How to Develop an Organizational Chart

Organizational charts help establish clear lines of authority in a business.

Organizational charts are a visual representation of the structure and lines of command in businesses and other organizations. These charts help provide a framework that describes how an organization divides work, authority and responsibility. When developing an organizational chart, you need to clearly delineate the overall structure of your organization, sub-units and positions within those areas. Successful organizations use a strong organizational chart to facilitate effective communication and good decision-making.

Instructions

1. Determine the divisions or areas of your company. This can be a functional area, such as an Information Technology department, or it can be by product line or business units such as a division that offers consulting services. For some companies, regional or geographic divisions may make sense. How you divide your company should mimic how work is divided in your company and illustrate a logical way of assigning responsibility.

2. Draw a basic outline of the desired company structure based on lines of authority. For example, you may draw a pyramid with the CEO at the top, vice presidents for each division underneath the CEO and then positions that report to the vice-presidents listed under them. This outline should replicate your desired structure, rather than the formal or informal structure that exists. Create appropriate titles for each position in the chart. These can be based on existing titles, but they should support the new organizational design and accurately describe the role and level of the position.

3. After you have a basic drawing, make boxes around each position and draw lines between reporting structures. For instances where individuals have dual reporting responsibilities, use dotted lines, for individuals that report only to one person, use solid lines.

4. Transfer your organizational structure into a computerized format. You can use a formal organizational chart software, templates offered by popular business productivity packages, or other platforms that allows entering shapes, lines and descriptions. Putting your chart into an electronic format allows easy dissemination, updates and modifications.

5. Conduct a review of your proposed organizational chart with key employees in your company. Discuss options, methodology and necessary changes to help optimize your business processes. Once a formal structure is adopted, adjust individual positions, titles and responsibilities to fit the new structure.

Tips & Warnings

• Distribute your organizational chart to all company employees so they clearly understand the chain of command.

• Avoid using non-standard position titles in your organizational chart to avoid difficulties in employee recruitment.

References

• Management Guru: The History of Management
• Information Management: What is the Best Organizational Chart for Performance Management?
• Download A to Z: How to Create an Organizational Chart

Resources

• Organizational Chart Template for Microsoft Office