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How to Develop your Small Business Organizational Chart
March 16, 2020

How to Develop your Small Business Organizational Chart

Does your small business have an organizational chart? If not, you might be missing out on certain benefits. Org charts can help you and your employees develop a better understanding of your business.

If you don’t have an organizational chart yet, the process of developing one can seem confusing. There are different models that work best for different businesses, and there are a few steps you should follow to ensure your chart is useful.

Keep reading to learn how to develop a stellar org chart.

Why Org Charts Matter

Most large companies use org charts. You might have seen articles about how companies like Tesla and General Motors structure theirs.

Why are org charts so popular? They aren’t just a way of viewing a business’s employees or management structure. Instead, they give insight into how a company is run.

Some of the first organizational charts arose as a way to keep track of railroad employees in the 19th century. The New York and Erie Railroad printed a chart to try to get a handle on its rapidly expanding structure. At that time, communication was much more of a challenge than it is today. The org chart was a way for people in different locations to understand who was responsible for what.

These early versions were beautifully designed but often confusing. Over time, org charts got easier to read, but their information remained static. For many businesses, they were placed on a dusty shelf somewhere and only updated when absolutely necessary.

Now, organizational charts are changing, due partly to developments in the software used to create them. Modern charts are dynamic and interactive. Viewers can click to see different kinds of information and to understand relationships and roles.

For both large and small companies, these charts can play a significant role in how you structure your business.

The Process Of Building An Organizational Chart

Creating an org chart for a small business might be more straightforward than for a large company. Still, that doesn’t mean you shouldn’t put care into the process. Keep in mind that the chart you build will help your employees understand your business and their role. If you decide to sell your company or seek investors, an org chart will provide crucial insights.

Deciding How To Structure Your Business

There are several varieties of organizational charts. The best choice for your business depends on a few different factors.

Some models focus on supervisory structure, while others are based on location. Some charts group employees based on the particular project or product they work on. Below are some of the most popular structures.

Hierarchal

The hierarchical model is the most popular. It displays employees in groups under each supervisor or manager. The highest-level employee, typically a CEO or president, is listed at the top.

Often, the groups on a hierarchical chart are organized based on the members’ department. Employees may also be grouped based on their physical location or the product they’re responsible for.

This model can help create a sense of belonging within teams and encourage collaboration. It can also help workers see potential opportunities to grow their roles.

One potential downside of this style is that it can make lower-level employees feel undervalued.

Matrix

Relationships on a matrix organizational chart are laid out on a grid. This model is effective when workers report to more than one manager or work on multiple projects. For example, a salesperson might report to a sales manager while also working directly with the marketing team.

The matrix structure puts more focus on relationships, as opposed to each person’s level of authority.

With this model, there’s some potential for confusion as more people, departments, or projects are added. That’s why the matrix option might work best for smaller businesses.

Functional

A functional organizational chart is somewhat similar to the hierarchical model. The highest levels of responsibility are at the top. The difference is that with this type of chart, workers are organized based on their job functions.

Functional charts work for almost any company, from a business with a handful of employees to a large corporation.

An advantage of this style is that it helps all employees feel valued by focusing on their skills. However, it can create a sense of division between different functional areas. Teams might be less likely to spot collaboration opportunities. It can also make it more challenging for management to see how various departments work together.

Circle

In circular organizational charts, higher-level employees are in the middle, and lower-level workers are on the outside. Walt Disney Studios and Apple have both used this model.

One goal of this type of chart is to represent each department or group as part of a whole. Unlike the hierarchal or functional models, departments aren’t visually separated.

The circle model may be confusing for people who are used to traditional top-down charts. It can be more difficult to see who reports to whom. On the other hand, employees may appreciate how this view feels more inclusive. No one is at the top or bottom of the structure.

Collecting and Categorizing Employee Data

When you’re ready to create your business’s organizational chart, you’ll need to gather employee data. The bare minimum you’ll need is each person’s name and title. If you have multiple offices, you may choose to include location as well.

Before you get started, decide how to store this information. You might decide to keep things simple with a spreadsheet or use a dedicated org chart software. Bear in mind that some of the data you collect may be considered confidential.

Many businesses today include much more than the basics. Photos of each employee are one possibility. They’re especially helpful for new hires who are getting to know everyone.

You might decide to include a bit of personal information to foster a sense of community. People could share their favorite hobby or sports team.

Creating an organizational chart gives you a chance to gather your team’s emergency contact information. Personal phone numbers and email addresses are good to have on hand if there’s an office closure.

Don’t rush through this phase of your project. As you obtain information, you might come across inefficiencies. You also might find discrepancies in how team members understand their department’s purpose. Now is a good time to resolve these issues.

Deciding On A Completion Method

Once you’ve gathered employee information, it’s time to decide on your next steps. Depending on your company’s size, you might assign a team to complete the organizational chart. This team can work with you to determine the best model for your chart. They can also track down any missing information or photos.

If you’re using software designed for creating these charts, the process should be reasonably easy. The software will guide you as you add and organize data.

Remember that an organizational chart should be a living document. Employees will come and go. As your business grows, you may also find that a particular structure is no longer the best fit. Choose a person or team to be responsible for keeping the chart up to date.

Develop Your Org Chart

After you’ve gathered employee information and decided how to complete the project, you can begin development.

First, you’ll need to plug in your data. It’s possible to enter it manually, and doing so might not take long for a smaller business. However, most org chart templates offer options to pull in information automatically. You might provide data from a spreadsheet or another source based on the program you’re using.

Expect some of the development process to include trial and error. Once you have a draft, gather feedback from employees at different levels. Everyone should understand the information you wish to convey in the chart. If they find it confusing, you’ll need to go back to the drawing board.

With interactive charts, viewers can click hyperlinks to see more information. Consider what data should be immediately available and what should be shown after clicking.

Put some thought into the design of your chart. If possible, format it to fit on one page. You might consider using the same color scheme as your branding or marketing materials. Most importantly, the document should be logically organized and easy to read.

Where To Find Organizational Chart Templates

Whether you use a program designed for org charts or not, it’s wise to start with a template. You won’t need to start from scratch to create the perfect chart for your unique business.

Below are some of the best places to find organization chart templates.

  • Microsoft

If you already have PowerPoint, Word, or Visio, you can build an org chart for free. Each of these programs includes several built-in templates. They require more hands-on effort than some other programs, but can also be customized.

  • Pingboard

Pingboard makes it easy to create an interactive chart that is easy to update. Its templates are organized by industry, such as restaurants, construction companies, and hospitals. There’s a free option for up to ten users and paid options for larger teams.

  • Creately

This option offers thousands of professional, customizable templates. They include hierarchical, matrix, and functional org charts, among others. Creately can help you build a variety of diagrams in addition to your chart. Plans start at $4 per month when billed annually.

  • SmartDraw

With an online version and a downloadable option, SmartDraw is convenient to use. It integrates with Microsoft Office and Google apps, including Docs.

Most importantly, it offers an impressive variety of customizable templates. Prices are higher than other options but may be worth it for SmartDraw’s features. The cost to purchase the software for a single user is currently $297.

Benefits of Org Charts Regardless of Business Size

There are several reasons to maintain an up-to-date organizational chart for your business. Their benefits apply to companies of all sizes, not just large ones.

Put simply, an org chart shows who does what. It provides clarity on how the business is structured. For new hires or contractors, it’s helpful for educating them on names and titles. It also shows who workers should contact for help with certain projects or issues.

These charts can help avoid conflict by clearly showing who is responsible for different tasks. If colleagues disagree about who should handle a specific duty, the organizational chart can clarify. Ambitious employees can spot opportunities for advancement.

For management, organizational charts give a big-picture view of how the company allocates resources. You can see how many employees there are in each area and spot any inefficiencies. You can also use the information to justify changes to your team’s headcount. By viewing a competitor’s organizational structure, you can get inspiration on how to improve your operations.

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Frequently Asked Questions

Which type of organizational chart should I use?

Think about the information you want to focus on. Is it your management hierarchy, or how different teams collaborate? Do most of your employees report to one person, or do they have multiple managers? As you think through these questions, remember that you can always try different models and see what works best.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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