Organizational Chart

Definition

An Organizational Chart (often referred to as an org chart) is a diagram that visually conveys a company’s internal structure by detailing the roles, responsibilities, and relationships between individuals within an organization. The chart’s purpose is to illustrate the hierarchical structure of departments and employees within the organization, making it clear which employees are responsible for certain tasks and who reports to whom. Organizational charts come in various forms, with three common patterns of organization being:

Line Organization
Functional Organization
Line and Staff Organization

Examples

Line Organization: This is the simplest form of an organizational structure where authority flows in a direct, vertical line from top to bottom. An example is a small business where decisions are made solely by the owner or primary leader and passed down to employees.
Functional Organization: In this type, the organization is divided into various departments or functions, each with its own specialized tasks. For example, a marketing department solely focused on promotional activities, while the finance department handles budgeting and expenditures.
Line and Staff Organization: This structure combines elements of both line and functional organizations. Line executives are responsible for the core activities directly contributing to the business’s primary goals, while staff executives provide specialized advisory and support services. For instance, a company might have a CEO (line position), supported by departments such as HR, IT, and Legal (staff positions).

Frequently Asked Questions

What is the primary purpose of an organizational chart?
- The primary purpose is to depict the structure of an organization, showing the relationships and relative ranks of its parts and positions/jobs.
What are the benefits of having an organizational chart?
- It provides a clear outline of accountability and authority, aids in decision-making, improves departmental coordination, and helps with organizational planning and communication.
How often should an organizational chart be updated?
- Ideally, an org chart should be reviewed and updated regularly, particularly when there are significant changes in the company structure, such as new hires, promotions, or departmental changes.
Can small businesses benefit from an organizational chart?
- Yes, even small businesses can benefit from an organizational chart to better clarify roles and responsibilities, improving overall workflow and efficiency.
What is a matrix organizational structure?
- A matrix structure is a hybrid of functional and divisional structures where employees report to multiple managers—typically, a functional manager and project manager—fostering more flexible and dynamic working relationships.

Hierarchy: A system in which members of an organization are ranked according to relative status or authority.
Span of Control: The number of subordinates that a manager or supervisor can directly control.
Functional Departmentalization: Assignment of jobs to specialized units or departments based on the function they perform.
Chain of Command: The formal line of authority, communication, and responsibility within an organization.

Online References

Suggested Books for Further Studies

“Reengineering the Corporation: A Manifesto for Business Revolution” by Michael Hammer and James A. Champy: This book investigates how restructuring an organization can alter its efficiency and productivity.
“Organization Theory: Modern, Symbolic, and Postmodern Perspectives” by Mary Jo Hatch: Provides a comprehensive overview of organizational theory and its applications.
“Principles of Management” by Charles W. L. Hill and Steven McShane: A textbook covering various facets of management, including organizational structures.

Fundamentals of Organizational Chart: Business Management Basics Quiz

### What is the main purpose of an organizational chart? - [x] To depict the structure of an organization, showing relationships and relative ranks of parts and positions. - [ ] To list the salaries of all employees. - [ ] To record the number of employees in each department. - [ ] To create visual appeal in annual reports. > **Explanation:** The main purpose of an organizational chart is to visually represent the hierarchy and relationships between different roles within the organization. ### Which type of organizational structure features direct vertical lines of authority from top to bottom? - [x] Line Organization - [ ] Functional Organization - [ ] Matrix Organization - [ ] Network Organization > **Explanation:** The Line Organization structure features a clear vertical line of authority flowing from the top level to the lowest rank. ### What type of organizational structure divides tasks into specialized departments? - [ ] Line Organization - [x] Functional Organization - [ ] Matrix Organization - [ ] Team-Based Organization > **Explanation:** A Functional Organization divides tasks into specialized departments each focusing on a specific function (e.g., marketing, finance). ### Which organizational structure combines line authority and staff advice? - [ ] Line Organization - [ ] Functional Organization - [x] Line and Staff Organization - [ ] Projectized Organization > **Explanation:** Line and Staff Organization combines the direct line authority roles with specialized staff advisory roles. ### Add a related term for "Chain of Command." - [x] Hierarchy - [ ] Networking - [ ] Budgeting - [ ] Reporting > **Explanation:** Chain of Command is closely related to Hierarchy, both dealing with levels of authority within an organization. ### How often should an organization ideally update its organizational chart? - [ ] Once a decade - [ ] Bi-annually - [x] Whenever there are significant changes - [ ] Never, only when the company is founded > **Explanation:** An organizational chart should be updated whenever there are significant changes such as new hires, role changes, or restructuring. ### Which is NOT a benefit of organizational charts? - [ ] Improved departmental coordination - [x] Elimination of all internal conflicts - [ ] Clear outline of accountability - [ ] Aids in decision-making > **Explanation:** While organizational charts provide multiple benefits, they do not necessarily eliminate all internal conflicts. ### What does span of control refer to? - [x] The number of subordinates under a manager's direct control - [ ] The physical size of an office - [ ] The geographical area of a company’s operations - [ ] The total budget managed by a department > **Explanation:** Span of control refers to how many subordinates a manager can effectively supervise directly. ### What type of organizational structure involves employees reporting to multiple managers? - [ ] Functional Organization - [x] Matrix Organization - [ ] Network Organization - [ ] Line and Staff Organization > **Explanation:** In a Matrix Organization, employees report to multiple managers, such as a functional manager and a project manager. ### Define a "Functional Departmentalization." - [ ] Grouping based on product lines - [ ] Grouping based on customer segments - [x] Grouping jobs by functions performed - [ ] Grouping geographically > **Explanation:** Functional Departmentalization involves grouping jobs by the functions performed, creating specialized departments such as finance, HR, and marketing.

Thank you for delving into the structure of organizational charts. Continue exploring and mastering organizational concepts to better foster efficiency in managerial roles!