An organizational chart gives you a visual representation of your organization’s structure and hierarchy. Knowing the various types of organizational charts and their uses can help you select the right one for your own company. In this article, we explain what an organizational chart is and list eight different types of organizational charts and their uses.
What is an organizational chart?
An organizational chart is a graphical representation of a company’s internal structure that details the various roles, responsibilities and relationships. It essentially shows the organization’s reporting or relationship hierarchy. An organizational chart can have various structures and serve a variety of purposes depending on the type.
What are the benefits of an organizational chart?
Organizations use organizational charts for various reasons. Not only do they provide benefits to a company’s employees, but they also provide great benefits to its leadership team. Here are some benefits of an organizational chart:
Details job duties
Works as a visual employee directory with information like telephone numbers and email addresses
Shows a company’s reporting relationships and hierarchy
Helps leadership team handle growth or company changes
Helps employees understand how they fit into an organization
Helps visualize information like business entity structures
Helps visualize and plan for company reorganizations
Types of organizational charts
Companies across the workforce follow different organizational structures or charts. Understanding how these charts work can help you determine which provides the most benefit for your company. Here are eight different types of organizational charts:
A hierarchical chart represents a traditional business structure in a pyramid shape that structures its elements by rank. This type of chart starts at the top of a company’s chain of command with positions like the chief executive officer or manager and flows down to middle managers and then to more entry-level employees. Because of its structure, companies have an easy time modifying them should the organization expand. You can use this type of chart if you have many small teams under different management. With a hierarchical chart, managers can better work with their team members and have greater control over their departments.
A divisional organizational chart groups a company’s activities or functions into divisions. These divisions include geographical, product-based or market-based service groups. Here’s a look at each of these types of divisional organizational charts:
In a market-based divisional chart, each division has a dedicated market, industry or customer type. Organizations that have products or services specific to market segments benefit the most from this type of divisional chart. If a company has advanced knowledge of these market segments, it’s even more beneficial. Companies use this chart to stay aware of demand changes in their various audience segments.
A product-based divisional chart includes many smaller structures. In other words, it has multiple divisions, each with its own team. With a product-based divisional structure, each division has a dedicated product line with assigned employees. This chart benefits companies with multiple products. A product-based divisional chart can even shorten product development cycles, allowing companies to go to market with new products and services even quicker.
Geographical divisional charts have divisions based on geography. These divisions may include things like regions or territories. A geographical divisional chart bodes well for companies that need to stay close to supply sources or its customers. It also lets each division make decisions from more diverse points of view.
In a matrix chart, employees have dual reporting relationships. This type of chart allows for flexibility and a more balanced decision-making process since it includes two chains of command rather than one. Since a single project in this chart has more than one business line, this type of chart lets these business lines share resources more easily and allows for greater communication.
Horizontal or flat
A horizontal or flat organizational chart limits the various levels of management so that other company employees remain close to the company’s leadership team. Not only does this chart allow for greater detail, but may also allow for greater employee productivity since it doesn’t have as much hierarchical pressure compared to other organizational charts.
Companies often use this type of organizational chart when they work with another company and share resources. Companies may also use a network organizational chart if they have multiple locations and different leadership and functions. In addition, a company that outsources its staff may use this chart to demonstrate company workflows. You can use this type of organizational chart to eliminate management levels, essentially letting employees to make decisions without leadership approvals. This results in a more streamlined process and fewer administrative costs.
Team-based organizational charts consist of teams working toward the same goal despite their different tasks. While this chart isn’t as hierarchical as other organizational charts, its flexible nature promotes problem-solving, collaboration and decision-making. Employees get chosen for a team based on the skills they contribute so that together, all teams can rally toward a common purpose. Companies use this type of organizational chart to group employees in order to ensure a variety of expertise and to address certain operational components in the company.
Though it has a different shape than other charts, a circular organizational chart follows a hierarchical structure. Higher-level employees stay on the inner rings of the circle and lower-level employees take over the circle’s outer rings. Instead of leaders or executives at the top of the organization, they remain at the center of the company, sharing their vision for the organization outward rather than down a typical chain of command. Companies use this type of chart to encourage internal communication and a free flow of information throughout the organization.
A process-based organizational chart focuses on the flow of various processes. It accounts for not only every employee’s activities but also how these activities interact. Organizations use this type of chart when they’re looking to improve the company’s speed and efficiency since it’s easily adaptable.
I hope you find this article helpful.