8 Reasons Why Organizational Chart is Necessary for a Growing Company

For any growing business, choosing the best direction is key to success. And a clear, reliable plan on how to get there is vital. While there are some differentiating factors between large and small business operations. One of them is based on the implementation and communication of a stable organizational system.

By implementing a functional and clear organizational chart. You’ll be able to boost your business in the direction it needs. For small business owners, it’s essential to contemplate using a formal structure from the beginning of the endeavor.

This is because of a structured plan from the get-go. Can enhance your business’ growth process throughout the various evolutionary stages of the company. There are many small businesses and growing companies that consider an organization chart. To be an overly formal and unimportant process, meant only for larger corporations.

However, we’re going to show you how every business needs an organization chart from day 1. If they hope to enhance their business through both communication and overall workforce management ’s improvements.

The Organizational Chart (Org Chart)

First, what is an organizational ​​chart, exactly? A traditional organizational chart is the representation of an organization’s overall structure. The purpose of the org chart to show existing relationships and rankings of job positions within the business/organization/company. Employee’s names and job positions are typically depicted through boxes or circles. Using lines to link them to other departments and employees.

By viewing the organization chart, people are quickly able to understand how the organization is structured and designed. The number of company levels and where every employee fit into the organization. Organizational charts were used primarily by HR, new hires and business leaders in the past.

Today, HR is typically responsible for maintaining this organizational chart by providing updates on position changes. New hires or when an employee leaves the company.
When other business positions need to use the organization chart, they know to go to HR for assistance.

Business leaders may use the organization chart for some reasons. Such as reducing headcount, planning presentations or determining where a specific employee may acquire an opportunity to change job positions. For new hires, the organization chart works as a lifeline. Giving them the chance to learn names and titles and to understand fully. Where they are placed in the larger structure of the business or corporation.

On top of that. Any employee may benefit from having access to their co-worker’s photos, names and professional/personal profiles available. Now, why is one of these organizational charts necessary?

Why Your Business Needs an Organizational Chart

organizational chart - Business Organizational Chart Plan

First and foremost, an organizational chart helps businesses design and build a clear structure with clear communication. Every business you can think of needs a clear structure. Helps channel all the employees’ contributions towards the company’s primary objectives. 

These charts work at visually communicating the organizational structure consistently to everyone working on. Guiding and informing specific contributions to their team’s goals.On top of this crucial point, There are eight other reasons why an organization chart is essential for new or growing business of any kind.

1. Organizational Charts Help in Dividing Functions 

organizational chart - man pointing at you

No matter what organization we’re talking about, big or small. Every single one is required to perform some functions to meet specific objectives. When communication of these responsibilities fails, many efforts can be duplicated, resulting in individuals butting heads.

This destroys effectiveness and productivity. By implementing a clear and concise organizational chart into your business structure. You’ll be able to coordinate responsibilities for more effective outcomes efficiently.

2. An Organizational Chart Lays Down the Relationships Between Functional Groups and Employees

organizational chart - topology chart

The relationship employees have with each other within an organization plays a vital role. In either the growth or failure of an organization or business.

Clear communication of how various employees and groups are related to each other yields greater growth. This is because it helps to avoid conflicts in the workplace.

3. An Organizational Chart Helps in Assessing Employees’ Workloads

organizational chart - evaluation

It’s hard to evaluate managers working for you without having a clear understanding of their range of responsibility.

An organization chart shows managers or directors’ amount of control. Which makes it easier to assess workloads and figure out whether or not adjustments are needed. This gives decision makers a leg-up in the restructuring of responsibilities within an entire organization.

4. An Organizational Chart Helps Gauge Competency

organizational chart - a man shaking hands

With responsibilities clearly given out and solidified through an organizational chart. Organizations and companies are able to measure every employee’s contribution and growth over a span of time.

When it comes to evaluating employees and managing their growth for maximum productivity, this measure is critical. If done properly, it can also result in reduced turnover.

5. A Well-built Organizational Chart Improves Coordination

organizational chart - sky diving group

In most businesses and organizations, every employee or group of individuals is tasked with certain roles. However, a lot of projects require cross-functional coordination.

A reliable organizational chart helps focus that coordination to meet the objectives more efficiently. Like a high-functioning computer. Every employee is able to streamline their time and energy on specific tasks, productively.

6. A Strong Organizational Chart Illustrates Clearly Who to Bring In

organizational chart - Company Organization Chart

An organizational chart helps every employee identify collaborators, decision makers and stakeholders for any issue or task.

This aids in identifying and conquering roadblocks by knowing exactly who should be involved. When a decision or plan change is required.

7. An Organizational Chart is a Good Resource for Allocation and Analysis

organizational chart - analysis result

Organizational charts are also used to produce work groups, create a budget analysis and important reports for productivity.

This helps the organization or business manage the talent and financial resources available for increased productivity and overall growth.

8. Organizational Charts Find Various Holes in an Organizational Structure

organizational chart - Checking the Market
Becomes more difficult to identify where there are potholes in your business without the use of the organizational chart. By using a solid organizational chart, tasks or roles that no one is yet responsible for are visibly apparent.
Once this is known, managers can write more effective job descriptions and requirements to fill those requirements quickly. An organization chart shows key players to reach the organization or company’s goals, smoothly.
Clunky or ineffective communication creates a problematic situation for contributors to put their best foot forward. This ultimately affects productivity and overall growth of the business.
A solid organizational chart allows for effective and professional resource management. Making it easier to keep an eye on growth and performance throughout the entire organization.

A Common Issue: A People-Based Organizational Chart

organizational chart - People base chart

Now that you know exactly how an organizational chart can help improve your business. It’s time to leave you with a vital takeaway. What not to do when creating an organization chart.

Many business owners have used some form of an organizational chart in their lives. However, these charts tend to be people-based charts. (A people-based chart is usually covered in boxes with employee names residing inside.) The problem with this structure is the number of unclear accountabilities. Positions tend to be vague and the people who have acquired the roles end up building their roles. Around their weaknesses and strengths as opposed to the core needs and goals of the company.

As you begin developing your organizational chart, remember to organize your employees based on the business. Main activities such as marketing, sales, operations, finance and administration, instead of individual talents. This is referred to as a “position based” organization chart. Which outlines the positions in order to create the results your business needs to thrive.

This way, a manager can also use the organizational chart to develop what business should look like in future. This is done by figuring out which skills and roles the company will need to bring on board. To meet long-term profitability targets.

To do this, first image how you would like your business to look like in a couple years. You should consider every aspect of the business, from revenue to service lines. Take into consideration what type of structure would be able to create these results.

This is when you can begin building your organizational chart to show key roles and responsibilities. Keep tweaking and improving your chart based on any company changes. Enjoy watching your company vision become reality.

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