Who cares if there is an "official" organization chart? Who bothers to look at the chart or even cares whether there is a current chart or not? Wanna hug your organization chart? Today is the day to start!
If you are the owner or CEO of a small to medium-sized business, do you really need to have an organization chart? The answer is an emphatic "yes"! No other tool in the toolbox of organization effectiveness is more fundamental than the organization chart, and yet it is often underestimated and overlooked.
It is important to understand that an organization chart is much more than just a graphic of names and titles. Rather, it is a visual representation of the structure that a company chooses to use to accomplish its mission and vision. Structure determines how work is done, where power and authority lie, and most importantly, who is accountable for delivering results. As such, it can even provide insights into the culture of the business. The organization chart itself brings the structure to life and makes it understandable.
Here are some ways to use an organization chart during various phases of development:
In this phase, it is likely there are few employees. Everyone knows each other and the whole team works hard to make sure everything gets done, so creating an organization chart may seem like a low priority. However, according to Michael E. Gerber in his book "The E-Myth Revisited", this is the ideal time to establish the future state and structure of how the company will operate.
Create the key roles and functions, and then fill in who is currently the responsible person, even if the same name(s) appear in multiple boxes. The strategic benefit of this is that it compels the owner(s) to intentionally set a vision of what they want to become, much like the Stephen Covey concept of "begin with the end in mind". On a more tactical level, even with a small team, it can also help avoid duplicate efforts or tasks falling through the cracks.
Business growth means adding people and complexity. Having a documented structure makes it easier and less chaotic to integrate new employees and clarify their roles and responsibilities. Rather than keeping it "in the owner’s head", the organization chart acts as a map to guide people where they need to go and with whom they need to work, in order to accomplish their own tasks and objectives. That enables performance and continued growth.
Also at this point, it has usually become necessary to insert levels of management, so the organization chart supports several HR-related needs. It shows reporting relationships so that responsibility for employee performance management is clear. It assists in making sure span of control, or number of subordinates per supervisor, is reasonable and effective. And it identifies career progression and cross-training opportunities.
At this stage, growth may continue but at a slower rate. Most of the updates to the organization chart may be adjusting names as people join and leave the company. However, change is constant, whether driven by internal or external forces, and leadership must remain vigilant and adjust company structure as needed. Regular review and update of the organization chart acts as a sanity check that the underlying structure is still sound and identifies any areas for improvement.
Creating and maintaining an intentional organization design is a key and strategic element of a business plan, irrespective of the stage of growth or the size of a company. As an extension of the structure, the organization chart is the tangible representation of how things work, which makes it a powerful tool to align people to accomplish results.
Do you have an organization chart? When is the last time it was updated? Have you reviewed your company structure lately to ensure it is effectively supporting the achievement of your mission and vision? If not, please contact us for a free consultation. We’d love to help!
Thanks to Diane Janovsky, Strategic Partner to HPI Solutions for her thoughts on this important and often overlooked topic.