What is an 'Organizational Chart'

An organizational chart is a diagram that outlines the internal structure of a company. An organizational chart is the most common visual depiction of how an organization is structured. It outlines the roles, responsibilities and relationships between individuals within an organization. An organizational chart can be used to depict the structure of an organization as a whole, or broken down by department or unit.

Other variations include an org chart or organization chart.

BREAKING DOWN 'Organizational Chart'

Every employee in a company has a job title which designates his or her role in the company. The role entails the job responsibilities required of the employee and has a status which could fall below and/or above other employee roles within the organization. To better illustrate the hierarchical status of each job title within a company, most organizations use an organizational chart.

An organizational chart is a graphical depiction of the organizational structure of a company. The chart shows the level of each job title in which the bottom titles report to the titles that are directly drawn above them. For example, an assistant director will fall directly below a director on the chart, showing that the assistant director is a direct report to the director. The organizational chart reflects a company’s culture as it shows how the company works. Depending on the company, industry, or size of the firm, the same job role can be given different titles.

The organizational chart is a visual representation of a company’s managerial hierarchy and can be viewed by both internal and external stakeholders. The charts show the relationships between people in an organization and uses simple symbols such as lines, squares, and circles to connect how different job titles relate to each other. Most org charts include the job titles in squares or circles. These squares and circles are connected to each other with horizontal and vertical lines to depict the flow of decision making and answerability protocol. The horizontal lines connect job titles with working relationships, while vertical lines connect titles with reporting relationships.

In general, there are three types of organizational chart structures; hierarchical, flat, and matrix. The hierarchical organizational chart is the most common type of org chart with higher ranking individuals situated atop the chart and lower ranking persons found below them. For example, a public company would usually have its shareholders in the highest square box, followed vertically by the Chairman of the Board of Directors, Vice Chairman of the Board, and Board members. The Chief Executive Officer (CEO) would usually be situated directly under Board members. The other C-suite executives may fall directly under the CEO, and will be joined together by a horizontal line under the CEO. Other job titles that may follow the C-Suite executives include: President, Senior Vice President, Vice President, Assistant Vice President, Senior Director, Assistant Director, Manager, Assistant Manager, Full time employees, Part time employees, contractors, etc. The hierarchy of an organization depends on the industry, geographical location, and size of the company. In a hierarchical organization, members typically communicate most frequently to the direct report(s) below them and the person above them that they are positioned to report to. Authority flows downward in a hierarchical structured firm.

A flat organizational chart, also known as a horizontal chart, depicts individuals along the same level, not placing greater importance to an individual's title by placing them above any other individual. This type of chart usually has two levels – managers and their direct reports. Employees that work in companies with flat structures generally have more decision-making power and responsibilities than employees in hierarchical corporations. Authority flows horizontally in a flat structured company.

A matrix organizational structure is more complicated, with individuals grouped by their common skill-sets and also by the groups in which they work and people they may report to. The matrix chart usually interconnects employees and teams with more than one manager that they would report to. Consider a software developer working on two projects with his regular team manager and another product manager. The matrix chart would have two vertical lines connecting the software developer to each manager he is working with. The chart shows that the product manager’s authority flows horizontally across departments, and the team manager’s authority flows downwards within his department or team.

Regardless of the kind of organizational structure a company has, the org chart is very useful when a company is considering restructuring its workforce, changing its management, and planning its resources and workforce. An organizational chart can also be effectively used to improve the lines of communication within a company, show work relationships, and give employees a transparent view on how the work they do fits into the overall scheme of the company.

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