An organization chart is one of the most popular business tools, which is primary used to visually communicate how individuals are connected to one another in an organization. This tool helps employees and other stakeholders to clearly see their position, job title and reporting relationship within an organization. Organization charts aim to summarize the cultural linkage among the individuals in an organization.

The main purpose of an organization chart is to show the structure of an organization in terms of ranks. It shows how managers, sub-managers and all other employees are connected within an organization. Line managers share a direct relationship between manager and subordinate. Lateral relationships are at the same hierarchical level. Staff has a relationship with several areas of the company, since they offer an advisory role with no direct authority. Functional relationship show how specialists are connected with other areas of the organization. They have some level of authority, since they can influence line mangers to implement their orders.

As the name implies, organizational chart is a diagram containing boxes, vertical and horizontal lines that connect the boxes together. The vertical lines show the reporting relationship, responsibilities and ranks, while the horizontal lines signify working relationship for the individuals in the same level of hierarchy. In case of dotted line, a strong working relationship is implied, encouraging supervision or help, but is not bounded by authority.

Use of Organizational Charts

Organizational charts are universally used wherever people are working in groups whether in a fortune 500 company or a local football club. The tool helps delegate authority and clearly assigns responsibility for various tasks without any ambiguity or confusion. The chart makes supervision convenient and provides an organized structure to communicate. Workforce planning is one of the most important elements of organizational chart, since it allows management to plan in advance. Departmentalization is encouraged if organization charts are employed, which could lead to operational efficiency in the organization. This concept also helps organization to avoid redundancy and duplication of activities, hence reduces wastage and costs. Another advantage of using organizational chart includes resource planning. Since resources are scarce, the chart could be used to dedicate the resources efficiently so that the benefit gained is greatest while the costs are kept to a minimum.

If the company is an updates version of organization chart at its disposal at all times, change management and integration of new technology becomes easier too, since the company is readily able to determine the impact looking at the organization chart. Moreover, organization charts are also widely used to performance evaluating purposes. Job analysis and employees’ performance can be evaluated using the working relationship linkages.