Business Structure: The value of an organizational chart
January 23, 2025 - 9 minutes read
For small business owners and startups, running a business is much like solving a giant puzzle. Each team member represents a piece, and together they fit to form a bigger picture.
But without a clear roadmap, that picture can become blurry. An organizational chart (org chart) isn’t just a “corporate tool” for big enterprises; it’s just as valuable for small and growing businesses.
If you don’t have an organizational chart yet, it might be time to consider creating one—and here’s why.
What Is an Organizational Chart?
An organizational chart is a visual diagram that outlines how your business is structured. It shows reporting relationships, defines roles and responsibilities, and highlights team hierarchies and communication flows.
Whether it’s a simple chart showcasing leadership positions or a more detailed one that includes every department and role across your company, having an org chart helps everyone understand how the business operates.
For instance, a retail store might include the store manager at the top, assistant managers, department leads, and sales associates below. A tech startup, on the other hand, might have founders or executives at the helm, with departments like engineering, marketing, and customer support mapped out to show collaboration.
The Benefits of Having an Organizational Chart
1. Clarity for Roles and Responsibilities
Have you noticed the occasional overlap—or worse, a gap—in your team’s responsibilities?
Confusion about “who does what” can lead to inefficiency and frustration. An org chart acts as a clearly defined guide, ensuring everyone understands their role and who is responsible for specific tasks.
For example, Susan, a business operations manager, shared how creating an org chart resolved internal confusion in her team: “Once we mapped our roles, it was clear where we needed extra support—and it became much easier to onboard new hires,” she explained.
2. Improved Communication
Poor communication is one of the leading challenges for businesses, large or small. Without a clear chain of command, employees might not know who to approach with questions or concerns. That’s where an org chart comes in.
With a well-structured chart, team members can easily identify who they report to, who manages different departments, and which colleagues they can collaborate with effectively. Building communication pathways enhances workflow and reduces bottlenecks.
3. Streamlined Decision-Making
Decision-making is smoother when there’s clarity in leadership and accountability. An organizational chart outlines the “decision tree” of your business. For example, when a critical business decision arises, employees (and even managers) immediately know who has the authority to approve or implement it.
This clarity allows CEOs to delegate decisions, freeing them up to focus on strategic growth while day-to-day operations run without constant involvement at every level.
4. Effective Workforce Planning
Looking to grow your business? If yes, workforce planning becomes crucial. An org chart not only reflects your current team structure but also helps visualize and plan for future roles.
Small businesses and startups often grow rapidly, and without a clear understanding of current and future needs, key positions may remain unfilled or redundancies may occur. With an org chart in place, it’s easier for managers to spot gaps in the structure and plan for new hires, departmental growth, or leadership changes proactively.
5. Onboarding Made Simple
Hiring new employees comes with challenges, particularly for small businesses where teams need to balance tight schedules as they train newcomers.
An organizational chart helps onboard hires faster by offering a snapshot of the team and how everyone fits into the bigger picture. New employees can quickly understand where they fit into the structure, who they’ll report to, and who their key collaborators are.
6. Builds Transparency and Trust
Employees thrive when they understand their role in advancing the company’s mission and feel recognized for their contributions. An updated org chart fosters transparency and trust by showing employees exactly how their efforts support the larger organization.
It also empowers employees with a clear view of potential internal mobility. Growth-driven employees appreciate seeing a clear career path within the company—improving retention for your most talented team members.
7. Supports Business Readiness
Beyond day-to-day operations, an org chart is essential for strategic readiness. For example, many businesses rely on these charts for succession planning, ensuring there’s a plan in place for leadership transitions. They’re also valuable when applying for funding, presenting to investors, or preparing for a merger or acquisition.
Investors—often keen to understand the structure and leadership of a business—find organizational charts helpful for making decisions about partnerships and funding opportunities.
How to Get Started Creating an Organizational Chart
If the thought of creating an org chart feels overwhelming, don’t worry—it’s simpler than you think. Follow these easy steps to get started.
First and foremost: Make it a FUNCTIONAL org chart.
This means to make sure the chart is focused on positions — not people. For it to really serve its purpose, no names should appear on the chart. By doing this, you will instill one of the core principles of Organizational Structure: First organize the work, and then organize the people doing the work.
Here is an example of a Functional Org Chart:
If you build an org chart around the people who are currently in your company, it could result in a fragile environment that is weakened each time a person leaves.
So, here’s what you should do:
- Outline Your Structure
Start by listing all roles and departments currently in your organization.
- Identify Reporting Lines
Clarify who reports to whom. Add leadership, department heads, and team members accordingly.
- Choose a Tool
There are many tools available for creating org charts, like Microsoft PowerPoint, Lucidchart, Canva, or free online diagram creators.
- Keep It Updated
A great org chart is a living document. Update it regularly as your team grows, roles evolve, or reporting structures change.
If you’re still unsure where to start, reach out to us! We’ll help you get your business organized.
Start Unlocking Your Business’s Potential
Creating an organizational chart is more than just mapping lines and titles. It’s about fostering clarity, communication, and cohesion within your business. It arms you with a powerful tool to manage growth, align your team’s efforts, and scale with confidence.
Still feeling uncertain about how to implement an org chart effectively for your business? We’re here to help. With hands-on expertise in business planning and organization, our team works with you to design a structure that sets you up for long-term success.