One of the most basic organizational development tools is the organization chart. Organization charts serve as a basic and fundamental document within the entire organization to delineate authority, responsibility and hierarchy. It allows the viewer to get a snapshot of how entities or divisions interact and work alongside one another for the common goals of the organization.
Although the concept of an organization chart is basic, there is no perfect one size fits all template for what an organization chart should look like. It is simply a graphical representation, ideally tailored to best fit the unique circumstances, personnel, culture and operation model of the business. There are many different types of organization charts that exist and the most common one is the hierarchical design showing a top down level of authority and reporting lines.
Why have an Organization Chart?
Organization charts are often viewed as a Human Resource exercise, which in of itself is viewed as more of a qualitative function. Ironically, the idea of structuring and solidifying a qualitative relationships seems counter-intuitive.
Often, the employee count is low, or it seems less of a priority in comparison to core business or entrepreneurial functions. In reality though, there are many less mature companies which are not yet scaled to a formal organization chart. That being said, there is reason they are considered basic tools of organizational development.
- They clarify reporting lines of authority and relationships between staff and functions
- Provides a road map of career progression for employees to drive performance
- Identify uneven workload and resource distribution within the company
- Help HR communicate organizational changes or movements companywide
Despite the standard noted benefits, the oversimplified idea that these are “obvious” and therefore a waste of time, misses the valuable opportunity of using in a more crucial context. Much like creating a Business Plan Budget, approaching it as a forward looking and strategic goal setting exercise allows the leadership to establish what the organization should strive for in an ideal state while critically assessing the current situation.
Structural and Organizational Values
Below is a hypothetical example of a relatively flat organization which has grown to 150 employees. In this example, one must wonder the effectiveness of organizational structure and relationships given the following:
- The Production units report directly to the CEO as does the President, as well as the VP of marketing
- There exists a CEO as well as a President
- There are dotted line reports where certain functions report to a direct manager as well as their manager
Like looking at the a company’s Debt/Equity ratio alone does not tell whether the optimal leverage is established without context, it is not possible to tell which form is best. Given the circumstances, personnel or industry, the optimal format should be like a bespoke custom tailored suit that fits perfectly.
In an alternative hypothetical example, a highly bureaucratic organization chart may tell a different story of how a company functions. But the questions to ask in assessing a company internally are very different in this example vs the one above
The Inverted Organization Chart
Although it is obvious that no one document is in of itself a representation of how a company functions, the process of creating the document may be just as meaningful as the end result itself. The number one thing that should be asked when doing this business planning exercise, like everything else is determining the main purpose.
If viewed as a document for the sole purpose of delineating authority, a crucial opportunity is missed. If the purpose is to allow Leadership to improve communication on how it views its most important assets, provide clarity, empowerment and engagement, the process of creation should be considered and the end result will be a representative microcosm of that. Take for example which is a variation of the Inverted Pyramid often used in Servant Leadership.
- Customer and external stakeholder demands come from the top and are the pinnacle priority
- Those interacting with them most frequently are the business units and individual functions with ground floor current knowledge of customer needs
- Each employee is an asset that requires support to continuously support the customers
- Leadership must be strong and supportive foundation supporting the whole organization
This does not of course suggest that this alternative representation is the best suited for your company. There is no right answer. Some organizations need a representation of an “overarching” leadership body that “heads-up” the company direction.
What the above representation does is break the singular and rigid thinking of how an organization is represented. After all, we “look up to authority”, people “grow into positions of leadership” and the “tone starts at the top”. The irony of course, is that a company is built from the “ground-up” with the Leadership as the “pillars” and “under the most pressure as the foundation” holding up the company.
In understanding that graphic visualizations can be powerful tools, the above represents an alternative thought process. After all, how Leadership sees itself will resonates through its employees. It drives culture, performance and results. As Steve Jobs said: “We don’t hire smart people so we can tell us what to do. We hire them so they can tell us.”