Organizational Charts: Importance, Types, and Benefits

organizational charts

Organizational charts are a visual representation of the hierarchy and structure followed within the organization. Putting it more simply, they are a flow chart that displays the relationship between departments and their employees. The purpose of creating an organization’s flowchart is to clarify the chain of command and the flow of authority with everyone in the organization. No matter whether the size of the organization is 20 or 200, managing them by creating a reporting structure will make the workflow smooth.

If you are new to organizational charts, read till the end to know its importance, the types that can be implemented, its examples, and their benefits.

Why are Organizational Charts Important?

An organizational chart plays an essential role in several places for a business. Let’s closely understand the significance of having these charts:

Hierarchy and Reporting Structure

Organizational charts help employees understand how each employee reports to one another. This type of hierarchical structure is developed based on individual and departmental responsibility. This is called a chain of command. A clear chain of command is vital for all employees as it will give them a guideline for whom to approach when certain situations arise. The structure will not only distinctly state who reports to whom but also show who are their team members.

When the organizational structure is known to all employees, the time wasted on identifying whom to communicate with will be eliminated. Further, issues will be addressed by the right person and will be resolved on time. Implementing automated HR software will help to maintain an organizational chart that can be easily shared with the workforce, and accordingly, employees will only route to appropriate reporting managers.


Identifying Manpower Needs

For growing companies, it’s critical to identify the manpower requirements. Organizational charts will give a bird’s-eye view of the workforce distribution. Managers can easily identify which department needs additional manpower and which one is overstaffed. In case managers identify the need to hire new employees they can raise the manpower requirement. Also, if any department is overstaffed, managers can plan to reshuffle employees as per their abilities and skills to create the right balance in each department.

Aligning Goals

For the growth and development of the organization, it is vital that each employee in the organization works in the same direction. That is why it is necessary that the goals are aligned at all levels of the organization. Organizational flow charts will help to streamline the goal alignment in one direction. The goal can be broken down between departments, and then it could be delegated between employees accordingly.

Helps New Employees

The organizational flow chart aids the process of onboarding. At the time of joining a new organization, employees are always eager to know who are the people they are going to work with. These charts can be helpful for new joiners to get information about their reporting managers and colleagues even before actually meeting them.

Administrative Purpose

The organizational charts can be useful for administrators and executives to view the structure of each department at a glance. There are several tasks that the admins have to perform, such as storing employee details, answering queries, arranging travel and accommodation, and much more. If the organizational structure is not displayed through the chart, how will the admins know which employee comes under which manager and what is their department?

The way of addressing employee queries and requirements can differ as per the department and position. Thus, admins need to have a source from which they can easily view each employee’s department and designation without wasting time on back-and-forth communication.


3 Types of Organizational Structures With Examples

There are various types of organizational structures that organizations can use as per their needs. Here we will discuss the most popular 3 types that organizations can implement:

Hierarchical Structure

A pyramid-shaped chart that has a top-down chain of command is called a hierarchical structure. It is the most common type of chart followed by traditional businesses. Here one top executive is defined under which middle management falls, having employees beneath it. The benefit of following this structure is that it distinctly defines the level of authority and shows the reporting structure of each employee.

hierarchical structure

Matrix Structure

In contrast to the traditional hierarchy here, the reporting structure is formed based on a grid or matrix. Employees that have similar skills are grouped under one head, as it is a matrix structure the same employee can even fall under another manager representing cross-functional teams. These structures are usually created based on products and special projects. One of the major advantages of following this structure is that employers can utilize their employees’ skills for different purposes apart from the main role, and it gives the organization a dynamic view.

For example, the operation department has 2 employees reporting to their departmental head. Now one of the employees from the operations department is assigned a Project A. That employee has to now report to the project manager of Project A as well as his departmental head.

matrix structure

Flat Structure

The organizational structure consisting of only one or none middle managers is called a flat structure. This model is mainly adopted by startups and smaller organizations as it has a limited number of employees. This is generally not possible for larger organizations because it increases direct reporting resulting in mismanagement and inefficiency. The purpose of eliminating middle-level managers is to make employees independent for faster decision-making. It makes employees more responsible towards their job and fosters the implementation of new ideas.

For example, a company has 10 employees. The CEO of the company is the only head, and all 10 employees from different departments directly report to the CEO.

flat structure

Summing it Up

Organizational structures that are truly useful in organizing and managing the workforce. Creating and using these structures will not only be beneficial for employers but even valuable for employees to understand their reporting structure clearly. We also have mentioned the 3 types of structures that organizations can use. If you are looking for such software that automates creating an organizational structure, get factoHRs HR software and leverage its benefits.

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