place to ensure that clear and effective communication continues amongst all teams, allowing more opportunities to improve your business.

Create an organisational chart

Org chart templates are available online to be used in Word®, PowerPoint® and Excel®, and are fairly easy to create yourself. However, this option can only give you a static document which will require frequent manual updates.

For the best results you can use our online HR software which has an org chart built in. The structure will update automatically to match your employee records, meaning that if someone joins, leaves or switches teams, your org chart will always be accurate.