Organizational charts play a critical role in the workplace. They display and communicate internal structure within the organization, allowing individuals to understand the hierarchy of teams, departments, and the organization as a whole.
Top tips to create an organization chart
Pick what type of organizational chart you’ll use.
When it comes to creating your organizational chart, the first step is not to draw a diagram of your current workforce and reporting structure. Instead, we strongly recommend taking a step back to think critically about your organization design, before laying out your organization chart. Taking a talent optimization approach, your organizational design should be dictated by your business strategy—and your strategy may require a different organizational model than what currently exists.
There is no right or wrong organizational model. The type you choose will be entirely dependent on your company’s goals and the structure it will take to get there.
Here are the most common types of organizational charts, their pros and cons, and why you might choose one type over another:
Hierarchical organizational model
This is the most common type of org chart. It shows the C-Suite at the top, followed by senior leadership, middle managers, and further on down the line.
In hierarchical models, employees are usually grouped by department and skill set. The benefit to a hierarchical model is that it’s familiar, stable, and has a clear chain of command that’s easy for employees to understand and follow. However, there is often a disconnect between departments due to low visibility. It can also result in work delays, as decisions go up the chain of command for approval.
This type of model can work for mid-size and enterprise level businesses, as well as small businesses that are looking to scale. As your organization grows, you will likely find yourself working with a hierarchical organization chart.
Matrix organizational model
A matrix model is when employees are grouped by project or product teams, and report to one or more functional managers. So if you work in marketing, you might find yourself reporting to the head of the product team and the head of the marketing team.
The benefit to a matrix organizational model is that it uses cross-functional groups, encouraging more open communication and collaboration across departments. It could work well for a larger business that has a number of product lines. However, many organizations that have used this model found that it created split loyalties between different managers and resulted in conflicting priorities.
Flat organizational model
A flat organizational chart removes middle management, allowing for faster decision-making. Flat models work well for newer companies and startups, where the need is for quick decision-making and risk-taking to get the company off the ground. Autonomy in these types of organizations is pushed down to the lowest level possible to allow for rapid growth.
As your organization grows, you’ll likely need to shift away from a flat model. Eventually, there will be too many direct reports for each executive to handle, and middle managers will handle some of the decision-making; this streamlines and speeds things up.
Remove the names. Focus on roles and responsibilities.
Organizational models built around individuals are headed for dysfunction. Taking names out of the equation allows you to focus on designing your organization optimally, rather than around specific individuals.
When you’re designing your organization, pay attention first to the roles your business strategy requires. What are the core responsibilities and scope of each role? Then think about the reporting structure for each role. For example, if your business strategy is to innovate and bring new products to market, ask yourself: does this individual have either the autonomy to make the decision or quick access to a decision maker? If not, you might need to change around the reporting structure on your org chart to allow them to more rapidly bring products to market.
With the names removed, think about how you’d design your company if you were starting from scratch. What key roles would you include? What teams would you build? Who would be responsible for which aspects of your business strategy? Select your organizational model from the answers to these questions, then turn your attention to how your current employees fit into those roles.
Limit the number of direct reports to any one person.
As your company grows, your managers will start to bring more people onto their teams. Regardless of how well they manage, there’s a cap on how many people a manager can effectively supervise. While the number of direct reports a manager has will depend upon the team and size of the organization, a good rule of thumb is five employees per manager.
When managers have too many direct reports, they can quickly become a bottleneck, hindering workflow and causing production to fall behind. This not only results in lost opportunity cost, but can also result in employee disengagement as direct reports start to feel like their manager isn’t able to give them the attention and feedback they need.
A quick glimpse at your org chart can help you identify individuals who have too many direct reports, becoming a bottleneck for progress. With this information in mind, you can proactively restructure your organizational chart to decrease the number of direct reports and increase efficiency on that team.
Now that you’ve built your org chart, it’s time to share it.
Make your charts widely—and remotely—accessible.
As companies grow and remote work becomes more common, it’s important that your organizational charts are accessible to everyone within your organization. This allows for role clarity and improved communication. Making your chart web-based will guarantee ease-of-access for both on-site and remote employees.
While you may not currently have remote workers, making your organizational charts “remote-flexible” will help you prepare for a future where some of your team will be working from home. In addition to being easily referenced by remote workers, a remote-accessible org chart allows all employees to be able to reference the chart on the go. As the saying goes, “An ever-accessible organizational chart is a highly used organizational chart.” (OK, so we made that up, but it should be a saying).
Adopt easy software tools.
There are many tools you can use to share your org chart; Organimi, Lucidchart, and Pingboard are just three examples. Here at The Predictive Index®, we use Zenefits as a way to easily share our org chart across the company. The tool allows us to not only see the organizational structure at a glance, but who reports to who, what any employee’s job title is, and contact information in case we need to get in touch.
Once your organizational chart is created, look for a software that will allow you to easily design, update, and share across your organization.
Designing and publishing your organizational chart isn’t a one-time effort. To ensure that your organization maintains maximum effectiveness, revisit your org chart about once a year. If your company is in the process of rapid growth or undergoing a major change, you may decide to update more frequently.
Join 10,000 companies solving the most complex people problems with PI.
Hire the right people, inspire their best work, design dream teams, and sustain engagement for the long haul.
