Organizational charts, or org charts, are essential tools for visualizing a company's structure, which is more important than ever given that two-thirds of organizations have redesigned their operating models in the last two years alone. They provide a clear picture of who reports to whom, the various departments, and the hierarchy within a business. This article delves into what organizational charts are, their importance, different types, and how to create and maintain them effectively.

What is an organizational chart?

Org chart definition

An organizational chart is a visual diagram that shows a company's structure, including employee roles, reporting relationships, and departmental hierarchies.

These charts range from simple hierarchies to complex matrix structures. They provide clarity on reporting lines and help employees understand how different roles connect within the organization.

Purpose and benefits

Organizational charts serve multiple purposes, including clarifying the reporting structure, defining roles—which is critical, as organizations with strong role clarity are nearly five times more likely to be healthy—and facilitating communication across departments. They are beneficial for new employees to understand their place within the company and for existing employees to see how their roles align with broader company goals.

Key components

Key components of an org chart include:

• Positions: Job titles and employee roles, from executive to entry-level positions.

• Relationships: Lines showing reporting structure and chain of command. (Dotted line reporting indicates dual reporting relationships.)

• Departments: Role groupings by function, location, or product line (e.g., marketing, sales, finance).

Including these elements ensures that the organizational chart provides a comprehensive overview of the company's structure, making it easier for employees to understand their place within the organization and for managers to oversee and manage their teams effectively.

Types of organizational charts

Hierarchical org chart

The most common type, the hierarchical org chart, displays a top-down structure; in fact, research shows that 89 percent of organizations still primarily use a traditional hierarchical model. The CEO is at the top, followed by senior management, middle management, and so on. This type of chart clearly defines the chain of command.

Matrix org chart

Matrix organization charts show dual reporting relationships. Employees might report to both a functional manager and a project manager, making this structure ideal for companies that work on multiple projects simultaneously.

Flat org chart

Flat org charts, also known as horizontal org charts, depict companies with few or no levels of middle management. For example, some experts suggest that even the largest companies shouldn't exceed six layers, while truly agile organizations often have only three layers. This type is common in startups and small businesses that value employee autonomy.

Functional org chart

Functional org charts organize employees based on their function or department, such as marketing, sales, or finance. Each department has a head who reports to a top-level executive.

Divisional org chart

Divisional org charts structure companies based on product lines, markets, or geographic locations. Each division operates semi-autonomously and has its own functional departments.

Org chart templates and examples

Where to find org chart templates

Many tools offer built-in org chart templates to get you started. General design platforms like Canva and presentation software like Microsoft PowerPoint or Google Slides provide basic, customizable templates. For more advanced needs, dedicated diagramming tools like Lucidchart or Microsoft Visio offer a wider variety of specialized templates.

Customizing templates for your organization

Once you select a template, customize it to fit your company's unique structure:

• Adjust hierarchy levels and add/remove role boxes

• Change colors to match your branding

• Modify reporting lines to reflect actual relationships

Start with a template matching your org chart type (hierarchical, matrix, etc.) for best results.

Common template formats and when to use them

Choose a template that aligns with your organizational structure:

• Hierarchical: Best for traditional companies with clear chain of command

• Matrix: Ideal for dual reporting relationships

• Flat/Horizontal: Perfect for startups with minimal management layers

How to read and interpret an org chart

Understanding different symbols and lines

• Boxes: Represent roles or departments.

• Lines: Indicate reporting relationships and hierarchy.

Identifying reporting relationships

Lines between boxes show who reports to whom, helping identify managers, team leads, and direct reports.

Recognizing departments and teams

Colors or grouping can differentiate departments or teams, making it easier to see the organizational structure at a glance.

Creating an effective organization chart

Steps to develop an org chart

1. Gather information: Collect details about all roles, departments, and reporting relationships. This includes understanding the responsibilities and interdependencies of each position, ensuring that you have a comprehensive view of the organization's structure.

2. Choose a format: Decide on the type of org chart that best suits your organization. Consider whether a hierarchical, matrix, flat, functional, or divisional structure will most effectively represent your company's internal relationships and workflows.

3. Use a tool: Utilize software or templates to create the chart. Many tools offer features that can simplify the process, such as drag-and-drop interfaces, customization options, and integration capabilities with other business software.

4. Input data: Enter all collected information into the chosen format. Make sure to double-check the accuracy of the data input to avoid errors that could misrepresent the organizational structure.

5. Review and revise: Ensure accuracy and make necessary adjustments. Regularly review the chart with key stakeholders to confirm that it correctly reflects the current organizational setup and addresses any discrepancies or updates.

Best practices and tips

Keep it simple

Avoid overcomplicating the chart with too much detail. A clear and straightforward chart is more effective in communicating the structure and hierarchy of the organization.

Use clear titles

Ensure job titles and departments are easily understandable. Clear and concise titles help avoid confusion and ensure that employees can quickly identify roles and responsibilities.

Update regularly

Keep the chart current to reflect any organizational changes. Regular updates ensure that the chart remains a reliable reference for employees, reflecting promotions, new hires, and departmental shifts.

Common mistakes to avoid

Outdated information

Ensure the chart is always up to date. An outdated chart can lead to confusion and inefficient processes, as employees may not be aware of recent changes in the organizational structure.

Overly complex structures

Simplify where possible to enhance readability. Complex charts can be difficult to understand and may not effectively communicate the organization's hierarchy and reporting lines.

Ignoring feedback

Regularly solicit and incorporate employee feedback to improve the chart's accuracy and usability. Employees can provide valuable insights into the effectiveness of the chart and suggest improvements based on their experiences.

Tools and software for creating org charts

Popular software options

Several tools are available for creating org charts, including Microsoft Visio, Lucidchart, SmartDraw, and Guru. Each offers various features to customize and automate the chart creation process.

Creating org charts in Excel and Office

You can create an org chart directly in Microsoft Office applications using the SmartArt feature. In Excel, Word, or PowerPoint, go to the Insert tab and click SmartArt in the Illustrations group. Select a hierarchy layout from the gallery, then type your organizational information into the text boxes that appear. While this method works for basic charts, it requires manual updates whenever your organization changes.

Comparison of features

Free vs. paid solutions

While free tools like Google Drawings and Canva can create basic org charts, paid solutions typically offer more advanced features like automation, integrations, and collaboration capabilities. Guru, for example, provides automated syncing with HR systems, ensuring your org charts and employee directories are always accurate without manual updates.

Understanding organizational structure

Relationship between org charts and organizational structure

Org charts visually represent the organizational structure, showcasing how different roles and departments interact. They highlight the hierarchy and can reveal gaps or overlaps in responsibilities, making it easier to identify areas needing adjustment.

How org charts reflect company hierarchy

Org charts display the hierarchy, showing who reports to whom and how decisions flow through the company. This visibility helps ensure everyone understands their role within the larger framework, fostering accountability and clarity across the organization.

Impact on communication and workflow

Clear organizational structures improve communication and workflow by defining reporting lines and responsibilities, a significant area for improvement, as research shows that only 13% of employees strongly agree that their organization's leadership communicates effectively. They help prevent misunderstandings and ensure tasks are directed to the appropriate individuals, ultimately enhancing overall efficiency and productivity within the company.

Maintaining and updating your org chart

Importance of keeping charts current

Regular updates ensure the org chart remains an accurate and useful tool for employees, reflecting any structural changes promptly and helping to close the 30 percent gap that can exist between a strategy's potential and its delivery due to shortcomings in the operating model. Keeping the chart current helps prevent confusion and ensures that everyone understands the latest organizational hierarchy and their specific roles within it.

Frequency of updates

Update the org chart whenever there are significant changes in roles, responsibilities, or departmental structures. Regular reviews, at least quarterly, can also help keep it current. This proactive approach ensures the chart always reflects the most up-to-date information, providing a reliable resource for employees and management alike.

Communicating changes to employees

Share updates with all employees to ensure everyone is aware of the latest organizational structure. This can be done through company-wide emails, meetings, or updates to the company intranet. Clear and consistent communication helps to maintain transparency and ensures that all staff members are informed about changes that may impact their roles or reporting lines.

Building your organization's AI source of truth

Organizational charts provide vital clarity, but only when they're accurate. The biggest challenge is keeping them current as teams evolve.

An org chart should be a living document, not a static file that quickly loses relevance.

Guru acts as your company's AI Source of Truth by connecting to your HRIS and other systems to ensure your people data is always up-to-date. By automating this process, Guru eliminates the manual work of updating charts and creates a trusted, permission-aware layer of knowledge for your entire organization. To see how you can transform your static org chart into a dynamic and trustworthy resource, watch a demo.